|Today's challenges demand we rethink money|
This article by Deirdre Kent and Helen Dew was first published in Tui Motu Interislands in August 2012.
Until two centuries ago, Christians, Jews and Muslims were united in condemning usury as sinful, the Catholic Church going so far as to excommunicate usurers. Interest serves self-interest, however, and Christians and Jews gradually learnt to overlook the sin.
Beginnings of banking
For landless Jewish goldsmiths, charging interest on loans to fellow Jews or to Christians wasn’t an option. Gentiles were the exception: when they deposited their gold with the goldsmiths they were given receipts in exchange. On realising that depositors were using the receipts as currency rather than uplifting their gold, the goldsmiths began lending more ‘receipts’ than they had gold to back them. They also began charging interest, a practice eventually legalised by Henry VIII in 1545 after he had broken ranks with the Pope.
Banking today: a flawed model
The charging of interest on unbacked loans remains the foundation of today’s banking system. Notes and coins created interest-free by the New Zealand government amount to a mere 1.6% of our money supply; the rest is created as interest-bearing bank debt, a system harbouring the seeds of its own destruction. Deregulation of banking 30 years ago compounded the problem, leading to a range of riskier and riskier “financial products” and a credit bubble. The resulting Global Financial Crisis that began in 2007 is nowhere near fully unwound.
The fatal flaw with the current money system is that money is always in short supply. Banks providing loans create the principal only, leaving borrowers to find extra money to repay the interest, either by increasing their production, competing with others facing the same problem or by further borrowing. So the money supply must keep increasing, and with it, the total debt.
The never-ending need to increase production causes intolerable demand on natural resources. The competition for an inadequate supply of money is a bit like musical chairs; someone misses out; bankruptcy is inevitable for some of the losers. Further borrowing compounds borrowers’ problems, consigning them to long-term and often inescapable debt.
We’re shaped by the money we design
Currency is the lifeblood of an economic system. Most people think that there’s only one type of money, because that’s all they’ve ever known. Cheques and credit cards represent special-purpose options, but money is money, they think, regardless of the form it takes. Few realise that there are, potentially at least, many different forms of money, and each type can affect the economy, the way people behave and the natural environment. The design of money creates the world we live in and affects our behaviour.
Money and sustainability
Increasing attention is finally being paid to the role of money in the sustainability debate. The Club of Rome has just published Money and Sustainability, the Missing Link<. The authors say our money system has five effects that make it incompatible with sustainability:
1. Amplification of the boom and bust cycles;
2. Short-term thinking;
3. Compulsory growth;
4. Concentration of wealth;
5. Devaluation of social capital.
Little wonder that regionally, nationally and globally, we are now faced with escalating debt, environmental damage, economic strain and social dislocation. The money system leaves a trail of destruction in its wake.
The gigantic credit bubble may take decades to unwind. In Greece, wages have fallen by up to 50% – much more than prices. New Zealand is vulnerable because our household debt is high and we are a trading country with long supply lines, importing 97% of our oil. With our banking system exposed to the Euro and to the Australian banking system, it may be prudent to consider changing to locally-owned banks.
The growing concern about the pathological nature of the monopoly national currency has prompted communities to create their own interest-free exchange systems, connecting unused or underutilised resources with unmet needs, and enabling exchanges to take place despite a shortage of national money.
The most common forms of these complementary currencies operating in New Zealand are babysitting circles - where parents earn ‘points’ for caring for one another’s children; Timebanking – where members earn ‘hours’ by giving and receiving a wide variety of non-commercial services; and Local Exchange and Trading Systems (LETS) – mutual credit systems for trading goods and services, including commercial activity.
Timebanking’s primary purpose is reweaving community, where everyone’s hour is equal, regardless of the type of service given. Introduced to New Zealand in 2005 by Project Lyttelton, Timebanking has now been embraced by twenty seven communities. The Lyttelton Timebank proved invaluable in the wake of the devastating earthquakes; its database and established networks immediately became part of the emergency response teams. Project Lyttelton Chair Margaret Jefferies asked, ‘Have you ever seen an entire household move from one house to another within 45 minutes? This is possible when you can pull work groups together quickly.’
Local Exchange and Trading System’s (LETS) members form trading circles, list their offerings and needs, and offer and accept payment for goods and services either wholly or partly in the local currency. Ten percent of Golden Bay households use this system, particularly for buying and selling locally produced food. Golden Bay and Wairarapa LETS use beautifully designed ‘vouchers’ as well as the electronic transfer system used by LETS in 50 countries.
Complementarity is key
Complementary currencies work alongside and supplement the national currency. Their principal advantages are:
· Protection against global economic instability
· Stemming ‘leakage’ of community wealth to outsiders/offshore
· Support for local small/medium businesses
· Business opportunities in import substitution
· Less fuel needed for imported product
· Increased employment opportunities
· Less conventional money required for desirable projects
· Enhanced sense of community
A business-to-business system, the WIR, currently used by 65,000 Swiss businesses, has operated for the past seventy-five years. Dozens of regionally-based local currency systems have spread throughout Germany. In Uruguay and Brazil, large-scale local currency systems have reduced unemployment by providing working capital to small- and medium-sized enterprises outside the constraints of the mainstream economy.
While most politicians and economists fail to look beyond conventional solutions to the growing debt crisis, local communities are leading the way in implementing liberating and life-giving exchange options that serve people and planet.
A natural community such as a parish is in an ideal position to work collectively on initiatives described. Challenges on many fronts can be seen as a cauldron of threat or an exciting time of creativity, calling people of faith to be salt and light in a troubled world.