Exchange has always been part of the human story, whether between individuals, tribes or nations. Some people have what others don’t, due to geography or skill, and exchange is a means of getting what you don’t have, and giving what you have a surplus of.
Money didn’t evolve from barter
But how did money evolve as a means of exchange? The conventional wisdom is that human economies were based on barter. Someone had plenty of eggs, but no honey (say). If they wanted honey, they had to find someone with honey, but who also wanted eggs – otherwise they had to swap their eggs for something that the person with honey wanted, before they could swap this for honey.
All very complicated, so inevitably at some point, some bright spark suggested that something be used as a means of exchange – preferably durable, like metal, shells or precious stones – or even useful in itself, like cattle or corn.
Economics textbooks tend to repeat this story, but the problem is, it’s not true. There is absolutely zero evidence of any historical economy based on barter.
So how did this myth come to be accepted? It may be because it was put forward by Aristotle, and for thousands of years, Aristotle was seen as the fount of all wisdom, and no-one was keen to challenge him. Aristotle also stated that the earth was the centre of the universe, a mistaken belief that held sway for 1800 years. Similarly, his view that barter economies gave way to money economies remains largely unchallenged, even though Aristotle had no direct knowledge of a barter economy. His ideas on barter and the nature of the solar system were pure conjecture.
Aristotle: not right about everything
The barter/money theory was repeated by Adam Smith, the father of modern economics, further entrenching the myth. Certainly barter would have happened on the margins (and still does), but there is no evidence that barter was anything other than marginal.
How did pre-money economies work?
So how did economies work before money? One theory is that of the ‘gift economy’, as found in families or in groups of friends. In a family, no-one is calculating the value of their work – it’s just their contribution to the family. This can work in tight-knit groups like extended families or small tribes, but can it work in larger groups that don’t have common goals (such as feeding, housing or defending themselves)?
After the agricultural revolution and the growth of towns, long before the invention of money, what was used as a medium of exchange, if not barter or gifting? A clue can be found in the first cuneiform script of the ancient Sumerians, over 5000 years ago. The ‘writing’ on clay tablets, was in fact a system of accounts, recording who was in credit or debt to whom. No money needed to change hands, as people’s contributions and obligations were recorded for all to see in the temple, where the clay tablets were kept.
The oldest known writing, on Sumerian clay tablets, was in fact an accounting system.
Way, way before writing, ‘tally sticks’ were used for the same purpose, and it’s now believed that tally systems (marks on sticks or bones representing credit or debt) go back over 20,000 years. These would have been used as an accounting system for dealings with people outside the immediate extended family / tribal group, in which the gift economy would have dominated.
The first real money / coins came into existence around 2,700 years ago. Humans have been around for 100-200,000 years, so it’s a mistake to think that money is essential to the human economy. David Graeber, in Debt: the First 5000 years, claimed that money developed as credit, rather than to replace barter. This only became widely necessary after the agricultural revolution, when people’s daily lives brought them into contact with people they didn’t know. Money could never have developed in a tribal society, where credit and debit are kept inside people’s heads. You either know that someone ‘owes you one’, or mental tallies are not even kept, as in families. Peer pressure is generally enough to make sure that everyone pulls their weight. Having lived in an intentional community for 13 years, I know this to be true.
After the agricultural revolution, and as tribal society began to be replaced with towns / ‘civil’ society, some sort of tally was required. Whether these tallies were clay tablets or tally sticks, what they represented was a ledger. People’s accounts started at zero, and if they provided a useful service or product for someone else, they received credit, and the account of the recipient of the product or service went into debit.
Tally sticks.
The problem with money
I believe that for human society, this mutual credit system is preferable to a money-based economy. The problem with money is that it concentrates. It’s a given for most people that money attracts money, and I believe that it’s a given because it’s true. If you try to get rich through your own work, you’ll find that it’s virtually impossible, unless you have some extremely rare skill, such as singing, acting, writing or painting. Otherwise, the road to riches is paved with other people’s work. You can either employ lots of other people, and extract profit from their work; you can own large areas of land and charge rent on it; you can own shares, which ultimately deliver their returns due to the work of thousands, perhaps millions of people in the companies in which you’ve invested; or (and this is the most important way that money attracts money), you can lend it at interest.
This is why real wealth today resides in the banking system, and with it, control over the economy and ultimately, the political system. It’s no coincidence that Trump has filled his cabinet with Goldman Sachs people rather than educators, healthcare professionals or academics. And it is no coincidence either, that banks have a government-mandated monopoly on the issuing of legal tender, via the lending of money that they don’t have, with compound interest attached, with security provided by the borrower (usually in the form of houses). Once you understand this (and a refreshing number of people now do), you realise that it’s the biggest scam the world has ever seen. If you don’t, it will be the subject of future articles.
In fact, the development of money and the development of empires occurred at the same time, and I don’t think it was coincidental. Of course you could build an empire through conquest, but it’s much more difficult to hold on to land than it is to hold on to money. Plus if you want an all-conquering army, you need to feed them. Yes, you can conquer land directly, and force local farmers to hand over food – but how much easier to buy it? Then the fact that you actually have an empire at all can be disguised. This is happening today with the US (or more accurately, corporate) empire.
The concentration of money is accelerating, and the problem is not that some people have more than others (there’s only so much one person can consume), it’s that concentration of wealth brings with it power, and therefore the destruction (or more accurately, the prevention) of democracy, as surplus wealth flows into the political process, into the lobby industry and into providing jobs for politicians, amongst a portfolio of other techniques for undermining our political system. Then war becomes a very profitable business for corporate weapons manufacturers, rather than a means of physical conquest – a very dangerous scenario, and one that guarantees a state of permanent war, and the impossibility of peace.
Money as the root of environmental damage
The lending of money with compound interest attached (previously forbidden in Christianity and Islam – a ban that has been rescinded in the former and is currently being bypassed in the latter) also means that the economy has to constantly grow. When loans are repaid, the debt is cancelled, but not the interest. In a stable economy, interest cannot be repaid, which is why every government in the world is pursuing perpetual, constant, impossible growth. It is this quest for growth that is at the root of the destruction of the earth’s ecology that is so detrimental to the prospects for human survival. Nature is still our life-support system – we’re not as clever as we like to think we are.
In the early 19th century, William Greene suggested the introduction of a mutual credit accounting system (think tally / clay tablets, but in a system of written ledgers, where credit is extended to people who are known and trusted in their communities). He saw that money was becoming concentrated in few hands, which meant that even though there were plenty of skilled people and resources, most people were living in poverty. Poverty was correctly identified as the concentration of wealth in few hands, and this is only possible in a money economy. His credit system involved limits on the amount of credit or debit individuals could hold. Individuals can only gain credit from their own work, not anyone else’s – surely a hallmark of a civilised society?
William Batchelder Greene: his ideas on mutual credit systems were way ahead of his time.
I believe that a mutual credit system is the solution to the problems of poverty, ecological destruction, war and even economic migration (mutual credit exchange is possible anywhere on the planet, so no-one has to travel to find work), and in the age of the internet, with blockchain technology as security, it is entirely possible to implement it globally – not by a technological imbecile like me, but by the technically-gifted people already working in cryptocurrencies, platform co-ops and free / open source software.
Here’s one of them (actually, he’s a self-confessed Luddite, but he has the vision to outline an implementable mutual ‘money’ system and to explain why it’s necessary) and here are another two (really worth making the time to read).
Anyone can have bright ideas of course, but it’s implementation that’s key. However, if I didn’t think that this system is implementable, through the development of the non-corporate sector (which is already happening), I wouldn’t bother blogging about it. But I believe that it’s achievable, even though very few people will actually understand it (insert appropriate Margaret Mead quote here). I’ll be blogging much more about this, as I believe it’s the only economic system that could replace capitalism – essential if we are to stop global ecological damage, and therefore survive.
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If everybody was limited to a maximum level of individual wealth, with all surpluses transferred to a “Commons Account”, then these surpluses could help fill up other peoples accounts around the world to this level, whilst also leaving a pot for international co-operation when developing needed community infrastructure and services.
In the case of oil companies historically, if this system was in effect, all profit made from oil extraction and consumption, would have been spread across the world, and invested into the community pot, instead of being robbed by one group of people (who are now avariciously fracking The Commons once again).
Where this system needs further evolution, is at the concept of individual wealth. Say for example that you have a maximum level of individual wealth in your account, and that a certain level of increment occurs over-time as world GDP is spread equitably, then we still have the innate problem of unethical generation of GDP.
This system does not encapsulate ethics, which is core to everything we do on Earth, and unethical “free-market” consumption by the global masses, drives animal suffering, international wars for minerals and resources and ecological degradation.
So what we need it a purchasing system that also denies anything deemed an “unethical want” whilst also equitably limiting the amount of individual purchasing power when equitably distributing ethical GDP.
In other words, there should be a Council Of Ethics, overseeing a Council Of Scientists etcetera, where the Council Of Ethics first prunes all unethical purchasing choices, and then limits unethical additions.
Now imagine walking into a 21st century supermarket and see what has being removed from the store, which frees up labour resources, so that we can share the burden of needed remains, whilst also having more free time for education in the “community education networks” that were built using money from the “Commons Account”.
What your views on this?
Hi. I’d just have one question really – how could it be implemeted?
“The problem with money is that it concentrates.”
I think you might find it worthwhile to look a bit deeper there, Dave; understanding why it concentrates is crucial to understanding how to reform or replace it.
As I see it, the underlying problem is that money serves different functions which aren’t wholly compatible with each other: its value as a medium of exchange rests on it circulating but, as a store of wealth, its value rests on it being taken out of circulation – while its function as a standard of value constrains the monetary authority’s ability to ensure that those first two functions are in balance.
It seems to me that this incompatibility is one of the primary causes of inequality because the fact that anyone with a surplus can take the medium of exchange out of circulation effectively allows the rich to charge others for the use of it. The core of the solution, to my mind, is to ensure that the medium of exchange has a carrying cost (as all real wealth does) – though of course there are all sorts of complexities!
I tend to look at every social problem by asking ‘how would this work in a healthy society?’. Even if we can’t see any prospect of getting sensible reform implemented, we still need to envisage how a healthy society would function; after all, it’s only when we have a destination in mind that we can be confident that our first steps are heading in the right direction. So, unlike you, I treat the state as central to this issue; I see government’s willingness to accept a particular currency in payment of taxes as guaranteeing its value (and as long as the state requires payment of taxes in a certain currency, alternative systems will have great difficulty getting established). If you’re interested, you can read my analysis and proposed solution on my monetary reform page.
‘I think you might find it worthwhile to look a bit deeper there, Dave; understanding why it concentrates is crucial to understanding how to reform or replace it.’
That’s fighting talk where I come from Malcolm. So here goes, ding ding.
I’ve read your analysis of money, and I agree entirely. That’s a given. (Not a very pugnacious start from Darby there, but I’m just warming up).
Money concentrates for two main reasons (and I apologise if this is teaching my grandmother to suck eggs, but this is just to emphasise these points and to inform people who don’t know):
1. 21st century capitalism isn’t about the real economy of goods and services – the derivatives market is ten times the size of the real economy. Capitalism is now a global computer game played by the world’s most powerful algorithms, on the world’s fastest computers, owned by the world’s wealthiest investment houses. These investment houses place their unbeatable super-computers literally, in the physical world, right next to stock market computers, so that they gain nanoseconds in the game. This allows them to intercept bids from lesser mortals, buy the stock they were intending to buy, then turn around and sell it to them for a few pennies extra. Those pennies won’t be a problem to the buyer (who won’t even know what’s happened), but on a global scale, and billions of times per day, it ensures wealth concentration. Rushkoff is the guy to follow for this – https://www.lowimpact.org/worse-think-review-douglas-rushkoffs-throwing-rocks-google-bus/.
2. The state can’t get all the money it needs to prop up capitalism from taxpayers – they won’t pay it, even in those mythical Scandinavian socialist republics. It has to go to banks to ask for money, and in return the state gives private banks a monopoly licence to create legal tender. Then the banks give the state as much money as it likes in exchange for government bonds, which are just IOUs (that will never be paid); but they can add interest that taxpayers have to pay. More here – https://www.lowimpact.org/why-the-banks-have-so-much-power-and-how-we-can-take-it-away-from-them/. Plus you can sign up for the Money & Society MOOC – I really recommend it. Next one starts in Feb – http://iflas.blogspot.co.uk/2014/12/money-and-society-mooc.html. (Ignore where it says August – it’s Feb).
This concentration of wealth and irreplaceable value for governments ensures that there is a liberal sprinkling of Goldman Sachs staff and alumni in national governments and supra-national institutions. Trump (Mr. anti-establishment!) filled his cabinet with them, and as the US cabinet is the boardroom of the global economy, it’s pretty clear who it’s being run by and for. Goldman isn’t actually the world’s largest investment house (JP Morgan is), so how Goldman get so many of their people’s hands onto the global steering wheel I don’t know. I guess I need to read a bit more of Matt Taibbi’s stuff – http://www.rollingstone.com/politics/news/the-great-american-bubble-machine-20100405 (and oldie but a goodie – the situation hasn’t got any better since then).
Where we diverge is that you think the state could be useful in helping to build a system to which we can transfer the economy away from capitalism. I think it’s the left’s biggest blind spot, currently. The state is so deep into an unholty alliance with banks that I don’t see the mechanism to be able to do it – even if the will were there, which it doesn’t seem to be. Western voters are so emamoured with the idea of living on the crumbs from the financial services sector – an entirely useless industry based on creaming off money from people who do useful work all over the world – that they continue to vote for people of the quality of Theresa May and Donald Trump. And even if people like Sanders and Corbyn ever manage to get in, to say that their hands will be tied is understatement of the century. Look at Syriza to see what will happen if they follow a truly radical path. But even if that happens, it has to happen forever – anything the left do (and it will, I believe, only be cosmetic within the current system, and if they ever gain power again) will be undone by the next Conservative / Republican government. It has to be permanent to mean anything, and it can’t be permanent in this system. That goes for your party too (I wish you luck, but you know you’re never going to succeed that way, surely – it’s just to make people think, yes?).
Look, if you and others manage to bring any change via the political system, I’ll salute you, but I’m not holding my breath. Best to help people working on the ground to build a mutualist, solidarity economy – community-supported agriulture, community energy, housing and worker co-ops, credit unions, plus free / open source software, blockchain, co-operative platforms to replace the ‘sharing’ economy etc. It’s all there – let’s grow it.
Ultimately, the solution will be based on a free market, rather than a state.
Not this bloke’s free market – https://www.youtube.com/watch?v=KAnXK0_d_T8
That’s a market that will always be corporate dominated with money concentrated at the top. I’m talking about this bloke’s free market – https://www.youtube.com/watch?v=Xa6AGDsbmtU – a free market in which anyone can produce and purchase anything they want, alone or in co-operation with others, but no-one can be remunerated from anyone else’s work. The ramifications of that are enormous, and there are people building it now. Jobs without bosses, land without lords, money without banks and ultimately, governance without politicians.
Here’s the ‘no money’ bit – https://www.lowimpact.org/lowimpact-topic/collaborative-credit/ – it can be scaled as local credits are translated to plug into a global system. It’s being built and it’s very interesting.
If you’re working to bring real change via the current political system, good luck to you. I hope you succeed, but I don’t think you will. Meanwhile, I’ll blog more in future about how we can shift our money from the corporate to the non-corporate sector. I hope you support that – whatever happens in your political adventures.
Thanks for the reply, Dave. I’m glad you recognised it as fighting talk! I’ll focus on money in this comment, and answer the political points separately.
“Money concentrates for two main reasons”
As I see it, what you give as reasons are in fact no more than descriptions of something that happens because money concentrates; those factors can’t possibly explain why money has tended to concentrate throughout its history, long before the existence of derivatives and fiat money.
What explains why money concentrates is a) the fact that currency (coin and bank notes) can be taken out of circulation by anyone who has a surplus, and b) the fact that a shortage of liquidity seriously hampers people’s ability to trade with each other. Those two facts, taken together, mean that rich people are able to charge interest; it’s their price for allowing money to circulate and people pay it because otherwise they can’t trade. That is the root cause of ‘rentier’ interest (which is the underlying mechanism by which money concentrates) and the stuff you describe is only significant because it is built on that foundation.
This control rich people have over the money supply is easy enough to understand when all money is gold or silver, which can’t be created out of thin air, but people often find it harder to grasp with fiat money. However, some central bankers and economists do recognise that the existence of cash, in its current form, prevents the monetary authorities from ensuring that money circulates properly and they have thought about what reforms might be introduced to give them proper control.
