Is Money Working for Us or Against Us?

“The economic revolution will be moral or it will not succeed. The moral revolution will be economic or it will not succeed.”
– Father Don Jose Maria

Think about it. A democratically operated and sociocratically organized, Mondragon-styled cooperative, would have the advantages of a corporation, but geared toward positive contributions to the community, and would be able to replace imports and create exports to stabilize, expand, and diversify a local economy. Such an enterprise would truly be a boon to any municipality and a great opportunity for the employee-owners that worked there. However, creating such a thing requires money. I’ve already discussed credit unions and the Vermont National Bank’s Socially Responsible Banking Fund™ as means whereby citizens can regain control of the economic rudder. But that’s only part of the equation, the part whereby money is accessed for a specific use. The other part is money and the monetary system itself.

Most economists and MBAs will tell you that individuals and companies are all about gaining market share and resources, but are they really? Aren’t they all just seeking to gain more money? It’s not about building a better society but about acquiring more money, especially in America. That’s the goal and nothing more. But what if acquiring money wasn’t the goal? What would happen to the system if we changed the ultimate goal to something more sensible? Are humans inherently greedy, money-grubbing jerks, or are we coerced into acting that way in order to survive? Don’t we really want to help one another? Most people are good and decent. Think about what happens when a disaster strikes. Do we say, “Too bad, screw you!” or do we chip in and offer help any way we can, even by donating money? We’re not at all what the current monetary system says we are, or makes us out to be.

We’re victims of a system that pits us against each other, despite our natural tendency to cooperate and help one another. But there’s the rub. Just as natural ecosystems need water in order to function and survive, economies need money. Money is the water of human systems, without it businesses, communities, and people soon perish. But, how is money created? Where does it come from? Could we change money – or the system within which it operates – so that it functions in a more beneficial manner, bringing out the best in us instead of the worst?

The problem is that the whole modern, monetary system is built upon lack and scarcity. That lack and scarcity is a direct result of how we’ve designed our national currencies. Lack and scarcity create greed and fear. (After all, if I don’t get mine, someone else will and I’ll be left without.) That greed and fear brings out the worst in us.
The single best explanation of the economic process that I’ve ever found comes from The Future of Money by Bernard Lietaer. It’s called “The Eleventh Round.”

Side Note: Click hear to read it on Lietaer’s website. An expanded version can be found here:

The Eleventh Round

Once upon a time, in a small village in the Outback, people used to barter for all their transactions. On every market day, people walked around with chickens, eggs, hams and breads, and engaged in prolonged negotiations among themselves to exchange what they needed. At key periods of the year, like harvests or whenever someone’s barn needed repairs after a big storm, people recalled the tradition of helping each other out that they had brought from the old country. They knew that if they had a problem some day, others would aid them in return.

One market day, a stranger with shiny black shoes and an elegant white hat came by and observed the whole process with a sardonic smile. When he saw one farmer running around to corral the six chickens he wanted to exchange for a big ham, he could not refrain from laughing. “Poor people,” he said. “So primitive.” The farmer’s wife overhead him and challenged the stranger, “Do you think you can do a better job handling chickens?” “Chickens, no,” responded the stranger. “But there is a much better way to eliminate all that hassle.” “Oh yes, how so?” asked the woman. “See that tree there?” the stranger replied. “Well, I will go wait there for one of you to bring me one large cowhide. Then have every family come visit me. I’ll explain the better way.”

And so it happened. He took the cowhide, and cut perfect leather rounds in it, and put an elaborate and graceful little stamp on each round. Then he gave to each family ten rounds, and explained that each represented the value of one chicken. “Now you can trade and bargain with the rounds instead of the unwieldy chickens,” he explained.

It made sense. Everyone was impressed with the man with the shiny shoes and inspiring hat.

“Oh, by the way,” he added after every family had received their ten rounds, “in a year’s time, I will come back and sit under the same tree. I want you each to bring me back 11 rounds. That 11th round is a token of appreciation for the technological improvement I just made possible in your lives.” “But where will the 11th round come from?” asked the farmer with the six chickens. “You’ll see,” said the man with a reassuring smile.

Analysis: Assuming that the population and its annual production remain exactly the same during the next year, what do you think had to happen? Remember that the 11th round was never created. Therefore, bottom line, one of each 11 families will have to lose all its rounds, even if everyone managed his affairs well, in order to provide the 11th round to ten others.

So when a storm threatened the crop of one of the families, people became less generous with their time to help bring it in before disaster struck. While it was much more convenient to exchange the rounds instead of the chickens on market days, the new game also had the unintended side effect of actively discouraging the spontaneous cooperation that was traditional in the village. Instead, the new money game was generating a systemic undertow of competition among all the participants.

Commentary: This is how today’s money system pits participants in the economy against each other. The story isolates the role of interest – the eleventh round – as part of the money creation process, and its impact on the participants. When the bank creates money by providing you with your $100,000 mortgage, it creates only the principal. However, it expects you to bring back $200,000 over the next twenty years or so. If you don’t, you’ll lose your house. Your bank does not create the interest; it sends you out into the world to battle against everyone else to bring back the second $100,000. Since all the other banks do exactly the same thing, the system requires that some participants go bankrupt in order to provide you with this additional $100,000. To put it simply, when you pay back interest on your loan, you are using someone else’s principal.

