Sacred Economics: Money, Gift, and Society in the Age of Transition (19 page)

Today we sell away the last vestiges of our divine endowment: our health, the biosphere and genome, even our own minds. Pythagoras’s dictum, “All things are number,” has nearly come true: the world has been converted into money. This is the process that is culminating in our age. It is almost complete, especially in America and the “developed” world. In the “developing” world (notice how these terms assume our own economic system as the destination of other societies) there still remain people who live substantially in gift cultures, where natural and social wealth is not yet the subject of property. Globalization is the process of stripping away these assets, to feed the money machine’s insatiable, existential need to grow. Yet this strip-mining of other lands is running up against its limits too, both because there is almost nothing left to take and because of growing pockets of effective resistance.

The result is that the supply of money—and the corresponding volume of debt—has for several decades outstripped the production of goods and services that it promises. It is deeply related to the problem of overcapacity in classical economics. To defer the Marxian crisis of capital—a vicious circle of falling profits, falling wages, depressed consumption, and overproduction in mature
industries—into the future, we must constantly develop new, highprofit industries and markets. The continuation of capitalism as we know it depends on an infinite supply of these new industries, which essentially must convert infinite new realms of social, natural, cultural, and spiritual capital into money. The problem is that these resources are finite, and the closer they come to exhaustion, the more painful their extraction becomes. Therefore, contemporaneous with the financial crisis we have an ecological crisis and a health crisis. They are intimately interlinked. We cannot convert much more of the earth into money, or much more of our health into money, before the basis of life itself is threatened.

An ancient Chinese myth helps illuminate what is happening. There was a monster, it is said, called the
tao tie
, which was possessed of an insatiable appetite. It consumed every creature around it, even the earth itself, yet it was still hungry. So it turned finally to its own body, eating its arms, legs, and torso, leaving nothing but the head.

A head cannot live without its body. Faced with the exhaustion of the nonmonetized commonwealth that it consumes, financial capital has turned to devour its own body: the industrial economy that it was supposed to serve. If income from production of goods and services is insufficient to service debt, then creditors seize assets instead. This is what has happened both in the American economy and globally. Mortgages, for example, were originally a path toward owning your own home free and clear, starting with 20 percent equity. Today few ever dream of actually one day repaying their mortgage, but only of endlessly refinancing it, in effect renting the house from the bank. Globally, Third World countries find themselves in a similar situation, as they are forced to sell off national assets and gut social services under IMF austerity programs. Just as
you might feel your entire productive labor is in the service of debt repayment, so is their entire economy directed toward producing commodity goods to repay foreign debt.

IMF austerity measures are exactly analogous to a court-imposed debt-payment plan. They say, “You are going to have to make do with less, work harder, and devote a greater proportion of your income to debt payments. You will give me everything you own and turn over all your future earnings to me!” Worker pensions, teacher salaries, minerals, oil—all are turned to debt service. The forms of slavery have changed over the years, but not the essential directive. The irony is that in the long term, austerity measures don’t even benefit the creditors. They choke off economic growth by reducing consumption, demand, and business investment opportunities. Jobs evaporate, commodity prices fall, and the debtor people and nations are less able than ever to make their payments.

Incapable of thinking beyond the short term, the money interests love austerity because the debtor is essentially saying, “We will devote more of our labor and resources toward the servicing of debt.” It allows unserviceable debts to be serviced just a little while longer. This is what is happening in Europe at the time of this writing (2010), as governments slash pensions and agree to privatize social services so that they can assure bondholders that they will be paid. The rumblings of austerity are audible here in America too, in the form of alarums about the federal deficit. From within the logic of bond markets and budget deficits, the case for greater fiscal responsibility is unassailable. From outside that logic, it is absurd: are we to be forced by mere numbers, mere interpretation of bits, to erode the standard of living of the many for the sake of preserving the wealth of the few?

Eventually, debtors run out of disposable income and seizable assets. The crash underway today should have actually happened many years ago, except that various phony and inflated assets were created to keep it going a little longer as the financial
tao tie
cannibalized itself, covering debt with more debt. The efforts to shore up this edifice cannot work, because it must keep growing—all those debts bear interest. Yet the authorities keep trying. When you hear the phrase “rescue the financial system,” translate it in your mind into “keep the debts on the books.” They are trying to find a way for you (and debtor nations too) to keep paying and for the debt to keep growing. A debt pyramid cannot grow forever, because eventually, after all the debtors’ assets are gone, and all their disposable income devoted to debt payments, creditors have no choice but to lend debtors the money to make their payments. Soon the outstanding balance is so high that they have to borrow money even to pay interest, which means that money is no longer flowing, and can no longer flow, from debtor to creditor. This is the final stage, usually short, though prolonged in our day by Wall Street’s financial “wizardry.” The loans and any derivatives built on them begin to lose their value, and debt deflation ensues.

Essentially, the proximate financial crisis and the deeper growth crisis of civilization are connected in two ways. Interest-based debt-money compels economic growth, and a debt crisis is a symptom that shows up whenever growth slows.