Basically, to keep the medium of exchange circulating, it’s necessary to make ‘stagnant’ money lose value. Unfortunately, if banks charged their customers for holding excessive balances in current accounts, many people would hold it in cash instead, so the supply of currency in active circulation would dry up.
Technically, it wouldn’t be too difficult to separate the different functions of money, but we have to recognise that there is a need for all of them. If you try to build an alternative system that only provides a medium of exchange, I’d say it has no hope of establishing itself in competition with a reasonably well-designed system that also provides a monetary store of wealth.
Your two points do certainly describe pernicious aspects of the current system but the first would be trivially easy for a competent regulator to deal with and the second (which I have one or two quibbles with) is entirely a function of the problem I discussed above.
“the state gives private banks a monopoly licence to create legal tender”
Well, no, banks don’t create legal tender (which is just coin and Bank of England banknotes). Banks create contracts to supply legal tender. But, because they create those contracts in a form that can be transferred, their customers are able to use those contracts as though they are legal tender. The distinction is important because, although this profoundly affects the monetary system, it’s not an essentially monetary phenomenon – it’s a function of contract law. That means that tackling the problems it causes is far more complicated.
In the system you’re promoting, you say there will be no lending. I won’t say that’s impossible to ensure but it does imply a contract with every user of the system (enforceable in every jurisdiction the system operates in) prohibiting them from entering into certain kinds of contract. I look forward to seeing your system’s terms and conditions! This point does emphasise the fact (which I’ll say more about in my next comment) that this system you’re promoting is dependent on a framework of law.
“The state can’t get all the money it needs to prop up capitalism from taxpayers”
The state doesn’t need to prop up capitalism; the reason it bailed out banks after the crash was to prop up the payments system. It only looks like ‘propping up capitalism’ because the payment system and bank lending are currently so entwined that it wasn’t possible to prop up one without bailing out the other – and the reason for that lies in the fact that currently the functions of money are entwined. (Politicians might choose to prop up capitalism but that’s a failure of the political system, not of the monetary system.)
“the banks give the state as much money as it likes in exchange for government bonds, which [pay the banks] interest that taxpayers have to pay”
This is simply because those functions of money are entwined: the state levies taxes, and pays for everything it buys, in a form which, for practical purposes, can be controlled by private individuals. Separate those functions and the state will no longer need to pay interest. (There is also a problem in that politicians are often tempted to spend more than the current generation is willing to pay in taxes, but that doesn’t lead to taxpayers paying interest to the private sector, it merely leads to degradation of the money supply.)
That brings me to the state’s involvement in the economy, which I’ll discuss in a separate comment.
On the political front, we’re perhaps not as far apart as you think, Dave. For several years, I’ve been saying we need to develop an ‘imago’ society that could grow inside the existing system and take it over from within (back in 2011 I even wrote a blog post called Imago Society, on the now-defunct Uncivilisation site) and my attempt to set up a reform party is connected with that.
Turning to some specifics of what you said …
“Ultimately, the solution will be based on a free market, rather than a state.”
Can there be a free market without a state? In a world of perfect people I suppose there could but, as long as people are imperfect, there will be broken agreements and cheating and threats of violence – things which require dispute resolution, and laws, and law enforcement. In other words, some form of state will continue to be necessary in our new world, to underpin the free market.
On top of providing a legal framework, the operation of the state inevitably involves material resources. So the state is bound to be an actor within the economy, even if its involvement is minimal. It needs a mechanism for matching its base resource (the labour of its citizens) to the things it needs to pay for (the labour of those it employs or buys services from). For the record, I argue that people should have an absolute right to pay their taxes in a form they have a natural capacity to supply (i.e. labour). However, it will generally be more convenient for both sides if taxes are paid in tokens of some kind (we can call them credits, or money, or ‘specie’, or whatever, but I’ll just call them tokens). The state’s willingness to accept those tokens in payment of taxes will act as a guarantee of their value and people will be keen to acquire them. That means that, given a choice, most people will prefer payment in those tokens than in other forms.
If the system you’re supporting is only aimed at filling in the gaps in a broader system that’s not working very well, I can certainly see some value in it. But it appears to be aiming considerably higher than that. You talk of it replacing the existing system – and, from what I’ve seen, I don’t think it has any chance at all. My guess is that nearly everyone will prefer to use a medium of exchange that a) can be used to pay taxes and b) can be readily exchanged (on easily understood terms) for a monetary store of wealth.
Turning to your broader goals …
“Jobs without bosses, land without lords, money without banks and ultimately, governance without politicians”
‘Jobs without bosses’ – do you think people should be banned from entering into employment contracts with each other? The real problem, to my mind, is the fact that people start from totally unequal positions, because various laws a) effectively deny the poor a right to the land they need to sustain life and b) oblige them to obtain money, which they can only do on the terms set by those who control it. Ensuring that people can deal with each other on fairly equal terms would be far better than preventing them entering into arrangements that might suit both parties.
‘Land without lords’ – somebody has to determine the rules governing who gets to use which bit of land, and on what terms, and somebody has to oversee the use of land to ensure that limits are being respected. You can call them something else but the power will be the same. What matters is the process for holding them to account, to ensure the land they oversee can’t be treated as their personal fief. Incidentally, I’ve been pointing out for years that freehold land ownership used to be part of the machinery of government, and that existing freehold rights were originally essentially administrative – part of my land reform solution involves restoring the element of trusteeship that was lost when those administrative rights mutated into private rights.
‘Governance without politicians’ – I can’t see how that can possibly happen unless we throw away all laws. The big problem with our current system is that the structure of governance and processes of accountability are inadequate and have been for years; for centuries even – they are, after all, still evolving from primitive origins. To my mind, the reason they haven’t evolved faster isn’t just resistance from vested interests, it’s also because nobody’s properly analysed the changes that a truly healthy society would need to implement. Until we do that – and have tried to get those changes accepted – I think it’s premature to judge the current system as broken beyond repair.
Having said that, we do need to recognise that it might be and therefore we need a fallback plan. I said above that I’ve been advocating an ‘imago society’ for years. However …
1. If we want to develop a healthy alternative society to replace the current dysfunctional one, we can’t make it reliant on the current system; we have to have a vision of how a healthy society might operate in all its aspects.
2. At some point, if it’s going to replace the current one, it’s going to come into conflict with it – possibly a conflict which will involve some violence. How that turns out will depend, in part, on how our new society has behaved while it has been developing. If we want public support at that stage, it would help if we can say ‘we tried everything we could to get this system adopted through established mechanisms’; if we say ‘we didn’t bother offering this to the electorate [because they’re too foolish, or too much in thrall to vested interests, to see what’s good for them]’, it isn’t likely to go down very well.
At one time, I thought the only way meaningful change could happen would be through a revolution of some kind, but I worried about how that could be reconciled with a commitment to law. In the end I came up with a definition of ‘lawful rebellion’ – which requires making every reasonable effort to achieve change within the existing system. I’m less cynical these days but I still recognise that it might come to that.
So that’s the context of my attempt to set up a reform party. It’s not that I have any great expectation of it working, it’s that a) we simply won’t be able to replace the existing system without working out solutions to all its core problems; b) there’s no reason not to propose those solutions within the current system; and c) the process of working out viable solutions, and strategies for persuading people to take them seriously, will enhance our ability to establish an alternative.
Over to you, Dave. Feel free to take the gloves off!
‘those factors can’t possibly explain why money has tended to concentrate throughout its history, long before the existence of derivatives and fiat money’
Granted – those are current factors. The reason that money has always concentrated is that it has always been lent at interest. Debt jubilees have been blips, but interest compounds relentlessly, and we now have a situation where there is more debt than money, and it can never be paid back – as you know, the more money created, the more debt there is.
Yes, reading your analysis of money and interest, I concur entirely. No brawling there – where we differ is in the politics. I believe that a solution has to come from grassroots, and you believe that a solution will come from the political class, the state. How you can believe that is beyond me, as that approach has led to Trump in the White House with a cabinet full of bankers. And if he’d lost, we’d have corporate Clinton instead. How can you think that that approach will ever work, seriously? When you look at global institutions, do you not see that they’ve been co-opted by the corporate sector – or let’s narrow it down, by banks, by money? You don’t think it’s corrupt? What would they have to do to make it more obvious?
The fact that it ‘would be trivially easy for a competent regulator to deal with’ is irrelevant to the real world, in the same way that it would be ‘trivially easy’ for Accrington Stanley to win the premier league. All they have to do is to score more goals than their opposition every game – simple. But when you can see where power lies, and how much money (and therefore power) Manchester City and Goldman Sachs have, you realise what a futile dream it is.
It would be trivially easy to do a lot of things, but you have to see where power is, to know whether those things are going to happen, and where you locate power depends on the way you see the world – your story about how the world works. I’ll come to that again in my response to your next post.
In the credit commons system that is being developed, there is a credit (and debit) limit on individual accounts; credit can only be earned, and as there’s no money (unless you call the credit in the system money, which is valid as it’s a means of exchange – but it’s not money in the way that most people think of money), which means no interest and therefore no incentive to lend. They’ve thought of social security, and fees on each transaction acting as a tax to support people when they can’t work. But it’s only by doing useful things for your community that you can get credit, not by owning land that you don’t work, or shares, or debt. Its inability to provide a store of value is precisely why it’s a better system – money should be a means of exchange and a measure of value, but having your means of exchange as a store of value is a very bad idea – as you point out in a different way. We don’t need to store value, we need to exchange it in a free market, with a safety net, and without any of it being extracted by people who do no work. Of course it’s a shot in the dark, but so was trying to end slavery, or get universal suffrage (notwithstanding that the latter has been rendered pointless by the infiltration of money). And when it’s been tried in slum communities in Africa, and they’ve realised that they can get the essentials of life without official currency, it’s taken off, and is still taking off – http://grassrootseconomics.org/. That system uses vouchers, but not in the way that the current wave of local currencies are vouchers – i.e. sterling vouchers. Bitcoin and the rest are sterling / dollar vouchers too, unless they’re mined, which uses completely unsustainable amounts of energy. I’m not knocking these new currencies – they show that something big is brewing. I’m backing collaborative credit and the credit commons, when enough people can see the potential. The problem will be retraining people to do useful things again, rather than the corporate human resources / marketing / sales etc. The ‘bullshit jobs’ that David Graeber talks about. But it’s not impossible – people hate those jobs, but just look at the interesting things that people do when they retire! The potential is there.
Capitalism wouldn’t last a week without the state, allowing corporates to avoid tax with impunity, allowing bankers to stay out of jail and stay in positions of influence, allowing banks and corporations to employ politicians, providing schools for future workers, the NHS and social services for knackered workers, defence to provide markets. But surely you know all this?
‘the payment system and bank lending are currently so entwined that it wasn’t possible to prop up one without bailing out the other’ – agreed.
‘There is also a problem in that politicians are often tempted to spend more than the current generation is willing to pay in taxes’ – they’re not tempted, they’re forced, if they want to maintain the military, NHS, social services, civil service, police, prisons, debt repayments, various bailouts etc. It’s way beyond what taxation will bear – even if they clawed back the trillions in offshore accounts (which isn’t going to happen).
My position, as someone who has worked in the environmental field for a long time, is that we’re headed for collapse, the cause of which is the human economy, which we need to stabilise, quickly. Capitalism can’t be stabilised, and so we have to build a new system. The political system has been co-opted, and so we have to build it ourselves. There are great people already building it, and I’d like to help them. ‘Regulating’ or reforming capitalism is really uninteresting for me. If that’s what you want to do, I don’t want to fight you because of it. But please, just give your support to grassroots, non-corporate initiatives – community energy, community-supported agriculture, free and open source software, housing and worker co-ops, credit unions, and DIY. As long as you move your money and don’t support the corporate sector, we’re on the same team. Whatever else you want to do, it’s not my business.
‘we need to develop an ‘imago’ society that could grow inside the existing system and take it over from within’ – now we’re back on the same team (did you mean pupa though? – imago is the adult state).
Where we differ is in whether we see the state as a hindrance or a help in that aim. You might have guessed that I see it as a hindrance. Its unholy alliance with the corporate sector means that it has to oppose any alternative, and trust me, it will attempt to crush the ‘imago’ (pupa?) before it turns into a dangerous dragonfly. Already, community energy groups are not allowed to supply their own electricity to their own members locally – they have to sell it to the national grid for 4p per unit and buy it back for 18p per unit. Local micro-grids are being developed now, but watch what happens – it will be a game of cat and mouse to try to outwit them.
‘Can there be a free market without a state?’ – there can only be a free market without a state. Think of the ways that the state subsidise the corporate sector – from allowing them to avoid tax (whilst clamping down on small businesses), offering them exclusive access to govt. contracts, subsidies, joining/starting overseas wars that are a bonanza for corporate weapons manufacturers; promoting trade deals that allow corporations to sue governments for putting cigarettes in plain packaging, bringing in the minimum wage, dumping nuclear etc. I don’t want to go on and on – you can think of lots more, surely? Google corporate welfare.
‘I argue that people should have an absolute right to pay their taxes in a form they have a natural capacity to supply (i.e. labour)’ – agreed.
‘I don’t think it has any chance at all’ – you may be right, but it definitely won’t if we don’t try. What happened to your imago/pupa idea – it wasn’t a mutualist, grassroots, collaborative idea? If not, what was it?
‘My guess is that nearly everyone will prefer to use a medium of exchange that a) can be used to pay taxes and b) can be readily exchanged’ – yes, but you’ve already suggested labour
‘(on easily understood terms) for a monetary store of wealth’ – no – what do you want monetary wealth for? It’s the root of all evil.
‘‘Jobs without bosses’ – do you think people should be banned from entering into employment contracts with each other?’ – yes, exactly – in the same way that people are prevented from entering slavery, even voluntarily. It’s a no-no, and extracting wealth from other people’s work will be seen that way one day. It’s seen by plenty already. Really, listen to this guy – it’s sublime: https://www.youtube.com/watch?v=Xa6AGDsbmtU. Watch all four – perfect. Read anything about mutualism, especially by Kevin Carson. Google wage slavery. We have to end the extractive economy – wealth needs to stay in communities, not be extracted by people who do no work. Entrepreneurship can still be remunerated, even in a co-op. But self-employment is just fine, and if you want to grow, form a co-op rather than extracting wealth from other people’s work – and passing that right on to your children, or someone with wealth who buys your company. Small businesses – sure, but Tesco was a corner shop once. Let’s get the (non-extractive) structure right from the off. Think Uber vs a drivers’ platform co-op. You have to decide who’s side you’re on. If it’s Uber, we’re on different teams again.
Land reform is a huge one. I’m on the board of http://ecologicalland.coop/. This is the only way we’ll get the land back. The state and its planning system is a huge barrier. Meanwhile the corporate sector is hoovering up millions of square miles of Africa and Asia. The super-wealthy are consolidating their grip on the land as it becomes more expensive, although as a source of wealth, it’s had its day. Money rules, now.
‘‘’Governance without politicians’ – I can’t see how that can possibly happen unless we throw away all laws.’ – there’s a huge body of literature on anarchist / mutualist structures. You’d have to wade in at least a bit before we could have any useful conversation about that. Rules don’t have to come from a centralised state, that can be seized. Is always seized – either by communists, fascists or bankers.
‘the reason they haven’t evolved faster’ – they’re not evolving. Who’s in the White House?
‘it’s premature to judge the current system as broken beyond repair’ – it’s not broken – it’s performing exactly as it was meant to.
‘If we want to develop a healthy alternative society to replace the current dysfunctional one, we can’t make it reliant on the current system’ – exactly
‘At some point, if it’s going to replace the current one, it’s going to come into conflict with it – possibly a conflict which will involve some violence.’ – yes
‘if we say ‘we didn’t bother offering this to the electorate [because they’re too foolish, or too much in thrall to vested interests, to see what’s good for them]’, it isn’t likely to go down very well.’ – it’s not about electorates in a capitalist world, any government has to play the capitalist game or risk capital flight and the wrath of whichever ‘troika’ decides to take umbrage – think Syriza. Plus to make meaningful change, an ‘alternative’ party would have to retain power forever, which ain’t gonna happen.
I’ve had similar debates before – but we’re on the same page when it comes to money, which is unusual. Very few people get it – had a debate with a retired banker the other day who was dismissive of my claim that we had zero reserve banking in this country until I got a laptop out and showed him – he was genuinely shocked.
“I believe that a solution has to come from grassroots, and you believe that a solution will come from the political class, the state.”
No, you’ve misunderstood there, Dave. I don’t doubt at all that we have to get support at the grassroot level before we can establish a healthy society. But I believe a solution will only come if we acknowledge the need for a state and work out how it should operate.
Why do we need a state? You yourself have given a couple of answers to that in your description of the credit commons system that’s being developed:
“there is a credit (and debit) limit on individual accounts” and
“They’ve thought of social security, and fees on each transaction acting as a tax to support people when they can’t work.”
In other words, there are going to be rules and thresholds. That implies some arrangement for reviewing whether the rules are working effectively and whether the thresholds are appropriate, and altering them if necessary. That, in turn, implies a process for deciding which people take those decisions and a mechanism for holding them accountable and replacing them if they’re not doing it satisfactorily. And it implies a meta-system that ensures those rules and processes are adhered to.
(I particularly liked this bit from Slater and Jenkin’s paper: “departing members must clear their credits or debts before closing their accounts” – I wonder if Death has agreed to that requirement!)
“[there will be] no interest and therefore no incentive to lend”
It’s not monetary interest which creates the incentive to lend, Dave, it’s the possibility of gain. But where do you get the idea that monetary interest will be impossible? Let’s look at two people: A has currently reached his credit limit but maybe has an opportunity to earn some more, while B has currently reached his debit limit but wants to buy something. If they make an agreement that A will pay B some credits now in exchange for B paying A a greater number of credits at some point in the future, then this is a loan at interest. What makes this impossible in your system?
This loan is also, from A’s perspective, a monetary store of wealth. A fairly insecure one but if he’s confident B will in fact repay it … I expect you’ve heard the term ‘shadow banking system’.
“We don’t need to store value”
We could certainly have a society of some kind without any ability to store wealth other than in physical form, but it’d be a fairly crude one. Being able to store modest amounts in relatively liquid form does give a sense of security that’s hard to achieve otherwise and that sense of security can allow us to take risks and be more creative than would otherwise be possible. Most people want there to be some way of saving money.
The pernicious aspects of wealth accumulation come when it’s too unevenly spread, with no mechanism for redistributing it. The system I propose would allow some accumulation of paper wealth but it would have a carrying cost (which could be at a higher percentage for larger balances) and, as I envisage it, credit balances would not be heritable. And (in case you’re tempted to object that not everybody can have savings because it’s a zero sum game) a monetary store of wealth is a claim on what will be produced in the future, and it can be justified as a mechanism by which the next generation pays for the infrastructure the current generation leaves them.
Having said that, the system you’re championing could be extended to allow some wealth accumulation. If it doesn’t do so, I’d say it has very little chance of gaining widespread acceptance – for the simple reason that most people will prefer to use a system that does allow it.
As for its success in slum communities in Africa, the fact that people embrace an alternative when dysfunctional official systems are failing them isn’t an indication that it can displace even a half-adequate official system on any large scale. Filling in the gaps is very different from providing everything people need from a monetary system.
“You don’t think [the existing system is] corrupt? What would they have to do to make it more obvious?”
If a system is fundamentally flawed, it will produce perverse outcomes even if everyone within it is behaving honestly and honourably. I don’t doubt there’s plenty of corruption within the existing system but, as things stand, I have no way of knowing how significant it is. When gross inequality is built into its very foundations, I don’t see any need to presume that the injustice it produces stems from corruption. I do, however, see a good reason for not presuming it – the same reason that leads the courts to presume people innocent until they’re proven guilty.
“we have to build a new system”
Yes. But in order to do that, we’ll need to earn a lot of people’s support, and unless we build the new system in a form that properly meets people’s real-world needs, and can stand in isolation, it has very little chance of doing anything more than filling in the gaps. Since doing that reduces people’s frustration with the existing dysfunctional system, it might actually help prop it up.
“‘Regulating’ or reforming capitalism is really uninteresting for me.”
I’m interested in how a healthy society would operate, and I’m interested in how we transition to it from where we are now. As far as I’m concerned, we won’t be able to work out a sensible strategy for making that transition without understanding how the current system operates, what aspects of it are sound and what aspects will need to be discarded. Sticking a label on a complex system makes it an easy target to rant about, but it rarely helps us understand it, so I don’t really have much use for the word ‘capitalism’.
It may be that we’ll need to break the established system in order to make room for a new one and if that’s the case, so be it. Over the years, I’ve thought of various (mostly wildly unrealistic) strategies for bringing that about, and I’ve speculated a lot about how it might play out. One thing I’m certain of is that causing the existing system to break down would be traumatic for huge numbers of people. If we’re too arrogant to even look for ways to make the transition reasonably smoothly we will forfeit a lot of goodwill – and that will make it very much harder for a new system to get established.
“did you mean pupa though?”
I see the current system as the larva/pupa which, with Brexit and Trump, has tied itself up in its own contradictions; it’s reached the limits of its development and needs to be transformed. What I’m thinking is that we need to initiate the metamorphosis which goes on inside the pupa.
“the state […] will attempt to crush the ‘imago’ (pupa?) before it turns into a dangerous dragonfly”
I’d been thinking butterfly, but dragonfly might be more appropriate! Yes, I agree. That’s why we need to make it difficult for them to do that. Part of making it difficult for them will be securing the moral high ground, and that’s why it’s important to fulfil the requirements I discussed in my definition of lawful rebellion.
You think people should be banned from entering into employment contracts with each other – but, at the same time, you think there’ll be no need for a state! How will it be banned then? And how exactly will ’employment contract’ be defined in a way that clearly distinguishes it from all the contracts that are beneficial. (Though presumably, if there’s no state, there won’t be any contracts at all because there’ll be no legal system to enforce them.)
I sat through the first of those ‘Abolish Human Rentals’ videos waiting for some substance, but mostly what he talked about was slavery and old types of marriage contract. It was only when it got to the end that I realised there was another video … and now you tell me there are actually four! He seemed to be suggesting that entering into an employment contract involves temporarily giving up your rights as an individual person. You expect me to take that seriously? If you can point me to some text that makes the case fairly succinctly I’ll certainly read it, but life’s too short for me to sit through much of that kind of waffle.
At base, an employment contract is simply an agreement between two people to pool specific resources to some end (one of them supplying labour, the other supplying whatever else is needed) and (if it’s a commercial venture) to share any profits or losses in a specific way: the specific way being that the labour-provider is guaranteed a return even if the enterprise makes a loss, but the other person gets the benefit of any profits.
If the two parties start from grossly unequal positions, the outcome is likely to be exploitative. But that isn’t a problem with employment contracts it’s a problem with the broader system of resource allocation. If they start from relatively equal positions, a contract like that could easily suit both of them and, in a free market, I can’t see any reason why the law should prevent it.
“This is the only way we’ll get the land back.”
By buying it, a bit at a time? How many centuries do you think that will take? And what will happen when the state disappears and can no longer guarantee rights of ownership? Do we go back to ‘I’m bigger than you so I get more land’? Does your Ecological Land Co-op have plans for its own system of law enforcement or is the need for such things going to magically disappear?
“Rules don’t have to come from a centralised state”
My website is called Local Sovereignty – where did you get the idea I favour a centralised state? But do you understand how states became centralised? Because if you don’t, I’d say the chances of your setting up structures that will avoid that happening again are pretty slim.
I’d need a good reason to wade through all the literature on anarchist / mutualist structures. Polemics about the obvious iniquities of the current system certainly aren’t going to persuade me – I’d need to see some sign that I’d find credible solutions that would stand up, on their own, to the demands of the real world. But I already have credible solutions of my own, solutions which are capable of being integrated into the current system and would transform it – will I find that in the literature you’re talking about?
When it comes down to it, if we’re going to replace existing systems, we need solutions that are capable of absorbing them.
“they’re not evolving. Who’s in the White House?”
Who’s in the White House? Someone who’s tying the system up in its own contradictions. What would you expect to happen in a society entering its pupa stage?
“the current system [is] not broken – it’s performing exactly as it was meant to”
Meant by who? The people who, centuries ago, demanded that they should be able to send representatives for a ‘parlement’ with the king about what he could legitimately require from them? Or the people, later, who forced the king to acknowledge the supremacy of Parliament? The ones who fought the battles that led to universal suffrage? Or do you mean the people who voted for Brexit and Trump?
It might look to you that it’s performing as it’s meant to, but I’d say that’s just your prejudice. If you could drag your eyes away from the glaring faults of the existing system and look instead at its many strengths, you might begin to appreciate just how much work it would take to envisage a totally new system. You might also be surprised by how many of today’s problems actually have their roots in imperfect but well-intentioned reforms that were designed to protect and enhance ordinary people’s freedom. Just because some rogues have got control of the reins, doesn’t mean the horses and carriage should be written off, especially when it’s still full of passengers.
“it’s not about electorates”
Building a new system and replacing the old one is partly about getting public support. If your attitude is that the public are too foolish, or too much in thrall to vested interests, for it to even be worth trying to get their support through peaceful means, they’re not going to be well-disposed towards you if it comes to a violent confrontation. As far as I’m concerned, glibly dismissing the electoral process can only be counter-productive. Do you think you can get a new system introduced without getting public opinion on your side? What are you planning to do, impose it by force? You certainly won’t get much support telling people they have to wade into a huge body of literature before you’ll talk to them about how the new society will be governed.
As for Syriza, all their failure shows is that passion and wishful-thinking are nowhere near enough; without a realistic strategy that takes account of how other people are likely to behave, any attempt to introduce meaningful reform is bound to fail.
“to make meaningful change, an ‘alternative’ party would have to retain power forever, which ain’t gonna happen”
No, all it has to do (for my definition of meaningful change) is establish a set of rules that makes the political process properly accountable to the public, and responsive to their wishes, in a way that can’t be easily changed or corrupted by minorities. (In fact, the manifesto I drafted explicitly requires that the proposed new party dissolve itself once its reforms were implemented.) If a political system doesn’t allow future generations to govern themselves as they see fit, I would count that a failure. So, if your ambition is to introduce something that sets in stone arbitrary solutions to current problems, then we’re definitely on different tracks.
In your response in the money-focused strand of this exchange, you said:
“It would be trivially easy to do a lot of things, but you have to see where power is, to know whether those things are going to happen”
If we have a plausible plan for ensuring that power doesn’t get seized by private interests then we don’t have to pour energy into solving all the specific problems that only happen because the current system is distorted. So if a current problem would be trivially easy to solve under a competent regulator, it’s a waste of time getting het up about it. The problem we need to be primarily concerned with is that fact that we don’t have properly accountable government.
I see this all the time. People don’t seem to understand that, if we are to have a healthy society, it’s pointless working out systems that assume an unhealthy one. If we’re going to develop a healthy society, the core problem is understanding how to build genuine, reliable democratic accountability into it. If we can do that, we can be reasonably confident that all the necessary sub-systems will not be distorted by vested interests. That means we can think about how we solve the problems that are intrinsic to those sub-systems without worrying about how they are distorted in the current system.
‘(I particularly liked this bit from Slater and Jenkin’s paper: “departing members must clear their credits or debts before closing their accounts” – I wonder if Death has agreed to that requirement!)’
I’m pretty sure they were talking about living people. Not much any system can do about death, unfortunately. Some people will die in credit, some in debit – it’ll all come out in the wash.
‘If they make an agreement that A will pay B some credits now in exchange for B paying A a greater number of credits at some point in the future, then this is a loan at interest. What makes this impossible in your system?’
The software doesn’t allow you to accumulate credits or debits past a certain amount (why would you want people who don’t spend their credits to give other people work, or who take but don’t give – neither is any good to your community. Houses can be bought by signing contracts to pay the builder or the seller a certain amount of credits each month, but without having to pay interest on a loan from an unnecessary third party) Limits are linked to your past turnover in the system, and limits are generally set at 3 months activity, I believe. It can be tweaked using some sort of (really) democratic decision-making process. There are quite a few – sociocracy, Loomio etc. It’s not my specialist area I’m afraid, but there are plenty. But it certainly doesn’t require the corporate state, which will be hostile to any meaningful systemic change.
‘Being able to store modest amounts in relatively liquid form does give a sense of security that’s hard to achieve otherwise’
As the basis of a system that is destroying the biosphere, that sense of security is illusory.
‘Most people want there to be some way of saving money.’
Less so in these days of ubiquitous credit. But saving money for what? Just to accumulate it and take it out of circulation? You’ve said yourself that that’s a problem. Contracts can be entered into to get expensive things you need (like houses) that can be paid for over a period of time (but without interest).
Tell you what, if you have specific questions about collaborative credit / the credit commons, first have a look here – https://www.lowimpact.org/credit-commonsworld-without-money/, where various specific questions have been answered, and if they’re not there, you could post them in the comments section here – https://www.lowimpact.org/lowimpact-topic/collaborative-credit/. Matthew, one of the founders of credit commons, has agreed to answer queries.
‘the system I propose would allow some accumulation of paper wealth but it would have a carrying cost (which could be at a higher percentage for larger balances) and, as I envisage it, credit balances would not be heritable.’
Where’s the (feasible) implementation plan? There are millions of competing ideas out there, but the common factor for 99% of them is the lack of an implementation plan. Voting in a party that will implement it, then retain power forever so that it’s not rescinded, then succeed in a capitalist world, avoiding capital flight and hostility from banks and global financial institutions (and if it doesn’t generate hostility in those quarters, it’s not a worthwhile idea), and therefore bankruptcy, is not a feasible plan.
Building a non-corporate economy from grassroots is implementable and in fact it’s being implemented. Credit commons is a tool that may or may not work, but it’s worth a shot. Participatory budgeting has worked well in cities all over the world, and represents the foundation of economic governance without the state. Loomio, sociocracy, holocracy and a whole stable of decision-making structures are out there and they work. This kind of approach is doable. Trying to steer the political system in a direction that the corporate sector don’t want it to be steered is not.
‘Having said that, the system you’re championing could be extended to allow some wealth accumulation. If it doesn’t do so, I’d say it has very little chance of gaining widespread acceptance – for the simple reason that most people will prefer to use a system that does allow it.’
I’d say that wealth accumulation is an absurd dream for 99% of the world’s population, it’s the root of our democracy and sustainability problem and I’d ask you again why you’d want wealth to accumulate?
‘As for its success in slum communities in Africa, the fact that people embrace an alternative when dysfunctional official systems are failing them isn’t an indication that it can displace even a half-adequate official system on any large scale. Filling in the gaps is very different from providing everything people need from a monetary system.’
Why couldn’t an alternative like credit commons provide everything that people need? Global capitalism doesn’t provide everything that people need. It reduces people in the poor world to virtual slavery, and takes away the things that people really need in the West, like a biosphere that’s not headed for collapse, like strong communities, like meaningful work. And the official system is not dysfunctional, if you understand that its function is to enrich the people at the top of it.
‘When gross inequality is built into its very foundations, I don’t see any need to presume that the injustice it produces stems from corruption.’
Agreed. I withdraw my previous statement. Problems don’t arise because of corruption, they arise because of what the system is set up to do, whether it’s corrupt or squeaky clean.
‘I don’t really have much use for the word ‘capitalism’.’
It doesn’t care whether you have much use for it or not, it just trundles on regardless. It’s what our economic system is – if you want to use another word for it, fine.
‘causing the existing system to break down would be traumatic for huge numbers of people’
Agreed, which is why I want to help build something to slowly replace it, rather than bringing anything down.
A couple more things
Contracts won’t need to be ‘enforced’, but if you break one, it will damage your local and online reputation. If you’re going to trade with someone, you’ll want to see their reviews and their trading record, on blockchain. If you want to make a living, you’d better play fair.
David Ellerman is a genius. To think that what he says is ‘waffle’ shows that you haven’t understood him. More in the next post.
The super-concise version is that it’s morally wrong to be rewarded for someone else’s work.
Articles (reasonably concise):
http://kevin_carson.tripod.com/
and
https://www.lowimpact.org/mutualism-philosophy-changing-society-difference-implementable/
and
https://www.lowimpact.org/small-key-can-open-large-door-know-whats-happening-rojava/ (actually implemented, among 3 million people – but will undoubtedly be crushed when ISIS is over and they’ve served their function).
If that doesn’t work for you – would you be opposed to an economy comprised of self-employment and co-ops – like a global Mondragon – or if society started to move in that direction, would you fight for the right of people to make money from other people’s work, which is the corollary of private employment contracts (and the stock market, derivatives market, rent etc. – would you fight to keep those things)?
As I said (and this is a very important point), Tesco started as a corner shop. If we’re happy with the shoots of a rentier economy, we’re on the slippery slope to corporate domination – it’s inevitable. Mondragon has grown to encompass 100k workers not because of laws preventing private employment contracts – but because people want to live that way. I lived at Redfield community for 13 years. We had rules that we abided by, but no state imposing those rules. Non-hierarchical institutions can be federated, networked, nested.
