Sacred Economics: Money, Gift, and Society in the Age of Transition (33 page)
Read Sacred Economics: Money, Gift, and Society in the Age of Transition Online
Authors: Charles Eisenstein
Think about it. Is it from an attitude of scarcity or abundance that someone buys fifty pairs of shoes? Is it the secure person or the insecure person who buys a third sports car and a 10,000-square-foot house? Whence this urge to own, to dominate, to control? It comes from a lonely, destitute self in a hostile, ungiving world.
Free-money embodies the spiritual teachings of abundance, interconnectedness, and impermanence. These teachings, however, present a truth that is in conflict with the world we have created through our beliefs, in particular that set of beliefs that composes the story of money. It is time to get used to a new world, in which we no longer try to get rich by keeping, by hoarding, by
having
. It is a world in which we are rich by giving. The New Age “prosperity programming” teachers I criticized in
Chapter 6
are actually
announcing an important truth. We do indeed need to take on an attitude of abundance and to create a world that embodies it.
My dear reader, think about it: is it really who you are to say, “I will lend you money—but only if you give me even more in return”? When we need money to live, is that not a formula for slavery? Significantly, the forgiveness of debts for which Solon was famous was prompted in part by the indebted servitude of a growing proportion of the population. Today, young people feel enslaved to their college loans, householders to their mortgages, and entire Third World nations to their foreign debt. Interest is slavery. And since the condition of slavery demeans the slaveholder as much as the slave, in our hearts we want none of it.
If you lend money to someone, is it really who you are to hold that obligation over her head, forever and ever? Interest on a loan amounts to that: it is a pressure to pay it back. It is the threat, “If you don’t pay me back, this is going to grow and grow.” A zero-interest or negative-interest loan bears with it a certain freedom. It lacks that threat of life-long debt slavery.
44
I find negative interest to be quite natural. If I loan money to a friend, and she doesn’t pay me back, eventually I want to say, “Forget about it—I don’t want to hold this over your head forever.” I don’t want to hold on to old things, old debts. A negative-interest money system reinforces this salutary tendency, native to all of us, to let go, release the past, and move on.
1.
Demurrage originally referred to a storage cost for goods, for example in addition to freight shipping costs. This term naturally applies to decaying currency because it applies to the use of money as a “store” of value. The goods for which it could be exchanged have upkeep costs, carry costs, and storage costs; therefore so should the money. The disadvantage of this term is that it is unfamiliar to most people and awkward.
Depreciating currency captures the idea that the value of the money declines with time. Unfortunately, the term is easily misunderstood to mean a depreciation in the purchasing power of the currency itself, rather than in the value of each token unit of it. Usually, depreciation refers to the value of a currency in relation to other currencies. “Negative interest” conveys the basic idea very effectively, especially in describing the system as a whole. It can create confusion, however, since interest usually applies to lending money and not to money itself. I will use these various terms interchangeably in this book, along with Silvio Gesell’s term, “free-money.”
2.
Kennedy,
Interest and Inflation-Free Money
, 40.
3.
Zarlenga,
Lost Science of Money
, 253.
4.
Without the stamps, it would effectively be worth 88 cents.
5.
Only a few of Gesell’s writings have been translated into English. I would be interested to know whether he touches upon any ecological themes in his voluminous German writings.
6.
Gesell,
The Natural Economic Order
, chapter 4.1.
7.
Keynes discusses Gesell in Chapter 23 of his classic
General Theory of Money, Employment, and Interest
. He finds his reasoning sound but incomplete, saying that it “just failed to reach down to the essence of the matter.” I will deal with his main criticism, that Gesell neglects to consider the liquidity premium of other forms of money, in a later section.
8.
This is according to contemporary news accounts (e.g., Cohrssen, “Wara”).
9.
Fisher,
Stamp Scrip
, chapter 4.
10.
Thomas Greco cites three contemporary accounts that appear in the 1934 journal
Annals of Collective Economy:
Alexander von Muralt, “The Wörgl Experiment with Depreciating Money”; M. Claude Bourdet, “A French View of the Wörgl Experiment: A New Economic Mecca”; and Michael Unterguggenberger, “The End Results of the Wörgl Experiment.” Greco disputes the contention that the currency’s success is attributable to demurrage.