In other words, the device used to create the scarcity indispensable for a bank-debt system to function involves having people compete for money that has not been created, and penalizes them with bankruptcy whenever they do not succeed. … No wonder ‘it is a tough world out there.’

In reality, we do not live in a world of zero growth population, output or money supply (as in the story). In the real world, there is typically some growth over time in all these variables. … This dynamic makes it much harder than in the Eleventh Round story to notice what is actually going on. With this dynamic view, the money system is like a treadmill that requires continuous economic growth, even if the real standard of living remains stagnant. … This need for perpetual growth is another fact of life that we tend to take for granted in modern societies, and one that we usually do not associate with either interest or our money system.

As this story so clearly illustrates, scarcity and lack are built into the system so that it guarantees that someone will lose. This happens on a global scale every day with rich and powerful nations exploiting and taking money (often in the form of resources) from weaker and poorer nations. The whole thing is absurd. We’ve created a Frankenstein monster and it’s destroying us instead of doing our bidding.

It affects everything else because the whole system operates on money. Is it true that we can’t grow enough food to feed everyone on the planet? It must be so because we have hunger all over the place. What about jobs? Do you really think there aren’t enough jobs for everyone? Obviously the answer is yes, since lots of people are unemployed. But why? Perhaps it’s because there isn’t enough money to pay for it all – yet we created the monetary system! We’ve become slaves to something we created to serve us. We are being driven to act inhumanely toward each other because of a system that is contrary to what we are. We have gotten our monetary system very, very wrong and it is destroying us.

“If I am so passionate about supporting the evolution of our money system, it is because I have spent all my life looking for the highest leverage place for improving all other systems. And I have found that money is it. It is a key acupuncture point when it comes to addressing most things we human beings care about such as having access to good quality health care, nutrition, housing and education and participating meaningfully to the life of our communities through work we enjoy.“
– Bernard Lietaer

Natural, non-human ecosystems like forest, tend to operate within a system of plentiful abundance, instead of lack and scarcity. Natural ecosystems are the exact opposite of what humanity has created. All the plants, animals, insects and microorganisms within a forest are interconnected and cannot survive otherwise. Yet, instead of recognizing our interdependence and the multiple connections we share, we focus on our separateness and our differences with a competitive, every-man-for-himself mentality. A forest wastes nothing. Everything is used and reused. A dead plant or animal becomes food for another. Yet, instead of recycling money and resources, we consume them and let the waste overtake us. A forest ecosystem is nonlinear with no one plant or animal more important than another. Loosing one species can dramatically impact the whole system. It is also flexible and adaptable, able to accommodate changing seasons, new species, and new growth. Yet, instead of being flexible, adaptable, and nonlinear we have created a system that is rigid, hierarchical, and dogmatic. A forest is diverse and unique, containing hundreds and thousands of species with no two forests being exactly alike. Yet, instead of diversity, we create the generic and propagate sameness everywhere.

What if we changed the goal? What if we reoriented the system to work for us instead of against us? What if we created a monetary system that produced abundance and encouraged interdependence, recycling, flexibility, diversity, and sustainability? If we have been able to maintain some of our innate human dignity in the midst of a system that brings out the worst in us, what kind of world could we create with a system that brings out the best in us? Change the system and everything changes.

Mr. Lietaer has stated this very thing. (He’s one of only a handful of thinkers applying systems theory to monetary systems. His website, Currency Solutions for a Wiser World, is an excellent resource for more information. I suggest starting with Monetary Literacy 101.)

“Money is like an iron ring we’ve put through our noses. We’ve forgotten that we designed it, and it’s now leading us around. I think it’s time to figure out where we want to go – in my opinion toward sustainability and community – and then design a money system to get us there.

“While economic textbooks claim that people and corporations are competing for markets and resources, I claim that in reality they are competing for money – using markets and resources to do so. So designing new money systems really amounts to redesigning the target that orients much human effort.

“Furthermore, I believe that greed and competition are not a result of immutable human temperament; I have come to the conclusion that greed and fear of scarcity are in fact being continuously created and amplified as a direct result of the kind of money we are using.

“For example, we can produce more than enough food to feed everybody, and there is definitely enough work for everybody in the world, but there is clearly not enough money to pay for it all. The scarcity is in our national currencies. In fact, the job of central banks is to create and maintain that currency scarcity. The direct consequence is that we have to fight with each other in order to survive.”
– Bernard Lietaer

He’s absolutely correct. Money – and the way we’ve designed it – lies at the heart of humanity’s most pressing problems. It determines, dictates, and defines our land use, economic development, food supply, job creation, and everything else. It’s THE linchpin that enables all else. (See: Can We Design a Better System? | What Happens When There’s No More Country? | Who’s Steering the Ship of State? | What Makes a City Grow? | Can We Balance Ecology and Economy? | What if We Treated Land Differently?)

To be continued…

Here’s a short video wherein Bernard Lietaer discusses his background and what he believes is needed for humanity to move forward.

Tim Wardell is a deep thinker, gardener, husband, father, would-be science fiction sex comedy novelist, and margarita aficionado. When not doing any of those things, he reads, studies, practices, and blogs about sustainability.

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