And if that doesn’t work for you, you’ll have to put the hours in, or we’re going to have to drop the subject or we’ll be talking at cross purposes. Being into political solutions but not understanding anarchism or mutualism as concepts (as well as liberalism, communism, libertarianism etc.) is a bit like being into football but not understanding the offside rule. It’s worth putting the time in to understand it – essential, I’d say.
As I said before, people see the world through their stories of how things got to be like this and what we can do about it. They don’t respond to logic or evidence if it contradicts their story, because then they won’t have a story – and you can’t take away someone’s story without giving them a new one. The two main stories below are both restoration narratives. The world fell into chaos – great depression, world wars, nazism, communism, cold war, nuclear threat, environmental threat etc. We have to restore order and security.
The left / social democratic / Keynesian story:
1. The world fell into chaos
2. This was brought about by wealthy elites
3. Justice is crushed
4. The solution lies in regulation, taxing wealthy elites and increasing public spending
5. We have to restore order and security by taking power from elites and giving it to the people via a paternalistic and benign state
The right / neoliberal story:
1. The world fell into chaos
2. This was brought about by a rise of state power which tends towards communism and fascism
3. Freedom is crushed
4. The solution lies in freeing entrepreneurs, removing red tape and reducing taxes
5. We have to restore order and security by taking power from the state and giving it to the people via free market capitalism
If we subscribe to one of these stories (and yours is more-or-less the first), we’ll have half the population against us from the start. The right is currently winning. It will swing back again, but if left and right are opposed in their respective stories, it’s stalemate. We can’t have ultimate restoration of order and security. Plus – both those stories are based on perpetual economic growth – which is impossible, and we’ll make ourselves extinct if we keep trying.
The battle between proponents of those two stories can never be won, the roots lie (largely) in upbringing – see https://www.lowimpact.org/roots-right-left-thinking-can-unite-left-right-corporate-power/, and it has caused, and continues to cause, an enormous amount of damage.
I suggest a third story, neither left nor right – but with aspects of both:
1. The world fell into chaos
2. It was brought about by an alliance of corporate sector and the state
3. Both freedom and justice are crushed
4. The solution lies in building a non-corporate economy, with a mutual credit exchange system replacing banks, and with participatory budgeting overseeing public works
5. We have to restore order and security by taking power from both corporations (especially banks) and the state and giving it to the people via local groups and self-organisation, within a free market, but with decentralised, distributed power, mutualism and real democratic governance within a stable economy
The way we sell this story is that we can live in balance with nature. It will also bring more interesting jobs, healthier food, stronger, safer communities, better social lives, no bosses or landlords, local uniqueness and freedom with justice.
Goodness – there’s a blog article in there.
It’s very unusual for someone to change their story – stories can be eroded gradually, until the contradictions that are left ensure that it has to change. But it’s not common and I’m not assuming that you’re going to change your story. What’s happening is that we’re challenging our own positions (in order to strengthen them) and grandstanding for anyone else reading this. But that doesn’t mean we have to fall out, because (bizarrely after so many words) it doesn’t matter. I’m not going to get involved in reformism, because life’s too short. I’m not going to pick fights with anyone who chooses that path, but I prefer to help develop the non-corporate economy. Do you support that? If so, great – we don’t need to argue about what else we do. I’ve had exactly the same conversation with Labour party members, revolutionary communists, far-right libertarians, Conservative parliamentary candidates and even non-mutualist anarchists – all of whom were happy to support co-operative, small-scale, peer-to-peer, commons, non-corporate, open source initiatives. So great – no need to argue about anything else. If your (or their) plan is implementable, then implement it and we’ll see what happens. The people building a non-corporate economy are already doing it, so let’s help them.
“Some people will die in credit, some in debit – it’ll all come out in the wash.”
It won’t come out in the wash if credits can be passed on but debits can’t (as happens in our current system). Their system will obviously have to have procedures to deal with that, and with the situation where people with debits simply walk away.
Having now read the whole of their paper, I have to say I think your blog posts do it a disservice; it’s far more realistic than you’ve suggested. If it’s promoted with that kind of hype (“There’s no money, so […] it can’t be scarce, so there’s no poverty”) I think a lot of people will dismiss it out of hand.
“why would you want people who don’t spend their credits to give other people work”
I assume you mean ‘why would you allow them to do work for other people?’, in which case the answer is ‘because they might have skills other people want the benefit of’. A system that deliberately makes it hard for someone with credits to buy something they want, from someone they trust, is unlikely to win widespread acceptance.
There are echoes here of our debate on meat-eating: the fact that there need to be overall limits doesn’t mean that there have to be individual limits. As long as stored wealth has a carrying-cost, there’s no reason why individuals should be prevented from accumulating as much as they like.
“saving money for what? Just to accumulate it and take it out of circulation? You’ve said yourself that that’s a problem.”
No, I haven’t said that, Dave. I’ve said that private individuals having the power to take the medium of exchange out of circulation is a problem. It’s perfectly possible to have a system of savings that doesn’t have any adverse impact on the amount of money in active circulation. Preventing the hoarding of cash, and introducing time-related charges on current account balances is all that’s necessary to remove rentier interest from the system. You don’t have to remove the ability to buy (non-transferable) bonds from trusted institutions.
As for what people save money for, have you never heard of rainy days? A prime reason people save is so that they can cope with unforeseen circumstances. Another reason is so that they can buy expensive things without going into debt: there’s a huge difference between choosing to work hard in anticipation of buying something you hope to enjoy, sometime in the future, and being obliged to work hard to pay for something that you’re kicking yourself for having bought in the past.
And, when it comes down to it, it doesn’t really matter why people want to save. If they do, they will favour a monetary system that makes it easy over one that makes it hard. If you’re hoping a new system will replace the current one, it needs to satisfy people’s real-world requirements.
“Contracts can be entered into to get expensive things you need (like houses) that can be paid for over a period of time (but without interest)”
It’s important to differentiate between rentier interest and legitimate charges which are levied through the mechanism of interest. We’re agreed the former is pernicious and needs to be prevented, but it’s perfectly reasonable for sellers to charge higher prices the longer they have to wait for payment, and interest is a mechanism that makes doing so easy.
Part of that extra price will reflect the risk that the buyer will default. But sellers often don’t want to carry that risk themselves. Should they be denied the right to sell that future income stream to a third party for a lump sum? Because if they can do that, then the system will be little different from buyers taking out loans; the third party will want all the same assurances of buyers’ ability to repay and sellers will insist on them providing them.
“Why couldn’t an alternative like credit commons provide everything that people need? Global capitalism doesn’t provide everything that people need.”
A credit commons could certainly provide everything people need – but not if it deliberately excludes some of those things because of an irrational association with injustices that are actually caused by something else. And not if it deliberately excludes some people from participating in it.
Stepping back a moment: do you notice what you’ve done in those two sentences? You’ve slid from a discussion about what monetary systems can do into a judgement of the outcomes of the broader system. Those outcomes aren’t purely the product of the monetary system (and we’re agreed anyway that the current monetary system is a source of injustice) – they’re also the product of ownership laws which give a minority control over resources which nobody can live without. I’m suggesting that a relatively simple change to the monetary system would remove the unfairness that is currently built in to it; the fact that the current system doesn’t provide everything that people need isn’t in any way a rebuttal of that.
What changes are needed in the monetary system is a separate question from how those changes are brought about. In principle, they could be initiated internally (through governments choosing to implement them) or externally (through a new system being built that displaces the old one). My view, which I’ll say more about in my other, more political response, is that both routes will be necessary: a credible alternative system will put pressure on the existing system which will force it to change; an inadequate alternative system, on the other hand, will reduce the pressure on the existing system, and will therefore help sustain it.
“if you want to use another word for [capitalism], fine.”
There are certainly occasions when the term’s useful, but reducing a complex system to a single word encourages people to embrace or reject it as a whole, without properly understanding its strengths and weaknesses. You’re looking at the unjust outcomes it produces and jumping to the conclusion that the whole system is irredeemably flawed without having bothered to analyse it properly. What would you think of someone who bought a new car because dirt was getting into the fuel line of the old one? Your criticisms of the current system are on a par with that. (Sorry for the analogy but it’s what came to mind – even though I gave my car up several years ago!)
“Trying to steer the political system in a direction that the corporate sector don’t want it to be steered is not [doable].”
History is full of examples where the political system has developed in ways established powers didn’t want it to go. It may not be simple but the rights our ancestors won for us in the past mean political change is much easier to achieve now than it has ever been.
History is also littered with examples of people who decided that reforming the existing system was impossible and went off to start new societies where everyone would treat each other fairly (issue 3 of The Land looked at some of them). Mostly they’ve left no trace but some did put down roots and grow to an impressive size; there’s a prominent example the other side of the Atlantic, currently headed by a guy called Trump.
“[democratic decision-making] certainly doesn’t require the corporate state, which will be hostile to any meaningful systemic change”
I obviously haven’t got across the perspective I’m looking at it from. I’m concerned with how a monetary system might operate in a mature society – because it’s only by having a vision of where we want to end up that we can know which direction to go in. For the most part, how we get past the obstacles in the way is a separate issue. However, if we can envisage different types of monetary system that would work equally well, it will probably be easier to transition to the one that is closer to what we have now (both technically and in terms of how easy it is to persuade people to embrace it).
As Slater and Jenkin acknowledge in their paper, getting the governance right is crucial.
“Contracts won’t need to be ‘enforced’, but if you break one, it will damage your local and online reputation.”
For some reason this makes me wonder what happened with your builder neighbour. Did he report the shoddy work he’d inspected? And did he get his legs broken as they’d threatened?
“If you’re going to trade with someone, you’ll want to see their reviews, recorded on blockchain.”
Speaking for myself, I really don’t want to be looking at online reviews every time I buy something. What I want is to trust that the person I’m buying from is honest and know that I have some recourse if they’re not; being able to give someone who’d cheated me a one star review wouldn’t be enough. Maybe I’m in a minority but my guess is I’m not.
I’ve looked at David Ellerman’s website and read his page ‘What is a human rental?’. He starts by stating that an employment contract constitutes an alienation of authority and responsibility, then argues that such alienation can’t in fact take place, that the most a person can do is choose to cooperate. He then asserts that the legal system pretends that the cooperation is an actual alienation of authority and fulfillment of the rental contract.
If you take that seriously you might well see him as a genius but, as far as can I see, there’s no more substance in it than there is in the legalistic stuff the freeman-on-the-land crowd come out with. The courts don’t need to pretend that the cooperation is an alienation of authority because they don’t consider that there’s any alienation involved. They regard an employment contract as a straightforward agreement to cooperate and generally all they’re concerned with is whether those terms have been conformed to. What part of his argument do you think I haven’t understood?
“would you fight for the right of people to make money from other people’s work, which is the corollary of private employment contracts (and the stock market, derivatives market, rent etc. – would you fight to keep those things)?”
I’d fight for people’s right to offer their labour on whatever terms they like, which is the essence of private employment contracts. What you’re doing is blaming employment contracts for something which is actually the result of perverse ownership laws.
“If we’re happy with the shoots of a rentier economy, we’re on the slippery slope to corporate domination”
If we fail to understand that a rentier economy inevitably has much in common with a healthy economy, we’re in danger of throwing out the baby and keeping the bathwater.
“I lived at Redfield community for 13 years. We had rules that we abided by, but no state imposing those rules.”
You had a community of people who had chosen to live with those rules, and anybody who didn’t want to abide by them could leave and go somewhere else. And if anybody broke the rules and refused to leave, the community would have been able to call on a higher power to evict them. What works in a small, voluntary self-contained sub-system isn’t a good guide to what will work in a larger, involuntary system which no-one has the possibility of leaving.
I’ve never understood the difficulty people have understanding this. I remember a conversation I had with Tony Gosling a few years ago at a TLIO meeting where he railed against hierarchy and contrasted it with how well native American tribes governed themselves by all getting together to work out solutions to important questions. He did recognise, as soon as I pointed it out, that scale matters – solutions that are practical for a few hundred people won’t necessarily work for thousands or millions – but I’m always surprised that such an obvious thing needs pointing out. (Then again, I’m often apalled by my own capacity to overlook the obvious.)
“Non-hierarchical institutions can be federated, networked, nested”
And federation, networking and nesting all have the same potential for corruption and need for satisfactory checks and balances that hierarchies do. Whatever the system’s called, relations between neighbouring communities will be mediated through ‘trusted’ individuals so, for practical purposes, there will be a hierarchy. In essence, that’s how our existing system came about: trusted individuals from different communities got together to work out common solutions. If we don’t understand why that hasn’t turned out well, any new system is in danger of reproducing the same flaws.
What needs to be recognised is that the process creates possibilities for corruption which aren’t present at the smaller scale … and future evolution of a system can introduce new possibilities for corruption that cannot be envisaged when it’s first conceived. Unless there are adequate mechanisms for people to monitor their representatives and replace them when need be, any system has the potential to become distorted whatever label you stick on it.
“Being into political solutions but not understanding anarchism or mutualism as concepts (as well as liberalism, communism, libertarianism etc.) is a bit like being into football but not understanding the offside rule.”
I don’t think I’d read about mutualism before, but I’m certainly familiar with the various other isms you list and I see no reason to spend any more time on them than I already have. Political philosophy may be a worthwhile subject of academic study but I can’t see that it’s any more relevant to working out practical solutions to the problems of governance than theories of plant classification are to establishing practical methods of growing vegetables.
For people who aren’t themselves interested in thinking deeply about governance, reading political theory may be the best way to get an idea of the range of possible solutions. For people like me, who do think deeply about it and who like to dig down to fundamental principles, reading other people’s ideas has only limited value and carries a danger that our thinking might be constrained by their analysis.
Also, sticking labels on different perspectives can obscure the fact that, very often, they’re simply different ways of looking at the same thing. That makes it easy to slip into a habit of focusing on the (sometimes relatively minor) differences between isms, and take for granted the huge amount that is common to them. Kevin Carson’s introduction to mutualism strikes me as a good example of that. He outlines ways it differs from other flavours of anarchism and paints a broad-brush picture of its (fairly commonplace) goals. I see nothing to suggest he has any useful insights into how those goals can be secured and the fact that he contrasts the virtues of those goals with the outcomes of established systems doesn’t inspire confidence in the clarity of his thinking; how a system is implemented is crucial to whether its goals are achieved. Maybe there’s something practical buried somewhere in the site but I see no reason to search for it.
I find it more useful to look directly at what actually happens in the world and work out solutions on the basis of what I see for myself. Getting an outline of other people’s ideas can certainly be useful but the more time you spend reading, the less you can devote to thinking – and there are a lot of isms out there (including ‘Ramsayism’ – though when Chris Smaje coined the term he was referring to my thinking about land ownership and inheritance rather than my broader political philosophy).
I might have found George Lakoff’s thinking about left and right useful if I hadn’t already arrived at a broader (and possibly deeper) understanding of the same question. I treat the left/right divide as being the product of two natural polarities, one of which is similar to his. In my analysis, people view government from diametrically opposed positions: some people emphasise individual responsibility and collective rights, while others emphasise collective responsibility and individual rights. There might be some family dynamic involved in that, as Lakoff suggests, but I suspect the polarity is more fundamental (i.e. a fundamental polarity underlies the family dynamic rather than emerging from it).
From a practical point of view, though, I regard the other polarity as more significant. I see an ever-present tension within political life between the need for consolidation and security and the impulse for expansion and betterment, and this manifests as a polarity in the functions of government. This offers a way of incorporating both left and right perspectives into political structures, through electing different representatives to oversee those different aspects of government (Polarised Representation).
“If we subscribe to one of these stories (and yours is more-or-less the first)”
My story isn’t like any of those three, Dave, because a) it isn’t a restoration narrative, b) it doesn’t start last century and c) it isn’t rooted in finding people to blame. I don’t think there was some kind of golden age before the great depression; what’s happening today is merely the latest chapter in an old, old story, which might be summarised as:
1. Amidst primordial chaos, arbitrary law establishes a degree of order and security;
2. Order and security allow concepts of fairness and justice to emerge;
3. Pursuit of justice leads to (partial) introduction of systematic law;
4. Incompatibilities between arbitrary and systematic law expose us to subtler forms of chaos;
5. We have to establish deeper levels of order and security through developing more coherent forms of law.
(Points 2/3 through 5 are on a loop and I see progress more as a spiral than the linear movement forwards or backwards that your three stories imply.)
“I prefer to help develop the non-corporate economy. Do you support that?”