The present crisis is the final stage of what began in the 1930s. Successive solutions to the fundamental problem of keeping pace with money that expands with the rate of interest have been applied, and exhausted. The first effective solution was war, a state that has been permanent since 1940. Unfortunately, or rather fortunately, nuclear weapons and a shift in human consciousness have
limited the solution of endless military escalation. War between the great powers is no longer possible. Other solutions—globalization, technology-enabled development of new goods and services to replace human functions never before commoditized, technology-enabled plunder of natural resources once off limits, and finally financial autocannibalism—have similarly run their course. Unless there are realms of wealth I have not considered, and new depths of poverty, misery, and alienation to which we might plunge, the inevitable cannot be delayed much longer.

The credit bubble that is blamed as the source of our current economic woes was not a cause of them at all, but only a symptom. When returns on capital investment began falling in the early 1970s, capital began a desperate search for other ways to maintain its expansion. When each bubble popped—commodities in the late 1970s, S&L real estate investments in the 1980s, the dotcom stocks in the 1990s, and real estate and financial derivatives in the 2000s—capital immediately moved on to the next, maintaining an illusion of economic expansion. But the real economy was stagnating. There were not enough needs to meet the overcapacity of production, not enough social and natural capital left to convert into money.

To maintain the exponential growth of money, either the volume of goods and services must be able to keep pace with it, or imperialism and war must be able to escalate indefinitely. All have reached their limit. There is nowhere to turn.

Today, the impasse in our ability to convert nature into commodities and relationships into services is not temporary. There is little more we can convert. Technological progress and refinements to industrial methods will not help us take more fish from the seas—the fish are mostly gone. It will not help us increase the
timber harvest—the forests are already stressed to capacity. It will not allow us to pump more oil—the reserves are drying up. We cannot expand the service sector—there are hardly any things we do for each other that we don’t pay for already. There is no more room for economic growth as we have known it; that is, no more room for the conversion of life and the world into money. Therefore, even if we follow the more radical policy prescriptions from the left, hoping by an annulment of debts and a redistribution of income to ignite renewed economic growth, we can only succeed in depleting what remains of our divine bequest of nature, culture, and community. At best, economic stimulus will allow a modest, short-lived expansion as the functions that were demonetized during the recession are remonetized. For example, because of the economic situation, some friends and I cover for each other’s child care needs, whereas in prosperous times we might have sent our kids to preschool. Our reciprocity represents an opportunity for economic growth: what we do for each other freely can be converted into monetized services. Generalized to the whole society, this is only an opportunity to grow back to where we were before, at which point the same crisis will emerge again. “Shrink in order to grow,” the essence of war and deflation, is only effective, and decreasingly so, as a holding action while new realms of unmonetized social and natural capital are accessed.

The current problem is therefore much deeper than today’s conventional wisdom holds. Consider this typical example from a financial journal:

This describes only the most superficial level of a deeper problem of which the collateralized debt obligations (CDOs) and so forth are mere symptoms. The deeper problem was that there were insufficient “real needs” to which banks could devote their capital, because only those needs that will generate profits beyond the interest rate constitute valid lending opportunities. In an economy plagued by overproduction, such opportunities are rare. So, the financial industry played numbers games instead. The CDOs and so on were a symptom, not a cause, of the financial crisis that originated in the impossibility of economic growth keeping pace with interest.

Various pundits have observed that Bernard Madoff’s Ponzi scheme was not so different from the financial industry’s pyramid of mortgaged-based derivatives and other instruments, which themselves formed a bubble that, like Madoff’s, could only sustain itself through an unceasing, indeed exponentially growing, influx of new money. As such, it is a symbol of our times—and even more than people suppose. It is not only the Wall Street casino economy that is an unsustainable pyramid scheme. The larger economic system, based as it is on the eternal conversion of a finite commonwealth into money, is unsustainable as well. It is like a bonfire that must burn higher and higher, to the exhaustion of all available fuel. Only a fool would think that a fire can burn ever-higher
when the supply of fuel is finite. To extend the metaphor, the recent deindustrialization and financialization of the economy amount to using the heat to create more fuel. According to the second law of thermodynamics, the amount created is always less than the amount expended to create it. Obviously, the practice of borrowing new money to pay the principal and interest of old debts cannot last very long, but that is what the economy as a whole has done for ten years now.

Yet even abandoning this folly, we still must face the depletion of fuel (remember, I mean not literal energy sources, but any bond of nature or culture that can be turned into a commodity). Most of the proposals for addressing the present economic crisis amount to finding more fuel. Whether it is drilling more oil wells, paving over more green space, or spurring consumer spending, the goal is to reignite economic growth—that is, to expand the realm of goods and services. It means finding new things for which we can pay. Today, unimaginably to our forebears, we pay even for our water and our songs. What else is left to convert into money?

As far as I know, the first economist to recognize the fundamental problem and its relation to the money system was Frederick Soddy, a Nobel laureate and pioneer of nuclear chemistry who turned his attention to economics in the 1920s. Soddy was among the first to debunk the ideology of infinite exponential economic growth, extending the reasoning of Thomas Malthus beyond population to economics. Herman Daly describes Soddy’s view succinctly: