If we don't like predatory capitalism and we don't like socialism, what do we want? This is what Gar Alperovitz of The Next System has asked. Many in the climate emergency movement have also called for ideas for a new economy. While some of the ideas are expanded elsewhere, here is a summary of what we believe is necessary:-
1. Leave the existing currency alone. It is what Bernard Lietaer calls a yang currency and needs to be balanced with a yin currency. So many things are wrong with the system it is quicker and better to start again. But the trick is to find how.
2. Elect a Community Board. Appoint hapu and/or iwi representatives. This board guides the process of decentralisation of energy and many other systems previously centralised and vulnerable to shock. They decide what is important for your area in the way of infrastructure for your local resilience – a functioning water system, a port, a roading system, a local radio station, a micro electricity grid, Local Area Networks for internet. They are responsible for planning and community development.
3. Elect a Currency Board, responsible for designing and issuing the currency and keeping it stable. It will eventually become a community bank. These people must be willing to communicate with and cooperate with all the other neighbouring Currency Boards. You can see how important the elections are! This Committee will create a new natural currency that decays by design. They will decide if it will be digital or notes. They will ensure the notes are secure and decide on the rate of decay of the currency and how much to issue in order to avoid inflation.
4. Elect a Land and Resources Board and appoint hapu and/or iwi representatives with knowledge of local land stories, Treaty settlements, sensitive land that is not back under iwi control. These people work with any existing land trusts and decide on what land to buy to put into the Community Land Trust. They first seek council cooperation to put council owned land into their trust. They also work with any local cooperative to ensure the land they use goes into the CLT. Then they make recommendations to the Monetary Committee for suitable properties to buy up with new money. They also monitor local resources – water, fish, forests, minerals and set rules for sustainable use of the commons.
A Lot of Elections are needed
It seems like a lot of elections, but they are important because you need plenty of elected people to act as checks and balances on the other boards. This is big stuff you are dealing with. Each small board has a range of vital functions we are not used to at this level, and it is critical to avoid corruption.
Decide that your Community Board will function as a self-governing local entity, possibly serving a population of 5000 – 25,000 people. Know that you can both make and enforce your local rules, especially rules relating to your currency and your rental gathering. Resist interference from national government in matters you believe are just local matters. Tell them to go away. You will help them later when your own currency and revenue schemes are scaled up. (See Declaration of Interdependence for rights and responsibilities of local communities)
Put it into action
The next phase is for the Currency Board to spend the new currency into existencein one of four ways:
a. to pay for labour and materials for adapting and maintaining infrastructure – the ones decided by the Community Board. Or you could spend it into existence to pay part of the salary of bank staff. Or a Citizens Dividend for a start? Or all three?
b. To pay part of the salary of staff in the new currency.
c. To distribute a small Citizens Dividend.
d. To buy land for the Community Land Trust.
If you can employ staff, get them to persuade your local businesses to accept the new currency for payment.
The Land and Resources Board will decide which land you want to put into community ownership first. Is it bare land or already built on? Will you insist on compulsory purchases? Is there a local factory or business in your district that has privatised part of your commons? (minerals, intellectual property, water, knowledge, public infrastructure). What powers do you want to purchase land of those who are polluting the biosphere?
5. Employ a valuer to set up a Land Rental Index. Accept only the new currency as payment.
6. Compile and maintain of directory of local citizens, including all children. Each will be eligible to share the rents from the use of the commons.
7. Have your Community Board communicate at the earliest possible juncture with neighbouring governance units. Ask yourself at what stage will you need to cooperate with other boards for roading, sewerage, water supply, transport, stormwater infrastructure. Be sympathetic to your local council when they have rating (local tax) arrears and use it as a bargaining tool, so your citizens can pay their rates in the new currency.
8. Employ participatory budgeting. The decision about whether to spend new revenue on infrastructure, administration or on Citizens Dividends will be done at a public meeting only. Establish the principle of community participation in budgeting right from the start. There will always be a tension between building essential infrastructure and giving out Citizens Dividends. Some get really attached to their dividends. Since Alaska doesn’t have participatory budgeting and people love their dividends so much, Alaska’s system isn’t funding enough infrastructure.
Money is a clever human invention designed to be a medium of exchange. Everyone agrees to accept money because they know that other people trust it too. Unfortunately many centuries ago, governments started to accept bank credit as money. And when they accepted bank money for taxes, they either consciously or unconsciously gave banks a patent banks didn’t apply for or pay for. Nor did they check whether the invention was a working model. If they had done so they would never have granted the patent.
So we somehow allowed money to be lent into circulation with interest, causing a competitive system and a scarcity mentality where some amount of bankruptcy is inevitable. What’s more the patent had no termination date.
Banks continue this privilege of creating the country’s money supply (in the case of New Zealand it is at least 98.5% of our total money supply). So we gave banks the monopoly on money creation, didn’t tell the people and didn’t charge the banks a bean.
A discussion led by Phil Stevens on terminology.
Sin taxes are taxes, but otherwise we should call it rent or royalties. There is a widespread belief that tax or borrowing is the only way governments can get money and it is false because governments can create money. It is just that 98% of our money is created by private banks.
There are a number of mantras that are equally false but have become the dominant discourse – e.g. that a surplus is good. Professor Steve Keen and others have explained it isn't true but if you say it often enough people believe it. What is income tax then? Phil answers it is theft.
Recently a man sent me some information he had written for fellow Georgists in which he said "Banks are only allowed to lend out 90% of their deposits".
If only it were so! Not only has he been influenced by the propaganda that banks are merely intermediaries, but he obviously hasn't read The Chicago Plan Revisited (summary
here) by two economists from the IMF nor has he seen the paper from the Bank of England on Modern Monetary Creation. Of course he worked in a finance company where the rules are completely different.
The following is a parable that explains the dismal reality of our current money system in words anyone can understand. Called the Parable of the Eleventh Round it was written by Bernard Lietaer in his book The Future of Money. It explains how when money is created as interest bearing debt it actually changes behaviour from cooperative to competitive.
“Once upon a time, in a small village in the Outback, people used 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 big repairs after a 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 someday, 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 overheard 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 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 10 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. Everybody was impressed with the man with the shiny shoes and inspiring hat.
“Oh, by the way,” he added after every family had received their 10 rounds, “in a year’s time, I will come back and sit under that same tree. I want you to each 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.
Assuming that the population and its annual production remain exactly the same during that next year, what do you think had to happen? Remember, that 11th round was never created. Therefore, bottom line, one of each 11 families will have to lose all its rounds, even if everybody managed their affairs well, in order to provide the 11th round to 10 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.
This parable begins to show how competition, insecurity, and greed are woven into our economy because of interest. They can never be eliminated as long as the necessities of life are denominated in interest-money. But let us continue the story now to show how interest also creates an endless pressure for perpetual economic growth.
There are three primary ways Lietaer’s story could end: default, growth in the money supply, or redistribution of wealth. One of each eleven families could go bankrupt and surrender their farms to the man in the hat (the banker), or he could procure another cowhide and make more currency, or the villagers could tar-and-feather the banker and refuse to repay the rounds. The same choices face any economy based on usury.
So imagine now that the villagers gather round the man in the hat and say, “Sir, could you please give us some additional rounds so that none of us need go bankrupt?”
The man says, “I will, but only to those who can assure me they will pay me back. Since each round is worth one chicken, I’ll lend new rounds to people who have more chickens than the number of rounds they already owe me. That way, if they don’t pay back the rounds, I can seize their chickens instead. Oh, and because I’m such a nice guy, I’ll even create new rounds for people who don’t have additional chickens right now, if they can persuade me that they will breed more chickens in the future. So show me your business plan! Show me that you are trustworthy (one villager can create ‘credit reports’ to help you do that). I’ll lend at 10 percent-if you are a clever breeder, you can increase your flock by 20 percent per year, pay me back, and get rich yourself, too.”
The villagers ask, “That sounds OK, but since you are creating the new rounds at 10 percent interest also, there still won’t be enough to pay you back in the end.”
“That won’t be a problem,” says the man. “You see, when that time arrives, I will have created even more rounds, and when those come due, I’ll create yet more. I will always be willing to lend new rounds into existence. Of course, you’ll have to produce more chickens, but as long as you keep increasing chicken production, there will never be a problem.”
A child comes up to him and says, “Excuse me, sir, my family is sick, and we don’t have enough rounds to buy food. Can you issue some new rounds to me?”
“I’m sorry,” says the man, “but I cannot do that. You see, I only create rounds for those who are going to pay me back. Now, if your family has some chickens to pledge as collateral, or if you can prove you are able to work a little harder to breed more chickens, then I will be happy to give you the rounds.”
With a few unfortunate exceptions, the system worked fine for a while. The villagers grew their flocks fast enough to obtain the additional rounds they needed to pay back the man in the hat. Some, for whatever reason-ill fortune or ineptitude-did indeed go bankrupt, and their more fortunate, more efficient neighbors took over their farms and hired them as labor. Overall, though, the flocks grew at 10 percent a year along with the money supply. The village and its flocks had grown so large that the man in the hat was joined by many others like him, all busily cutting out new rounds and issuing them to anyone with a good plan to breed more chickens.
From time to time, problems arose. For one, it became apparent that no one really needed all those chickens. “We’re getting sick of eggs,” the children complained. “Every room in the house has a feather bed now,” complained the housewives. In order to keep consumption of chicken products growing, the villagers invented all kinds of devices. It became fashionable to buy a new feather mattress every month, and bigger houses to keep them in, and to have yards and yards full of chickens. Disputes arose with other villages that were settled with huge egg-throwing battles. “We must create demand for more chickens!” shouted the mayor, who was the brother-in-law of the man in the hat. “That way we will all continue to grow rich.”
One day, a village old-timer noticed another problem. Whereas the fields around the village had once been green and fertile, now they were brown and foul. All the vegetation had been stripped away to plant grain to feed the chickens. The ponds and streams, once full of fish, were now cesspools of stinking manure. She said, “This has to stop! If we keep expanding our flocks, we will soon drown in chicken shit!”
The man in the hat pulled her aside and, in reassuring tones, told her, “Don’t worry, there is another village down the road with plenty of fertile fields. The men of our village are planning to farm out chicken production to them. And if they don’t agree … well, we outnumber them. Anyway, you can’t be serious about ending growth. Why, how would your neighbors pay off their debts? How would I be able to create new rounds? Even I would go bankrupt.”
And so, one by one, all the villages turned to stinking cesspools surrounding enormous flocks of chickens that no one really needed, and the villages fought each other for the few remaining green spaces that could support a few more years of growth. Yet despite their best efforts to maintain growth, its pace began to slow. As growth slowed, debt began to rise in proportion to income, until many people spent all their available rounds just paying off the man in the hat. Many went bankrupt and had to work at subsistence wages for employers who themselves could barely meet their obligations to the man in the hat. There were fewer and fewer people who could afford to buy chicken products, making it even harder to maintain demand and growth. Amid an environment-wrecking superabundance of chickens, more and more people had barely enough on which to live, leading to the paradox of scarcity amidst abundance.”