I certainly support developing a non-corporate economy if it has a realistic chance of replacing the existing one. However, if you’re promoting an alternative system as a viable route to getting rid of the current dysfunctional system, when actually it has no hope of standing on its own, then I’d say you’re actually helping to sustain the existing system. If that possibility doesn’t worry you, I don’t know what to say.
A credible alternative society would both benefit from and reinforce a parallel movement for reform within the established sphere. Do you really want to restrict your movement to people who have lost all hope of the current system being reformed? There are huge numbers of people who are deeply disillusioned with it, but are frightened that the world might fall into chaos and are hostile to people they think are trying to hasten that. You’ll find it much easier to attract their support if your movement acknowledges a possibility of reforming the current system and recognises that, at some point, the new system will need to merge with the remnant of the old.
‘It won’t come out in the wash if credits can be passed on but debits can’t’
Credits and debits can’t be passed on. If you die, your credit or debit dies with you. You can’t do any work for anyone if you’re dead, and you can’t buy anything from anyone if you’re dead. (although there might need to be something in place to stop 90-year-olds from going to their debit limit). But everyone’s credit or debit is with the system, not tied to any individual within the system.
‘Having now read the whole of their paper, I have to say I think your blog posts do it a disservice; it’s far more realistic than you’ve suggested. If it’s promoted with that kind of hype (“There’s no money, so […] it can’t be scarce, so there’s no poverty”) I think a lot of people will dismiss it out of hand.’
Taken on board, thank you. You’re right that there could be poverty, even in a credit commons system, but it wouldn’t be from lack of money, it would be from lack of desire to provide things that other people need (inability to do that would be covered by a social security system).
‘ “why would you want people who don’t spend their credits to give other people work”
I assume you mean ‘why would you allow them to do work for other people?’, in which case the answer is ‘because they might have skills other people want the benefit of’. A system that deliberately makes it hard for someone with credits to buy something they want, from someone they trust, is unlikely to win widespread acceptance.’
No – I meant that if people don’t spend their credits, they’re not providing work for other people in the system to do.
‘there’s no reason why individuals should be prevented from accumulating as much as they like.’
There are two reasons. Accumulation of wealth increases consumption, but to prevent destruction of the biosphere we need less consumption. Plus concentration of wealth prevents democracy.
‘have you never heard of rainy days?’
That’s what the debit part is for. A rainy day is fine. A rainy year, due to injury etc. is covered by social security.
Most people’s ‘real-world requirements’ are to be able to get the things they need to survive, not to save. Saving is a luxury enjoyed by a tiny percentage of the world’s population. However, I’m not sure if there’s not a way of saving in the credit commons – if you ask Matthew on the collaborative credit page, I’d be interested in seeing his response.
You can buy expensive things (like houses) by contracting to give credits monthly over a set period.
‘it’s perfectly reasonable for sellers to charge higher prices the longer they have to wait for payment, and interest is a mechanism that makes doing so easy.’
But a better idea would be to charge a fee, that doesn’t compound, or for houses or businesses, to take a share of ownership that is slowly paid off. Muslims are right on this one (and so were Christians, until they saw how much money could be made from usury and changed the rules).
‘Part of that extra price will reflect the risk that the buyer will default.’
I’m not sure buyers can default in credit commons – again, a question for Matthew. In the same way that the software can be set (by participatory budgeting committees) to prevent transactions that push people too far into credit or debit, it can (I think) be set to transfer credits as and when agreed by both parties (although I may be overestimating the current technology). Transactions are recorded in a blockchain, and reputation is everything if you want to trade (which you’d have to, as there would be no money to make money from). Some sort of insurance would cover death or inability to work.
‘Should they be denied the right to sell that future income stream’
There wouldn’t really be ‘income streams’ – you’re thinking of making money from having money. In credit commons, you do something useful, you get credit.
‘Those outcomes aren’t purely the product of the monetary system’
Ultimately they are, because money concentrates (due to interest) in the banking system and at the top of the corporate ladder. This excess wealth overflows into the political system to ensure that states prop up the corporate system (via the ownership laws that you mention), and that people like you (i.e. good people) are not able to change that cosy set-up.
‘I’m suggesting that a relatively simple change to the monetary system would remove the unfairness that is currently built in to it’
But you absolutely can’t make that happen. How? And why haven’t you done it?
‘both routes will be necessary: a credible alternative system will put pressure on the existing system which will force it to change’
Sure. What’s your alternative system, apart from spreading the already existing solidarity economy? And if that’s what you’re saying I completely agree.
‘the conclusion that the whole system is irredeemably flawed’
correct
‘without having bothered to analyse it properly’
You’re going to have to stop doing that, or it’s going to be difficult to respond to you. It’s very patronising – as though you’re the only person who’s ever thought about anything.
‘History is full of examples where the political system has developed in ways established powers didn’t want it to go. It may not be simple but the rights our ancestors won for us in the past mean political change is much easier to achieve now than it has ever been.’
I think you’re breathtakingly, naively wrong. What can I say? The corporate empire is the most powerful empire the world has ever known.
‘For some reason this makes me wonder what happened with your builder neighbour. Did he report the shoddy work he’d inspected? And did he get his legs broken as they’d threatened?’
Nope, he kept schtum and safe.
‘Speaking for myself, I really don’t want to be looking at online reviews every time I buy something. What I want is to trust that the person I’m buying from is honest’
Exactly – which is why to be in credit commons, you first have to be part of a local collaborative credit group that know each other.
‘know that I have some recourse if they’re not’
It’s only about the exchange system. It wouldn’t change the legal system.
Ellerman’s arguments are the basis of mutualism – that no-one should make money from anyone else’s work. In company A, a co-operative, decisions are made collectively, everyone gets remunerated for the work they’ve done, no-one (who hasn’t done any work) creams money off from the work of the people in the company. In company B, a conventional company, decisions are imposed from above via a hierarchy, and shareholders (who do no work) cream money off from the work of people in the company. I prefer company A. You may not agree, but it’s not possible to prove that I’m right – it’s a question of ethics.
‘I’d fight for people’s right to offer their labour on whatever terms they like, which is the essence of private employment contracts.’
But we’ve established that I lean towards mutualism, and so I’d prefer to build the ‘solidarity economy’ which includes self-employment (but if you want to grow, then take on people as equal partners or stay self-employed). You can still be remunerated for your entrepreneurial work in a co-op – you just don’t get to be remunerated from other people’s work, for life, and to pass that right on to your children, or to sell shares to shareholders who then get remunerated from the people doing the actual work in your company. That’s not an ethical system to me. If it is to you, then that’s something we’re going to have to agree to disagree about.
‘If we fail to understand that a rentier economy inevitably has much in common with a healthy economy, we’re in danger of throwing out the baby and keeping the bathwater.’
ditto
From there onwards – I find political philosophy a good way to work out your values, and to think about systems that would reflect those values. I find it difficult to subscribe to -isms entirely, as you can then get locked into a ‘line’ and be expected to toe that line about all issues. It doesn’t leave room for flexibility. I only used the community example to show that there are different ways of imposing rules. It’s not impossible to imagine federations of communities, companies and individuals who can agree rules covering wider areas, without the assistance of professional politicians. For me, that’s a wonderful thought, and it’s why I’m so interested in what’s happening in Rojava. Regardless of how long that experiment lasts, they’ve done that for a population of three million, based on the philosophy of Murray Bookchin (I’d prefer Kevin Carson’s, but hey), which shows that it can work on a bigger scale than an individual community. Mondragon is worth looking at too, although it hasn’t encompassed the political system.
‘I don’t think there was some kind of golden age’
That’s not what I’m saying – but you have to agree that both the great depression and WW2 were examples of a fall.
‘subtler forms of chaos’
I believe that we may have already passed the ‘cascade point’ that worries ecologists so much, and that it may not be possible to stop or even slow down biodiversity loss – in which case the chaos we’re headed for will in no way be subtle.
‘I certainly support developing a non-corporate economy if it has a realistic chance of replacing the existing one.’
I think that it’s the only thing that has a realistic chance. I hope you support it. I’ll send you a link to the new website when it’s launched.
‘Do you really want to restrict your movement to people who have lost all hope of the current system being reformed?’
Not at all – I’m hoping you’ll be in it for a start. And if you manage to reform capitalism (sorry, ‘this system’) to the benefit of the non-corporate sector, I’ll take my hat off to you. But it’s not something I’m interested in, any more than I’m interested in greenwashing corporations. I would find it depressing and dispiriting. I wouldn’t be able to recharge my batteries. So I’d like to paraphrase what I said in a previous post – you do your thing and I’ll do mine. The solidarity economy is already growing, so it’s something you can do already (who provides your banking, phone account, software, energy, food etc?), but the corporate sector’s dominance of our political systems is also growing, and I can’t see any mechanism to prevent that. So I’ll keep helping to build the alternative. Help us, and if you make any headway in separating corporate and state power, let me know and I’ll try to help you.
By the way, this piece by Tim Jenkin is sublime – https://www.community-exchange.org/docs/aftercapitalism.html. Have a cup of tea and give it a go.
“if you want to grow, then take on people as equal partners or stay self-employed […] you just don’t get to be remunerated from other people’s work, for life, and to pass that right on to your children, or to sell shares to shareholders who then get remunerated from the people doing the actual work in your company. “
You keep doing this. We’re talking about some specific feature of society and you bring up a host of peripheral things which are only pernicious because of a whole set of other factors.
We’re talking here about employment contracts – people’s right to do work for others in exchange for payment of some kind. Say two people make an agreement by which person A pays person B a set sum every week, for a few months, to help with an expanded workload – that constitutes an employment contract. Person A is not being remunerated, for life, for B’s work; he’s not passing the right to B’s work on to his children; nor is he selling shares in it to outside shareholders. Why do you mention those things when they’re totally irrelevant to the issue in question?
The question of what people can pass on to their children is fundamental to a healthy society but it has nothing to do with employment contracts. Similarly, in a healthy system, people who make a one-off injection of money into a business would be contributing indirect labour to it and accepting some of its risks: the question of how they should be rewarded is important, but that too has nothing to do with employment contracts.
“if you want to grow, then take on people as equal partners or stay self-employed”
Are you suggesting that someone who has established a business, doing skilled work for others in the community, possibly using a stock of capital equipment that they’ve accumulated over a period of several years, should give 50% of the say in the business to someone who has come in to take over the paperwork and do some routine unskilled jobs? Are you suggesting that a person who is happy doing a few hours a week of routine, unskilled work for someone else, for a simple reward, should be forbidden from doing so?
I’ve no objection at all to the idea that mature businesses should operate as co-operatives of some kind. Quite the opposite: while it’s not something I’ve looked at in any detail, I have long taken for granted that it should be the case. But if a society has rules that unnecessarily constrain creative or energetic people’s ability to profit from their own inventiveness or drive, it will wither. Entrepreneurs are often motivated as much by a desire to shape the world as by a desire for wealth; deny them the right to do that, in whatever sphere they are contributing, and many of them will just shrug their shoulders, earn the minimum they need to survive and take up a hobby instead – and the greater part of what they might have contributed will be lost. As far as I’m concerned, rules that prevent exploitation are necessary, but rules that prevent equals from choosing their own terms to cooperate on would be pernicious.
“the corporate sector’s dominance of our political systems is also growing, and I can’t see any mechanism to prevent that.”
There’s a very obvious mechanism, Dave – if enough people vote for a party which is committed to introducing reforms which will make government properly accountable to the people, then the corporate sector’s dominance of our political systems will be broken. They will no doubt make all sorts of underhand attempts to persuade the public to ignore such a party, just as they will make all sorts of underhand attempts to persuade the public to ignore the solidarity economy. They may well manage to block it that way, just as they may manage to block the solidarity economy. But as you said yourself, about what you’re attempting, it definitely won’t succeed if we don’t try.
“[reforming capitalism is] not something I’m interested in, […] I would find it depressing and dispiriting”
What I would find depressing and dispiriting is the idea that there’s only one feasible path to a better world. In my experience, the more possible avenues I can imagine, the more hopeful I feel that it’s achievable.
I’m not trying to persuade you to be actively involved in pushing mainstream reform, I’m simply suggesting that the two approaches will be stronger if we embrace what they have in common. At some point, if you are successful in building your new society, it will have to either fight and defeat the established system, or merge with it. If your intention is to fight it then, indeed, you don’t need to pay any attention to how it operates or what attempts people are making to reform it from inside. But if you’re hoping to merge with it (or absorb its hollowed-out shell) it’ll help if the governance system you’ve developed bears some resemblance to the old one, and people dependent on the old system will find it easier to come to terms with the new one if the differences between the two have already been brought to their attention by mainstream reformers.
What I’m saying is that, if you deliberately design your new system to be as different as possible from the old one, you will be putting obstacles in your own way. But if you design it to be as similar as it can be without sacrificing the goals of social justice and democratic responsiveness, you will be making the path easier. Similarly, when mainstream activists focus on reforms that have never been tried, they inevitably meet resistance from people scared they wouldn’t be workable. If reformers can point to people already living, and thriving, with those different ways of doing things, it will make meaningful reform much easier to achieve. The two paths are complementary.
For myself, my ultimate fall-back plan requires me to have made reasonable efforts to encourage meaningful mainstream reform and to support the building of a credible alternative. But both those routes depend on widespread public support and if that isn’t forthcoming then … well, as I said in another comment, it’s actually the wilder possibilities that appeal to me more.
Thanks for the link to Tim Jenkin’s paper. I thought the first part was good but, not seeing everything through a ‘ruling class looking out for themselves’ lens, there are several points I find unconvincing in his historical analysis.
However, my most serious objection to what he says is on the core issue of how a monetary system works:
“This is not money issued as an exchange medium but money issued as debt. Attached to the debt is interest, which introduces another dimension to the logic of the system, that of the need to expand exponentially. This is required in order to expand the total quantity of the exchange medium so that the repayment of the principal as well as the interest does not reduce the total supply of money.”
This is a popular idea (which you also put forward in your posts) but I find it absurd. The interest on a loan is not essentially any different to a fee for providing it, which is no different from a charge for any other service. Does paying someone to cut your hair require an increase in the money supply? Of course it doesn’t. Every exchange which involves payment in money is an increase in its rate of circulation (and might therefore face real-world obstacles) but it certainly doesn’t create any need for the system to expand exponentially.
“[money] was from the start designed to work as a tool of extraction rather than as a neutral mechanism to ensure the fair distribution of society’s wealth. It enabled kings to requisition their requirements from the producing sector without having to maintain a cumbersome centralised bureaucracy to organise production and distribution.”
It’s an interesting hypothesis but I’m not sure it fits with his own narrative. Earlier on he suggested that it was the existence of a centralised bureaucracy to organise production and distribution which had given rise to formal exchange systems – and also to self-serving administrators who used their privileged position to benefit their own kind. The kings’ power is there in the physical control needed to maintain the centralised system. Is that power increased by introducing coins?
“By demanding taxation, subjects were compelled to provision the king in order to obtain the coins to pay their taxes.”
An equally plausible way of looking at it might be that rulers dealt with the problem of corruption in the centralised system by abandoning it; freeing people to control their own production and sell their produce to whoever they pleased, but requiring them to pay taxes in coin instead. In a broadly equitable society, this could have been seen (in principle) as quite a liberating innovation … except that, since coins (unlike produce) were easy to hide and keep for long periods, anyone with a small surplus could effectively hold it to ransom. So far from enhancing the king’s power, I’d say the introduction of monetary taxation positively reduced it.
It seems to me his hypothesis rests on a presumed solidarity among the ruling classes that, as far as I’m aware, was far from being present in the historic period. My impression is that the norm was a constant three-way tension between ruler, lords (Jenkin’s administrator class) and people – with the lords either constantly at odds with each other or trying to usurp the ruler, and kings as often as not looking after the interests of the people (because that was their best protection against ambitious lords). Perhaps the social dynamic was different in the period before written history but I’d need convincing.
“The failure of money-based exchange systems to comply with the requirement of exchange systems that they ensure balance and the equitable distribution of collectively-produced wealth, is a function of the fact that they have always been under private control or captured by special interests.”
Yes, but the reason they have been under private control, for many, many centuries, is the fact that coins or other forms of physical money are easy to hoard indefinitely. There isn’t any need to hypothesise a conspiracy among a pre-existing elite.
“Usually the power of capitalists over workers is explained as a consequence of their ownership of the means of production, but in truth that power is derived from the capitalist’s control over the means of exchange.”
Does he think the ability to charge land-rent doesn’t confer power? Ownership of the means of production might appear to be less significant than money but it’s obviously still a major cause of inequality and I’d say it underpins control of the means of exchange, rather than being derived from it. As I said in another comment, the people who control the means of production can choose to use whatever system of exchange they like, but the people who control the means of exchange don’t have any de facto power to force people to use it.