11.
Wüthrich, “Alternatives to Globalization.”
12.
Champ, “Stamp Scrip.”
13.
Fisher,
Stamp Scrip
, chapter 5.
14.
Lietaer,
The Future of Money
, 156–160.
15.
Champ, “Stamp Scrip.”
16.
Mankiw, “It May Be Time.”
17.
“The Money-Go-Round,”
Economist
, January 22, 2009.
18.
Hall and Woodward, “The Fed Needs to Make a Policy Statement.”
19.
Koenig and Dolmas, “Monetary Policy in a Zero-Interest Economy.”
20.
The latter two options are discussed by Buiter, “Negative Interest Rates.”
21.
Data from the Riksbank’s official website,
www.riksbank.com/swedishstat/
.
22.
Baker, “No Way Out.”
23.
Actually, it can cause price inflation due to a speculative bid-up of commodity prices in the absence of productive investment opportunities.
24.
Some of my more knowledgeable readers will no doubt protest that it is a misconception that banks make money off interest rate spreads. When banks make a loan, they say, they do not lend out depositors’ money but rather create new money—credit—by a simple accounting entry. Unfortunately, this too is a distortion of the ontogeny of money. I explain this further in the Appendix: Quantum Money and the Reserve Question. The upshot for present purposes is that negative-interest banking would be fundamentally similar in many important respects to banking today (at least before the “casino economy” took over).
25.
Most physiologic descriptions of the heart liken it to a pump, but the heart does not provide the propulsive force for blood circulation at all. It would be impossible for a 300-gram organ to pump a viscous fluid through thousands of miles of small blood vessels. In fact, embryonic circulation begins before a functioning heart is even present, possessing its own endogenous momentum sustained by its relationship to the entire circulatory system and indeed the entire body. The heart temporarily halts the flow, which expands the atrium before being released into the ventricle. It is more similar to a hydraulic ram than a pump, with the addition of a twisting function to maintain the blood’s spiraling motion.
26.
As a matter of fact, the Fed already attempts to exercise this listening, modulating function. Meredith Walker, a former Fed economist, describes how much of her work to prepare for Open Market Committee meetings involved communicating with myriad businesses and financial institutions, in effect listening to the pulse of the economy. Monetary policy was a natural response to this listening, except when political interference stymied the natural response and tilted the Fed toward more of a controlling role, similar to a pump.
27.
Keynes,
The General Theory of Employment, Interest, and Money
, book 4, chapter 23, section 4.
28.
Besides, in this system, interest rates on highly liquid debts-at-call would tend toward the demurrage rate.
29.
Anonymous comment on
http://blogs.ft.com/maverecon/2009/05/negative-interest-rates-when-are-they-coming-to-a-central-bank-near-you/
.
30.
The marginal efficiency of capital refers to the expected return on each dollar of new investment.
31.
Keynes,
The General Theory of Employment, Interest, and Money
, chapter 17, section 2.
32.
Ibid., sec. 3.
33.
When interest exceeds economic growth, they are indeed claiming a larger and larger proportion of society’s wealth for themselves—and at no risk, thanks to the bailouts.
34.
Rösl (2006).
35.
See, for example, Holden, “Mr. Keynes’ Consumption Function and the Time Preference Postulate.” This paper illustrates the ideological principles that are at stake, phrased therein as “psychological laws.”
36.
Diminishing marginal utility is often illustrated by fertilizer application. The first ton doubles yield; the next ton increases yield by 10 percent; the next by only 1 percent, and so on. This is a very general principle. Why shouldn’t it apply to money too?
37.
Senior,
Outline of the Science of Political Economy
, quoted in Handon and Yosifon, “The Situational Character,” 76. One cannot help notice the implication that a painful exertion of the will is an admirable virtue.
38.
Hoppe, “The Misesian Case against Keynes”; emphasis added.
39.
Marx,
Grundrisse
, 230.
40.
Everett, “Cultural Constraints on Grammar and Cognition in Pirahã.”
41.
Lee,
The Dobe !Kung
, 101.
42.
Sahlins,
Stone Age Economics
, 209.
43.
If the demurrage rate were too high, speculative capital investments could also happen, resulting in overcapacity, inflation, and a boom-bust cycle. The Fed or central bank would need to exercise the same functions it (supposedly) does today, quelling economic overheating by raising interest rates (bringing the demurrage rate closer to zero). There may even be times in the future when it is appropriate for interest rates to climb back into positive territory. Such a time would be a high rate of economic growth. That way the risk-free interest rate would be less than the economic growth rate, obviating the concentration of wealth that interest usually causes. However, I think that such a scenario is unlikely when growth is no longer subsidized by the unsustainable drawdown of natural resources, and when the reclamation of social capital has shrunk the realm of paid services.
44.
This doesn’t mean that creditors couldn’t seize collateral or have courts enforce collection judgments against debtors for failure to make payments by the due date. It would mean, however, that the longer they waited, the less they could collect.
STEADY-STATE AND DEGROWTH ECONOMICS
Infinite growth of material consumption in a finite world is an impossibility
.
—E. F. Schumacher
The last two chapters have outlined an economy that is sustainable: it incorporates the ecological limits of the planet, and it thrives without a structural need for endless growth in consumption. But is sustainability to be our highest aspiration?
I have long been impatient with “sustainability,” as if that were an end in itself. Isn’t it more important to think about what we want to sustain, and therefore what we want to create? Many beautiful, necessary things are not sustainable: pregnancy, for example. I am heartened by the recent shift of thinking away from sustainability and toward transition. What we are transitioning to will be far more sustainable than our current way of life, but that is not the ultimate goal, just as the ultimate goal of life is not merely to stay alive.
A core concept of sacred economics is that it is an extension of ecology rather than an exception to it. So we have to ask, is nature fundamentally stable, sustainable, or harmonious? Does it have the
characteristics that we want in a society? Some people dismiss the idea that nature is harmonious or balanced, emphasizing instead its cruel, competitive, and wasteful aspects. This position has deep ideological implications, for it justifies the program of Ascent: to dominate and master nature through science and technology. Usually, people sympathetic to this view also carry a Hobbesian view of primitive society and human nature and see civilization with its various methods of social control to be a great improvement over brutal, primitive times. This is part of the story of Ascent—to rise above our animal nature into an exclusively human realm.
The view of nature as a vast competitive arena, a Darwinian struggle for survival among discrete competing organisms, reverberates throughout economic theory. In biology this paradigm has come under increasing challenge, but its economic translation still reigns supreme among most professional economists and policymakers. Just as Darwinian “selfish genes” are supposed to maximize their reproductive self-interest, so does Adam Smith’s “economic man” seek to maximize economic self-interest. This is a core assumption of economics instrumental in formulating the laws of supply and demand.
In the last two decades, a momentous paradigm shift has emerged in biology that emphasizes cooperation, symbiosis, and homeostatic maintenance of wholes larger than the individual organism. Furthermore, the very notion of genetic integrity has come under question as new discoveries demonstrate the importance of gene sharing across organism and species boundaries. The downfall of the paradigm of competing separate selves in biology corresponds to similar developments in psychology, sociology, and—yes—economics. Competition and the “survival of the fittest” can no longer be axiomatic in any field.
That is not to say that competition is unimportant, or that nature is unchanging. Unsustainable processes do happen in nature, and they are not aberrations. They too serve a purpose: to propel systems from one phase to another.
At a recent conference, someone objected to my view of the law of return by observing that natural systems sometimes
do
produce large amounts of waste products that no other organism can utilize and that poison the environment for all. He was perhaps thinking of the Precambrian oxygen catastrophe, when photosynthesizing organisms emerged and “poisoned” the atmosphere with their waste product, oxygen. In the classic view, this malfunction of nature would have meant the end of life on earth if it weren’t for the extremely fortunate emergence of aerobic organisms that could remove oxygen from the atmosphere. This wasn’t nature’s harmony—it was a highly unlikely chance mutation. The conclusion is that we cannot rely on nature’s harmony, that we are always on the verge of catastrophe and therefore must exercise technological control over nature, over the body, and over human nature. This is the ideology of Ascent, which is congruent to the economic ideology of growth and inimical to the ideal of a steady-state economy. My questioner didn’t go this far; his point was basically, “Don’t appeal to natural law to justify a zero-growth economy.”