“An egalitarian exchange system is a de-politicised exchange system. This means it is not used as a tool of class rule and empowerment but as an instrument for the community control of collective resources and efforts”
I’d say a society’s exchange system is intrinsically political because it’s a centre of power. And it can only be truly egalitarian if there are effective democratic controls built into the governance system that oversees it, to ensure that special interests don’t take control of it.
“In [a medium-based exchange system], the buyer can withhold or delay the exchange medium (payment), which the supplying party (seller) requires in order to acquire their means of life or to continue producing.”
This rests on an assumption that no physical medium can be created which will lose value if it doesn’t circulate at an acceptable rate. I see no reason to think that’s the case. As I pointed out earlier in the debate, there are central bankers and mainstream economists who are well aware of the problem of hoardable currency and are actively debating how it might be addressed.
Medium-based systems undoubtedly have significant advantages over centralised information-based ones – if the medium can be made in a form that prevents hoarding. It’s a tricky problem certainly but not necessarily insoluble.
“With an information-based exchange system all that needs to happen after there has been a transfer of value from a provider to a receiver, is that a record of the transaction needs to be made. If it is the provider (seller) who does the recording, the receiving party (buyer) has no sway over the situation. The provider is immediately credited and the receiver is debited at the same time.”
Ah, yes, ‘all that needs to happen’ – how much is carried in that little phrase! A physical medium does all of that, automatically, without requiring any link to the centralised information base, while also giving the seller confirmation of the buyer’s creditworthiness and limiting the seller’s opportunity for fraud.
As an aside, one of the things that had me rolling my eyes in your posts on the credit commons was the ‘cybergangsters’ argument, where you said ‘In this system, nothing is destroyed but an account whose overall balance is always zero’. One other thing that would be destroyed is people’s immediate ability to make payments that others might be relying on (just as would be the case with the established banking system – which, in fact, also sums to zero). I might be unusually selfish, but if I lost the credits I’d received for doing some work, I wouldn’t be hugely consoled by the fact that the person who’d had the benefit of the work was no longer liable for the balancing debits.
What wouldn’t be affected by cybergangsters would be people’s possession of physical money. I’d say, if cash can be made to lose value after a set period, it makes for a far more convenient and robust exchange system.
“Alternative exchange systems that build local economies and offering a wide range of goods and services will be eagerly adopted in the communities in which they appear, especially in areas where the regular economy is showing signs of systemic breakdown. If they can be shown to be democratic and as providers of community resilience they offer great hope for providing alternatives to capitalism.”
‘If they can be shown to be democratic’. Yes, indeed. Personally, I’m not yet convinced of this credit commons even as an exchange system but it’s the governance system that is really tricky. I’ll maybe post some questions for Matthew.
Malcolm
I know I said ‘ding ding’ but just to let you know I don’t feel at all combative. I can tell that you’re a good guy, but if we’re not on the same page, then we have to accept that – it doesn’t mean that we can’t be useful to each other. For example, if your party committed to helping develop the solidarity / non-corporate economy, and you had a chance of winning, you’d get my vote. I’m seeing this debate as if it’s a friendly discussion in the pub.
The system I would like to help build is similar to the existing system in that it’s a free market – consisting of people who are freely exchanging value that they created themselves, not that other people created. It would be ‘free’ in ways that a capitalist market can never be. But it doesn’t have anything to do with central planning or socialism.
The kind of contract that you mention is exactly the kind of ‘contract’ / exchange we’re talking about with collaborative credit / credit commons. No problem with that at all. But the worker won’t have all her eggs in one basket – she’ll be exchanging with lots of other people – we have to be careful not to encourage an ‘Uber’ situation, with the (apparently ‘self-employed’) drivers doing all the work, and shareholders taking all the profit. If that kind of behaviour happens at the micro level, wealth will concentrate at the macro level.
The micro reflects the macro. If wife-beating is widespread, and unpunished, then society will reflect that, and it will be very unlikely that women would have equal pay or hold high office. If casual racism is everywhere, it will probably mean that there won’t be any black politicians etc. If private, extractive businesses are the norm, and money is lent at interest, people like Trump will achieve high office and his cabinet will be full of bankers.
Yes, that’s exactly what I mean – if you want to take people onto the books of your company, then do it co-operatively, otherwise stay self-employed and do the work yourself. If you contract with a self-employed person to do some work for your company, that’s different, but they have to have other work, or you start to get the Uber situation above. There are already laws to make sure that companies don’t avoid sickness pay, holidays, job security etc, by employing lots of ‘self-employed contractors’ full-time.
Take an organisation like Suma Wholefoods, or the Ecological Land Co-op, of which I’m a member. People worked very hard to get those businesses established, but they still don’t get to tell other people what to do, or to make money from their work, or to pass the business on to their children who played no part in establishing or growing the business (although their children will be free to join if they want to). Because that’s the kind of people they are. As it happens, those two organisations pay all their workers the same rate, but they don’t have to. They can take on a part-time worker for less than they pay the staff with the most responsibility, but collectively, they choose not to.
Entrepreneurs who start co-ops can be remunerated for the work they’ve done from future profits. But that’s all – for the work they’ve done, not for the work that other people have done. If that makes them shrug their shoulders and earn the minimum wage, then that’s fine by me. The economy needs to shrink anyway, and we don’t need Richard Branson to own our railways (see http://go-op.coop/). I mean it. That’s my political philosophy. The micro reflects the macro. Donald Trump is the perfect US president. The fact that a person of his low quality is able to achieve the highest political office in the world makes it abundantly clear that it’s a really, really shit system – but it seems that you still can’t see it. You hold out hope that some Robin Hood party will be elected in the US (if they get elected in any other country, their country will be bankrupt in about 2 months) – but even if it is, which is very unlikely, that’s not where the power is.
‘The interest on a loan is not essentially any different to a fee for providing it, which is no different from a charge for any other service. Does paying someone to cut your hair require an increase in the money supply? Of course it doesn’t. Every exchange which involves payment in money is an increase in its rate of circulation (and might therefore face real-world obstacles) but it certainly doesn’t create any need for the system to expand exponentially’
Virtually all money comes into existence as debt. It’s not like a haircut, where the barber then has the money to buy something else – maybe from you. If all money is debt, and there’s interest attached (or in fact, a fee, but that doesn’t compound and make the situation worse), where is the interest going to come from? Other people will have to go into debt, to increase the money supply to pay previous interest. And on it goes. If I’m right, then global debt should escalate to the point where there’s not enough money in the world to pay it. If you’re right, it shouldn’t. And while I’m at it – ‘fee for providing it?’ Really? They provided nothing. They had nothing. And yet they make 250k in interest on each 250k mortgage, and if the debtor defaults, they get a real property.
I don’t think you understood Jenkins. Rulers introduced coins, and demanded taxes in them. To get the coins to pay the taxes, people within the boundaries of the kingdom, or empire, had to provide things for the rulers – weapons, castles, soldiery, ships, food for the soldiers, etc. The barons facilitated that, for land, status and wealth. And so empires grew. This happened – it isn’t contentious. Tussles with the barons happened too, and a ruler’s coin was only valuable within their jurisdiction, so no solidarity between rulers required.
‘the reason they have been under private control, for many, many centuries, is the fact that coins or other forms of physical money are easy to hoard indefinitely. There isn’t any need to hypothesise a conspiracy among a pre-existing elite.’
Agreed. No conspiracy – just amass the most wealth and you’re in charge. But you’ll have to go some to amass more than a king demanding taxes from everyone in a kingdom in which he mints the coins.
Charging land rent only happens once you’ve got the land, and traditionally, that was by helping the king obtain it, and extract wealth from it. Real wealth and power lies with whoever controls the money system. It used to be monarchs, and now it’s bankers.
‘This rests on an assumption that no physical medium can be created which will lose value if it doesn’t circulate at an acceptable rate.’
Yes, like stamp scrip – but mutual credit is a much more beautiful and practical idea.
‘One other thing that would be destroyed is people’s immediate ability to make payments that others might be relying on’
In the credit commons, exchange is based on local trading groups. If the internet went down, for example, the accounts could be transferred onto paper, and people could continue trading. If the internet went down tomorrow (and the money system with it), without mutual credit, there wouldn’t be enough time or know-how to establish alternative trading systems and most people would be dead in a fortnight.
I’d be really interested to see your exchanges with Matthew. But I want to lay out my stall more clearly in the next post.
‘not seeing everything through a ‘ruling class looking out for themselves’ lens’
This seems to imply that you have no class consciousness. Is that fair to say?
Tell me where we part company:
The point for any species, including us, is to evolve rather than become extinct. The vast majority of species have failed. 99.99% of all species that have ever existed have become extinct – only the best evolved to get here. Cheetahs, dolphins, bacteria, oak trees, ants, bees, eagles – and us – all superb at surviving and passing on their genes. So let’s evolve, because the alternative is extinction.
I don’t think we’re doing very well in that respect, because we’re destroying nature. I’ve got plenty of peer-reviewed evidence for that, but I’m guessing you don’t need it. We’re losing species fast, and it’s not stopping. There’s a very real line – a number of species that we can’t fall below without ecological collapse – past which it’s impossible to do anything about it and our extinction will be inevitable. I know people, whose opinion I respect, who think it’s too late already, because of the difficulty and perhaps impossibility of removing our cancerous system.
I don’t think it’s impossible yet – but it will be at some point as long as we have capitalism.
You say you don’t like to use that word, but I’d like to ask you: if you don’t think that the cause of the damage is capitalism, then what do you think it is? The purpose of capitalism is to make as much money as possible, and encourage as much consumption of real, material things as possible; and to grow, with no brakes, like a cancer, on a finite planet.
Capitalism fails when it comes to every religious message – let go of ego, live in harmony with the rest of existence, renounce worldly goods and seek enlightenment, love one another and submit to a higher power than humans. Those are the distilled messages of the religions that almost all of humanity adheres to, and capitalism negates them all.
But if you put spiritual matters aside for a moment, capitalism must grow cancerously or die, and it must concentrate wealth, and so in the real world of course, that’s exactly what happens, which makes sustainability and democracy impossible.
When my nephew was 16, he lived on a council estate in Dudley, and I walked from my brother’s house to the off-licence with him and three of his friends. I asked them where they thought power was in the world. All four of them rubbed their fingers together in the universal sign for money. I’ve asked bankers the same question and they’ve given the same answer. In capitalism, whoever has the most money is in charge.
For many people, who probably spend too much of their lives reading, at some point, a penny will drop when they realise who owns the US Federal Reserve, and they grasp the implications of that. Power is with banks, and in case the point needs ramming home, Trump’s cabinet is full of Goldman Sachs people, as is every other international policy and financial institution.
When central bankers meet politicians, it’s not the politicians who are explaining what’s going to happen. They accept the situation as it’s explained by the money men, because of a combination of ignorance of how the money system works, and knowing that it brings stability and security, along with personal wealth and status.
We have nothing like democracy. Money is steering. Ultimate power does not lie in the political system – the political system is well outside the epicentre of power. Politicians are allowed to legalise gay marriage, invade other countries (they’re encouraged to do that, in fact) and even sometimes put corporate CEOs in jail (a corporate CEO who doesn’t stay within the law in this rigged system will not be spared), but they’re not allowed to steer. The steering is done by the money men, and I think that this is what Jenkin gets and you (maybe) don’t. The US Federal Reserve is the epicentre of human power, and it’s owned by a consortium of private bankers, the exact composition of which is, unless you can show me otherwise, secret. The state can only ever do superficial things. The economy is designed to grow remorselessly like a cancer, and to concentrate that additional wealth in the banks. Any government that fails to facilitate that will be removed by a combination of withdrawal of funds, withdrawal of media support and capital flight; and externally, violence or the threat of violence.
When someone gets a mortgage for, say 200k, and puts up a real property as security, and the bank lends them 200k that it didn’t have, and charges them interest, they end up paying 400k. 200k pays off the loan, and 200k accumulates in the bank as interest, for doing absolutely nothing. This is repeated with hundreds of millions of individuals around the world, and is repeated with each property for as long as they stand, as their owners die or move, and they’re put on the market again (this cycle is broken when housing co-ops with asset locks are formed). banks have a state licence to lend money they don’t have, and their part of the deal is to provide money to the state, created from nothing, with interest attached, that the taxpayer has to pay. The state sells bonds to the banks to raise the funds that are necessary to maintain the system, and the interest on those bonds is payable by taxpayers. There’s nowhere else for it to come from. People who live from their work, and not from interest on money, create all wealth. But there is a huge tumour attached to them, sucking wealth from them. The derivatives market is now ten times the size of the real economy of goods and services. It’s a global network, based on algorithms, written by the world’s cleverest coders, on the world’s fastest computers, owned by the world’s wealthiest investment houses.
But apart from the prevention of democracy and the extraction of wealth from the people who create it, which is unfortunate, it’s destroying the biosphere, which is suicidal. Evolution and capitalism don’t go together. So if you get that evolution is the point and that capitalism will make us extinct, then the immediate task (of everybody – we’re all equal humans) is to help build an alternative to capitalism.
It’s an enormous mountain to climb, against colossal power, but please don’t criticise people who are trying to build something that can’t be bought. Let’s try alternatives and see what happens – don’t throw rocks at them right from the start. It’s difficult enough as it is. The world’s states were bought a long time ago, and specifically the state that matters – the one that controls the military machine that ensures compliance (the US cabinet filled with Goldman Sachs people gives a valuable clue as to the function of the state).
Coincidentally, Monbiot posted this today – https://www.theguardian.com/commentisfree/2017/nov/22/black-friday-consumption-killing-planet-growth
Highlights:
‘Green consumerism, material decoupling, sustainable growth: all are illusions, designed to justify an economic model that is driving us to catastrophe.’
and:
‘We need a different system’
Exactly. Capitalism = growth = extinction. We can’t ‘tame it’ – take the growth out and it doesn’t exist; it doesn’t matter that it’s simplistic – it doesn’t need any deeper analysis. If you’re being attacked by a bear, and you say ‘I’m being attacked by a bear’, I’m not going to tell you that your analysis is simplistic. We live in very dangerous times. It’s urgent. Let’s tell it like it is.
(I’ve had to split this in two because I tried sending it yesterday, and again today, and it didn’t go through.)
“if people don’t spend their credits, they’re not providing work for other people in the system to do. […] Accumulation of wealth increases consumption”
So accumulation of credits should not be allowed because it means those people aren’t spending enough, but it’s wrong because it causes too much spending? I’d be interested to hear how you reconcile those two views.
If people don’t want to buy anything, they’re not providing work for other people in the system whatever exchange system is in use. It’s a problem in the current system because when people accumulate money they constrain other people’s ability to spend. But that’s not going to be a problem in your credit commons because a willing buyer and seller can create their own credits. In a healthy system, accumulation doesn’t give people control over essential resources – it just gives them a claim on future production.
“to prevent destruction of the biosphere we need less consumption.”
I agree we need less overall consumption of natural resources. That doesn’t mean a healthy society needs to limit individuals’ consumption, it just has to ensure that no individual gets more than their fair share of it. That means ensuring that wealth is only accumulated by people who have genuinely contributed more than others.
Preventing people from accumulating wealth in monetary form isn’t going to prevent them accumulating it at all, if they really want to; it’ll simply oblige them to spend it on physical things that they’re confident they’ll be able to sell later – things they themselves don’t have any real use for, but which others do want. Apart from being more trouble for the saver, the main effect will be to drive up the price of commodities. Not everyone would bother, though; some would just decide not to earn those extra credits – so preventing saving would risk discouraging people who have the most to give.
” Plus concentration of wealth prevents democracy.”
What do you base that on? I don’t see how you can make that judgement on the strength of what happens in Britain; what prevents genuine democracy here is the fact that our political processes are hopelessly inadequate. Private interests are able to distort the way government works because the political system is full of holes – money might be at the front of the queue to take advantage of those holes but it’s hardly alone. If a society doesn’t have proper mechanisms for ensuring leaders/managers are genuinely democratically accountable then obviously it will be open to corruption. But I’d be surprised if anyone can design a corruption-proof governance system for an alternative society without also understanding what political reforms are needed for the existing society.
“Most people’s ‘real-world requirements’ are to be able to get the things they need to survive, not to save.”
You’re probably familiar with Maslow’s hierarchy of needs. In practice, most people seem to find that, once their subsistence needs are satisfied, they become conscious of other needs. That’s what drives increased consumption; wealth merely facilitates it. But it’s not monetary wealth that does that, it’s real world wealth (i.e. the ability to make human labour more effective than it used to be).
“You can buy expensive things (like houses) by contracting to give credits monthly over a set period […] There wouldn’t really be ‘income streams’”
You’ve lost me there. If person A is contracted to pay person B a set amount every month for a fixed period, why is this not an income stream for person B?
“I’m not sure if there’s not a way of saving in the credit commons “
Now you say!
“I’m not sure buyers can default in credit commons […] Some sort of insurance would cover death or inability to work”
You seem to be saying that, when a buyer dies before paying off the debt, or defaults in some other way, the seller will still receive the full amount of credits – but they will come from the insurance arm of the credit commons rather than direct from the buyer. Have I understood that right?
But no doubt that’s also a question for Matthew on the collaborative credit page. Or rather, a string of questions.
“money concentrates (due to interest) in the banking system and at the top of the corporate ladder. This excess wealth overflows into the political system to ensure that states prop up the corporate system (via the ownership laws that you mention) “
Wealth concentrates in the hands of the rentier class, but that’s as much through their control over the means of production as it is through interest. You perhaps share Tim Jenkin’s view that “Usually the power of capitalists over workers is explained as a consequence of their ownership of the means of production, but in truth that power is derived from the capitalist’s control over the means of exchange”. I think he overlooks the fact that the people who control the means of production can choose to use whatever system of exchange they like, but the people who control the means of exchange don’t have any de facto power to force people to use it.
“It’s only about the exchange system. It wouldn’t change the legal system.”
You’ve said previously that ‘there can only be a free market without a state’. But a legal system is one of the core functions of a state and it’s going to provide the framework your credit commons operates within. As I see it, there’s no free market without laws which protect people from violence and dishonesty, and which provide a fair distribution of natural resources. Whether those laws are implemented by an insurgent new society or by reforming the established one, we still have to work out what they should be, and we still have to work out satisfactory democratic processes for implementing them. As Tim Jenkin and Matthew Slater say, “We see patterns in history that indicate governance is much more important to the success of a monetary system than whether it is metallic, fiat, or credit by nature”.
Most of my cynicism about the system you’re championing comes from having read your posts about it. A satisfactory exchange system is just one component of a healthy society, so your suggestion that this credit commons could eliminate poverty, economic migration and the need for a state … well, I’m sorry you’ve found my tone patronising but, on this topic, you’ve made it very hard for me to believe you’ve thought about it as critically as the subject deserves. For the record, I can see from a lot of what you’ve written on this site that you’ve thought a lot about a wide range of issues – if I didn’t respect you, I wouldn’t have bothered engaging with you.
“The corporate empire is the most powerful empire the world has ever known “
From the outside, a person driving a tank is scarily powerful. From inside, he’s just an ordinary person depending on the support of his crew. The corporate system is wholly reliant on the active cooperation of huge numbers of ordinary people inside it, and on the legal framework it operates within, which the public have the power to change. Personally, I think that makes the dominance of the corporate system very fragile. But if your misanthropy is justified (‘You could eat babies in front of the majority of people and as long as they can have their bacon sandwiches and watch football, they don’t care’), then I agree that the chances of reforming society from inside are indeed very slim. That’s why I have back-up plans.
Having said that, the exchange system is certainly a crucial element of a healthy system. Yes, building a new system from scratch could work – and might be necessary – but that doesn’t change the fact that a relatively simple change to the established monetary system would remove the unfairness that is currently built in to it.
“why haven’t you done it?”
The short answer is: because my understanding of what changes are needed and what strategies might bring them about still isn’t fully formed. A key part of my thinking is the fact that, whatever we’re doing, having no back-up plan weakens us immeasurably; working for reform within the existing system is much more likely to bear fruit if there are people like you building credible alternatives, and alternative systems are much more likely to appear credible to people in the mainstream if they can be readily understood in terms of the established system, and if they respect the value people see in the established system.
“What’s your alternative system, apart from spreading the already existing solidarity economy? “
I’m not trying to compete with the ‘already existing solidarity economy’, I’m trying to find out whether what people like you are building is what I’m looking for.
Tim Jenkin says, “So long as alternative exchange systems are seen as ‘complementary currencies’ designed solely to soften the blows of capitalism and serve as ‘lifeboats’, they will remain insignificant”. Governance is crucial if your credit commons is to be any more than a complementary currency. You’ve said ‘Loomio, sociocracy, holocracy and a whole stable of decision-making structures are out there and they work‘ but, as I’ve pointed out, all kinds of systems can work within a framework of law provided by a higher system, which wouldn’t work if the only guarantor of their integrity is their own internal checks and balances.
Your suggestion that the rules of the credit commons ‘can be tweaked using some sort of (really) democratic decision-making process’ doesn’t inspire confidence that the people setting it up have a coherent vision for a governance system. Genuinely democratic governance is something that a great many people have been trying to get right for many centuries; it is intrinsically difficult. I once planned to work out a new constitution from scratch but realised it was impossible to really know what ‘scratch’ is. That’s why my thinking builds on what reformers in the past have developed, and aims to integrate additional democratic levers into the established political structure (or something akin to it).
When I first set myself the task of actively working out a system I could properly consent to, it was for the new society I was envisaging – because, at that point, I still thought the current one was unreformable. I only started taking seriously the possibility of reform when I started looking properly at the current system’s strengths and weaknesses, and began to appreciate just how much it allows us to take for granted. Even then I discounted the possibility of reform through straightforward political means, because the barriers to getting the support of enough people seemed way too high. The only possibility I could see initially was to try and exploit the tension between the courts (who have debated whether the doctrine of parliamentary sovereignty is compatible with the rule of law) and government.
It’s only since the Brexit vote that I’ve begun to believe change might be possible through elections. But I’m not exploring that path with any great expectation that it will succeed, I’m doing so because I regard it as a necessary part of a broader process. What matters to me is that we should develop a healthy, stable society; how that happens, ultimately, is irrelevant to me. It might be through mainstream society implementing reforms, it might be through an imago society displacing what is currently there or it might be through the gods giving some body a mandate to impose it. I don’t care what route gets us there in the end but, whichever it is, we have to do the work of envisaging how a healthy society should operate.
Mainstream reform would be the least disruptive so, as far as I’m concerned, that has to be allowed a reasonable chance before an imago society has the right to displace it. But if the masses do live down to your opinion of them, then that won’t happen – so we do need to prepare for that, by building an alternative that’s capable of superseding the current system. That’s why I’m engaging here. But if the only alternatives that are being built won’t actually stand up when the old system collapses … well, I can imagine other, wilder possibilities (which actually appeal to me more) but, since most people would find them traumatic, they will only become legitimate if the other options have been given a reasonable chance.
In practice my guess is that the different paths will complement each other. If mainstream society has been offered, and has ignored, a set of reforms that would make it properly democratic and genuinely fair, that legitimises breaking it to make way for something new. And the presence of a coherent alternative society growing alongside the existing one will make it harder for the mainstream to ignore calls for reform. Both of those two options depend on gathering widespread support and that’s likely to be made easier, in my opinion, if we actively explore what might be possible if that support doesn’t materialise. (My experience is that there’s no more support for a new society among outsiders than there is for reform among mainstream people, but perhaps your build-it-and-they-will-come approach will draw people in.)
Here’s a practical example of how the different paths can intertwine. A new society will need a set of rules defining its core structure and the processes by which its rules are made and amended – a constitution, in other words. Well, you can’t register a political party without lodging the party’s constitution with the Electoral Commission so, back in April, when there was an outside chance of someone standing for Parliament on the platform I was proposing, I drafted one – and deliberately drafted it to include all the features that I think a healthy, properly democratic society will need. It needs one or two tweaks but, basically, after thirty years or more of thinking about it, I feel that I’ve arrived at a constitution which would secure genuinely democratic government. It’ll work for a new society as well as it would work for the current one but it was the (very faint) possibility of reform that caused it to crystallise.
Beyond having a coherent governance system, an alternative system also needs ways of attracting people who aren’t necessarily as disillusioned with the existing system as its early adopters. It also needs some means of binding those who join, in a way that doesn’t compromise their economic freedom but prevents them from transferring the benefits back into the established system. (By benefits I mean not just the credits they hold at any one time within the system, but any capital they might have accumulated as a result of membership).
I don’t know what thoughts you’ve had about attracting people from the mainstream but, personally, I doubt that a new system will thrive if it relies on everyone becoming disillusioned. The established monetary system is supported through the state’s use of it to levy taxes and that’s a powerful disincentive for people to switch to trading with a different exchange system. The only way I can see of overcoming that disincentive is for the new system to have control of some ‘disruptor’ technology that people want but can only buy as members of the new system. I’ve an idea for something that would qualify but so far I haven’t been able to make it – whether that’s because it’s not in fact doable, or because I’m unconsciously blocking myself from breaking through with it until an embryo new system is in place, I don’t know.
As far as binding people loosely into the system, the most promising idea I’ve come up with is to require new members to enter a covenant that would bring any real-estate wealth they have into the alternative system; not constraining their own use of it but preventing it ever being inherited by anyone who had, or could, inherit more than their fair share. That, of course, requires coherent rules governing inheritance and resource allocation, rules that neither allow cross-generation accumulation of wealth nor inhibit worthwhile economic activity. I’m fairly confident the ones I’ve worked out fit the bill; I’m not at all sure anything else I’ve seen does.
You did ask!
“It’s an enormous mountain to climb, against colossal power, but please don’t criticise people who are trying to build something that can’t be bought. Let’s try alternatives and see what happens – don’t throw rocks at them right from the start. It’s difficult enough as it is. The world’s states were bought a long time ago, and specifically the state that matters – the one that controls the military machine that ensures compliance (the US cabinet filled with Goldman Sachs people gives a valuable clue as to the function of the state).”
I’ve come to the party late and skimmed through reading some parts more than others but the final paragraph ressonates with me – don’t throw rocks at people who are trying to build the alternative. That’s exactly how I feel in my daily life – I spend more time dodging rocks than doing my job; putting food on the table and wildlife in the countryside. The rocks are thrown by people who *think* that they are opposing capitalism & promoting ethics, but in reality they’ve been taken in by it and have taken the bait hook, line and sinker. Dare to suggest that we shouldn’t have infinite growth & people just don’t get it – infinite growth isn’t possible so we shouldn’t continue to feed it.
Malcolm,
I mentioned various types of governance before, but I’d go for participatory budgeting a la Porto Alegre for public works / spending (tried and tested, and it works a treat), and something that gets people of a more philosophical bent into decision-making positions. I’m still looking into Nyerere’s Ujamaa idea (beaten by a combination of the left, internally, and the right, externally), or there’s Bookchin’s in Rojava (holding up well under the most pressure imaginable, surrounded by hostile forces) – and many more, that don’t require a corporate state.
I don’t understand why you find the idea of a global credit commons eliminating the need for economic migration unbelievable. If you can get what you need by providing products or services to your local community, and that’s the same anywhere in the world, why would you need to move anywhere for work?
Reformers have been plugging away, well, since the Glorious Revolution, and there have been many beneficial changes – votes for women, ending the Atlantic slave trade, universal suffrage, plus a raft of reforms after WW2, when the money powers could envisage Europe slipping towards communism. They’re taking them all back now, including the NHS. After so many years of reform, we’ve made a lot of progress socially, but economically and politically, we have Trump in the White House and a corporate global economy. I see zero chance of reforming this system. It would be like reforming cancer. But good luck to you if you do. And you’re right, the situation may change completely in the presence of a growing alternative economy, which may make reform much more possible. (and yes, build a bridge and people will cross it – especially if the people who give a shit cajole, pester, beg or blackmail apathetic friends and family into joining it too. It’s not that anyone really opposes it, apart from corporate interests).
‘Disruptor technology’ sounds interesting. Keep me up to speed. And do use this blog to reach people (including me) with your ideas. It’s good that some people are thinking about things like this.
‘not constraining their own use of it but preventing it ever being inherited by anyone who had, or could, inherit more than their fair share’ – that’ll be a housing co-op. A group of us are having meetings about selling our London properties and starting a co-op somewhere outside London, in a smaller town.
It’s been interesting, but I think I might be spent. It’s not often I meet someone with more doggedness than me. I’ve sort of covered everything in my last (long) post. I agree with a lot of what you say, and I wish you success, but I want to try the solidarity economy / credit commons route. I’ve said before that I’d try to help you a) if I can, and b) if I can see any way that you could be successful. I don’t see that at the moment (for either of us, if I’m honest), but I’ve chosen my path. I hope you wish me success.
I think more people are starting to get it. Maybe it’s the circles I move in, but most people I talk to about it think trying to achieve perpetual growth on a finite planet is futile at best and suicidal at worst. Even when Monbiot mentions it in the Guardian (and he’s the only one), a large proportion of commenters (on what is generally a right-centre forum) agree with him.
Malcolm,
If you’re still reading this, I may need to back-pedal on something, and concede that you may be right about interest requiring further debt.
I did some more research, and Steve Keen says this – https://www.forbes.com/sites/stevekeen/2015/03/30/the-principal-and-interest-on-debt-myth-2/#14b3dfc91c76
and I’ve not really known him to be wrong about anything.
I’m going to look into it some more (a group of us are forming a discussion group about the money system, after having taken the Money and Society MOOC – https://www.lowimpact.org/onlinecourse/money-society/ – that should be a good place).
However, Keen was just showing that it’s not a mathematical certainty that debt has to increase so that interest can be paid; but in the real world:
1. debt is a runaway problem, whether it is a mathematical certainty because loans comprise principal but not interest or not.
2. there’s still the ethical problem of the state monopoly licence for banks to create money from nothing, and ultimately, the damage that does to wealth inequality and democracy.
3. when we include government debt in his calculations, suddenly there’s no interest income for the banks, because it’s not being paid – government debt is growing remorselessly, which means that banks don’t have the money to re-spend into the economy; this is possibly the main reason that, in the real world, it still holds that more debt has to be issued to allow individuals and businesses to pay the interest on their debts.
4. from an environmental perspective, the most important thing for me is that even if interest doesn’t mean an eternal increase in debt, it does mean eternal economic growth, because increasing the velocity of transactions (to pay unnecessary interest on the loan of moneys that didn’t exist in the first place) requires an increase in throughput (resource use and waste). I can only think of a few things you could do to earn the money that the bank spends into the economy that don’t require an increase of throughput – for example, telling someone a story (but not from a book), or giving someone a massage (but not with oil), or prostituting yourself (but not using a condom) etc. Plus none of the people involved in those transactions would be allowed to use any kind of transport apart from walking, or any electricity, to get to those transactions. Even bicycles need to be made in factories.
Most transactions will require transport fuel, special clothing, tools, paper, electricity, computers, phones, paint etc. and therefore increasing the rate of transactions will increase the rate of throughput.
So I think you might be right, although there’s still opposition to what Keen is saying, so I’ll carry on researching.
Thanks, Dave, it’s good to hear you might be back-pedalling on that. I’m not just still reading the thread I’m still (slowly) composing replies. Here’s what I’ve written on this topic (I could’ve posted it already but, when I’ve several things to reply to, I generally prefer to post it all at the same time):
“If all money is debt, and there’s interest attached (or in fact, a fee, but that doesn’t compound and make the situation worse), where is the interest going to come from? Other people will have to go into debt, to increase the money supply to pay previous interest”
The (debatable) fact that all money is debt doesn’t mean that the converse is true; not all debt is money – interest isn’t, it’s merely a debt denominated in money. When a bank makes a loan it ‘creates new money’, in the form of the spending power that it makes available to the borrower (the principal) which it records as both an asset and a liability on its own balance sheet – that’s the ‘money creation’ aspect of it and interest isn’t any part of it. The borrower incurs a debt equivalent to the principal, to which interest is added as the lender’s motivation for taking on the liability (which it will have to redeem even if the borrower defaults).
That debt is not essentially different to any other debt denominated in money, whether for a haircut or a holiday or a house – it’s essentially just a legal obligation and it’s settled using ordinary money which the borrower acquires by doing work for someone else, i.e. through the normal circulation of money. When the debt is repaid, the amount corresponding to the principal is deleted from both sides of the bank’s balance sheet and the bank is left with the interest which it can spend, lend, or send unto its shareholders. It’s simply the lender’s payment for providing a service– just as the money the barber or the holiday company or the house-seller receive is their payment.
I don’t know where this idea came from that paying off interest requires an increase in the money supply. In principle, if it could be made to circulate fast enough, all the world’s economic activity (including the payment of interest on loans) could be mediated by a single coin. Though, strictly speaking, payment of interest doesn’t even require the velocity of money to increase. It can happen just as well through money being diverted – i.e. the borrower pays it with money paid by a buyer choosing to buy his product instead of something else.
Interest is no more than a payment for a service and when we’re trying to understand the mechanics of the monetary system, we don’t need to consider the ethics of the specific economic activity behind it. It might be an outrageously high payment for the service provided, it might be calculated through a convoluted formula, repayment might be required in an unreasonably short time and the service provided might be intrinsically unethical – but none of those things are caused by factors internal to the monetary system so none of them are relevant to understanding the mechanics of how it works. Getting enraged every time the process is discussed simply makes it harder to look at it objectively.
“And while I’m at it – ‘fee for providing it?’ Really?”
We’re agreed that rentier interest is pernicious, and leads to a flow of wealth from the poor to the rich, and that a healthy system would make it impossible. The iniquity of the present system is rooted in its underlying unfairness but neither of us need to be reminded of how bad it is. What we do need to do is work out what mechanisms would be effective and necessary in a healthy system.
Would all loans be banned in the society you’re envisaging? Let’s say you’ve accumulated a surplus which you’re planning to spend on improving your home, but maybe don’t have quite enough to do it just as you’d like. However, you know someone who wants to increase his earning capacity but needs some expensive equipment which he can’t afford. You could let him have the credit he needs, foregoing the ability to do your improvements immediately, in exchange for being able to do them better in a few years time. That would be a loan, at interest, which would be beneficial to both parties. Where exactly is the harm in that?
Steve Keen takes an accounting approach to show that interest doesn’t require new money whereas I prefer to focus on the fact that interest is not intrinsically different to any other payment: if interest needs more money to be created then so must every other payment, which is plainly absurd.
I’ve no argument about real-world constraints on how much economic activity can take place but that’s quite separate from the mechanics of the system.
“government debt is growing remorselessly […]; this is possibly the main reason that, in the real world, it still holds that more debt has to be issued to allow individuals and businesses to pay the interest on their debts.”
I think you’ve got this the wrong way round. Government debt is a means of putting more money into the system to make up for what the private sector is ‘hoarding’ (i.e. holding in too liquid a form). It comes back to the same fundamental problem that I keep focusing on: the medium of exchange being issued in a form that allows private individuals to take it out of circulation.
As for the environmental perspective, I’d say you’re trying to reduce an intrinsically broad problem to a narrow cause. As I see it, over-consumption of finite material resources is driven by human demand – money is merely a facilitator – so, to solve that problem, it’s the roots of that demand we need to deal with. Distorted patterns of ownership are quite likely a major factor in that and I’m happy to agree that rentier interest is as well, but I think the deeper cause is our alienation from the natural/supernatural world.
I’m writing something about the potential for disruptor technology and my thoughts on how we might try and tackle the inheritance problem but I seem to have some internal resistance to get past. I’ll post my other responses now – but, like you, I think there’s probably not much point in debating those questions further unless one of us makes a fairly major shift in perspective.
(Response to Dave’s first comment of November 21: https://www.lowimpact.org/money-causes-poverty-plus-war-ecological-destruction-replace/#comment-4259 )
”we have to be careful not to encourage an ‘Uber’ situation, with the (apparently ‘self-employed’) drivers doing all the work, and shareholders taking all the profit. If that kind of behaviour happens at the micro level, wealth will concentrate at the macro level. […] There are already laws to make sure that companies don’t avoid sickness pay, holidays, job security etc, by employing lots of ‘self-employed contractors’ full-time.”
We currently live in a world which is fundamentally unequal. As a result, many people feel they have to take bullshit jobs, which they don’t feel able to walk away from if they’re dissatisfied with how they’re being treated. Employers’ power to exploit those people doesn’t come from the employment contract they’ve entered into, it comes from the employees’ underlying insecurity. That’s why all those laws have been introduced (against the wishes of the capitalist barons), to mitigate some of the effects of inequality. Exploitation of workers is a result of concentration of wealth far more than it is a cause of it.
In a fundamentally equal society, people would not start from that position of insecurity. Nobody would feel compelled to stick with an employer who was exploiting them, so there would be no reason to deny them the right to do work for each other on whatever terms they thought best. Doing so would merely discourage some of the most productive people from contributing as much as they might otherwise.
“If that makes them shrug their shoulders and earn the minimum wage, then that’s fine by me. “
That would be a likely consequence if laws were introduced that forbid them to do what they’d prefer. But as long as yours is just a voluntary system, struggling to introduce a new exchange system into a more liberal broader environment, they simply won’t bother to use it. They’ll produce whatever it is they’re making and sell it using an exchange system that doesn’t try and impose pointless restrictions on them. If they’re producing things people want to buy, that means the buyers will also use the alternative exchange system. The more arbitrary requirements your credit commons imposes the less likely it is that people will migrate to it.
“The fact that a person of his low quality is able to achieve the highest political office in the world makes it abundantly clear that it’s a really, really shit system – but it seems that you still can’t see it.”
I’ve been able to see that for a very long time, Dave – I certainly didn’t need Trump’s election to make it clear. I can also see that throwing away the good bits of the current system, along with its faults, is unlikely to make the world a better place.
Three steps forward, two steps back is very common in all sorts of spheres; I see it as an essential part of how forward progress is integrated. We’re currently in a backward phase. However, to get a proper sense of what it means, I think you have to look not just at Trump’s ascendancy but also at the soul-searching going on among his many opponents.
“I don’t think you understood Jenkins. Rulers introduced coins, and demanded taxes in them.”
I think you’ve missed his point about how rulers, and the administrator class, came to be in a position to demand taxes be paid in these new-fangled ‘coins’ in the first place. They already had the power – the introduction of money didn’t create it, it simply altered the way it operated.
If his hypothesis is right (and it certainly seems quite plausible) the power had emerged from the social contract behind the establishment of central food stores. The custom of pooling production and having it distributed by trusted individuals created positions of power. But that power – the power over the exchange system – is essentially the power to control distribution and it rests on having some produce to distribute. It depends on the producers being willing to use it, or being forced to use it, and whether they can choose not to rests on the nature of their control of the means of production. When their control is determined by society’s rules as it is today, rather than physical possession, then the real power lies in those rules. The plutocrats might hold the reins – but the reins themselves are a construct of the legal framework.
“just amass the most wealth and you’re in charge. But you’ll have to go some to amass more than a king demanding taxes from everyone in a kingdom in which he mints the coins. “
I don’t know why you see everything in terms of extremes. It’s not a matter of being in charge, or amassing more than the person who has most. If you have something other people need, you can set the terms on which you make it available to them. That puts you nearer the powerful end of the spectrum than them, but that’s true across the board – you can be in the weakest 10% and still be in a position to exploit others.
What I’m primarily concerned with is that the rules and customs that bind us together as a society should not themselves be the cause of injustice. Currently, there’s a flow of wealth from the poorer to the richer which is caused by unsatisfactory laws. That is injustice created by our formalised collective behaviour and it profoundly distorts individual behaviour and its effects. My attitude is that until we’ve eliminated obvious errors at the societal level, we can’t tell what limitations need to be imposed at the individual level.
“Charging land rent only happens once you’ve got the land, and traditionally, that was by helping the king obtain it, and extract wealth from it. Real wealth and power lies with whoever controls the money system”
I don’t find the ‘robber baron’ narrative very convincing as an explanation of the emergence of hierarchies. I don’t doubt that powerful individuals forcing others to provide them with food was common enough, but the idea that organised societies evolved directly from that I don’t find credible. More likely is that they evolved from it indirectly (during the hunter/gatherer phase), through people cooperating to get rid of an oppressor and then deciding some rules to prevent it happening again … followed by recognising some respected individual as an arbiter … leading in time to the evolution Tim Jenkin describes.
In that scenario, the king obtained dominion over the land by being granted it by the people. He was their servant and so were the administrators under him. That relationship became inverted many, many centuries ago and institutions developed based on a stratified society. Over the last few centuries, however, another inversion has been taking place, which has effectively led to the people being acknowledged as sovereign. It’s true that the everyday operation of society still favours the administrators but that’s because the basic infrastructure of governance remains largely unreformed. That’s inertia, though, it’s not real control.
(Response to Dave’s second comment of November 21: https://www.lowimpact.org/money-causes-poverty-plus-war-ecological-destruction-replace/#comment-4265 )
“you have no class consciousness. Is that fair to say?”
I’m very conscious that most people in the class I was born into take inequality for granted and don’t want to look too closely at its root causes. I’m also conscious that most of them wouldn’t be capable of sustaining the kind of deliberate conspiracy that you think they engage in. Mostly, as far as I can tell, they take the world as they find it, make the most of the opportunities that come their way and resist changes that would reduce their share of the world’s wealth – justifying that with the (probably realistic) argument that they’re only doing what others would do if the tables were turned.
I’m also conscious that pretty well everyone, regardless of class, will instinctively reject accusations of wickedness and will close their minds to arguments made by people they regard as self-righteous. That’s partly why I try and frame my arguments in ways that the mainstream won’t reject out of hand. Changing the world is likely to be a whole lot easier if we don’t make enemies unnecessarily.
You wonder where we part company. Well, to start with, we part company here: “capitalism must grow cancerously or die, and it must concentrate wealth, and so in the real world of course, that’s exactly what happens, which makes sustainability and democracy impossible.”
You think capitalism causes money to concentrate, whereas I think capitalism is the result of wealth concentrating. That, in my view, is primarily the result of derelict laws – laws which have become detached from the circumstances that gave rise to them – and the haphazard development of the monetary system which allows private individuals to hold the medium of exchange to ransom.
Inheritance and ownership laws are good examples of derelict laws. As I see it, landownership in Britain used to be part of the machinery of government and landowners’ powers were primarily administrative. This included the power to nominate a successor, which was a way of ensuring continuity of administrative responsibility, and the power to charge rent, which was a way of paying for government. Over a period of several centuries, as society became more institutionalised, most of those administrative responsibilities were transferred to other bodies but those two remained with the landowners and came to be seen as privileges rather than responsibilities. In the economic sphere, I see restoring integrity to those two areas of law as the highest priority.
We part company here: “I asked them where they thought power was in the world. All four of them rubbed their fingers together in the universal sign for money. I’ve asked bankers the same question and they’ve given the same answer.”
You seem to think that if enough people believe something, then it must be true; I think all it means is that they’re looking at the world through the same lens – one the rich sold them, at a bargain price, because the more people believe it, the more effective the illusion.
You ask “if you don’t think that the cause of the damage is capitalism, then what do you think it is?”
My main objection to the word is that its meaning is too ill-defined and all-embracing to be useful. The answer to your question is: remote ownership of natural resources and hoardable money, compounded by an inadequate governance system. Put those things right and everything else will change. Sure, putting them right will be difficult but, for me, that’s all the more reason not to dissipate energy in trying to either mitigate the problems or fix things which maybe are only problematic because of those underlying flaws.
I say everything will change but, obviously, that doesn’t mean everything will become perfect. Until those fundamental changes have happened, though, we really can’t tell what else will be needed.
We also part company here: “Ultimate power does not lie in the political system – the political system is well outside the epicentre of power.”
You think the plutocrats can force politicians to act against the wishes of the electorate; I think their only real power is in their ability to manipulate public opinion and to exert covert pressure on matters where public opinion is unfocused.
Remote ownership (which underlies the power of the rich) rests on legislation and a complex web of relationship between different actors responsible for adjudication and law enforcement. I’d say most capitalists are well aware that their own comfort depends on the framework of law and even the ones who are happy to step outside it covertly are wary of doing anything that might cause it to break down.
And we part company here: “The economy is designed to grow remorselessly like a cancer, and to concentrate that additional wealth in the banks. Any government that fails to facilitate that will be removed by a combination of withdrawal of funds, withdrawal of media support and capital flight; and externally, violence or the threat of violence.”
I regard the growth imperative as a purely political consequence of those fundamental economic flaws (remote ownership of natural resources and hoardable money). Because of those factors there’s a constant flow of wealth from the poor to the rich and growth is necessary to create a counterflow (or the illusion of a counterflow) so that the inequality doesn’t get so bad that the poor revolt.
Governments get all the resources they need from the public so a threat of withdrawal of funds doesn’t carry any real weight. It’s only a consideration under the current system because of private interests’ ability to take money out of circulation. A government that introduced a non-hoardable currency wouldn’t have to worry about it. That reform would also make capital flight an empty threat; without the ability to withhold the medium of exchange, import/export balances would be driven by supply and demand of real-world goods and services. As for withdrawal of media support, if a radical government had been elected, it would mean that media hostility had already lost most of its power.
Malcolm,
Did you see my post of Nov 22? It’s right at the bottom – I posted out of sequence, sorry. But that’s what I want to say. I don’t know what we’re arguing about. Money as a means of exchange or a unit of value is fine. It’s just when the means of exchange is used as a store of value that problems arise. I think we agree on that. How can the same thing be used as a store of value and a means of exchange? It’s pulling in completely opposite directions. But I’d take it much further than you – the fact that it’s a store of value at all means that it will concentrate. Money attracts money. You can theorise as much as you like, but in the real world, money concentrates to an absurd degree, and that money spills out into the political system, via the lobby industry, political donations, jobs for politicians, and a thousand other ways, from control of global institutions, bankers in cabinets and ownership of the media to corporate sponsorship in schools, regulatory capture, bogus ‘citizens’ groups’ and state dependence on banks.
I’m not sure that we agree on that.
I’m only commenting now where I disagree with you or to answer a question.
‘Interest is no more than a payment for a service’
It’s that word ‘service’ I object to. Charging 250k on a 250k home, the money for which they didn’t have. We can do much better than this.
The money system is so complicated that most people (despite Positive Money’s gallant efforts) have no clue how it works, and people like us, who have spent quite a lot of time looking into it, can disagree about it – or at least about its effects.
‘Would all loans be banned in the society you’re envisaging? – etc.’
I’ve answered this before. You wouldn’t need loans – you can go into credit up to (I believe) 3 months’ average income. If that’s not enough, you can contract to provide credits over a longer time period. No ‘interest’, although more credits could be provided over a longer period, but nothing that compounds. (but do ask Matthew)
But, all we need, in the real world, is a means of exchange and a safety net. That’s it. Money as a ‘thing’, that can be accumulated, will always cause problems, in terms of overconsumption, damage to democracy and wealth inequality (and I’m not talking about the kind of wealth inequality that means that someone who works harder gets a slightly greater reward; I’m talking about the kind of wealth inequality we have in the world today, where people who work hard get squeezed, and people who do nothing useful at all get billions because they have billions).
‘allows private individuals to take it out of circulation’
I think this might be the same as what I mean when I talk about concentration of wealth, so we basically agree. But taken out of circulation where? It’s going to be invested in something, and so eventually paid out in salaries or spent on the business. It’s not going to be kept under a mattress. The problem for me is that this system ensures that it’s mostly hoovered up to concentrate even more in the same hands.
‘but I think the deeper cause is our alienation from the natural/supernatural world’
Agreed, apart from the ‘supernatural’. If something exists, it’s natural. If it’s not natural, it doesn’t exist. But let’s not do that – not on this thread, at least.
‘unless one of us makes a fairly major shift in perspective’
Unlikely. I’m suggesting that we consolidate what we agree on – the inequity, lack of democracy (or maybe not this one) and unsustainability of this system. We can help each other where we can (this is not just about you, it’s about reformers of all flavours, of which there are many). I’m just asking for support for building a non-corporate economy, and if any potential reforms look like they might assist that, they’ll get my support. I think that might be the best we can hope for.
For example, when I talk about class consciousness, I’m not talking culturally, I’m talking in terms of ownership. The Marxist critique of capitalism works for me – it’s just his solutions that don’t work.
‘That’s why all those laws have been introduced (against the wishes of the capitalist barons)’
This is why we’re miles apart. Nothing happens against the wishes of the capitalist barons. Those laws have been introduced for the same reason that the NHS was introduced – to soften capitalism and stave off revolution.
‘Exploitation of workers is a result of concentration of wealth’
Of course – now you’re talking.
‘far more than it is a cause of it.’
It’s both, and it’s ongoing.
‘They’ll produce whatever it is they’re making and sell it using an exchange system that doesn’t try and impose pointless restrictions on them.’
They will. The already wealthy will kick against any new system that threatens their wealth. But if poor people – the vast majority of the world – can see the benefit of an exchange system that doesn’t require money that they don’t have, because it’s accumulated in the hands of people who don’t like the new system, and if they take it up in large enough numbers, they’ll remove the source of wealth from the ‘capitalist barons’ (other people’s work), and make it impossible to gain anything at all without working for it (oh, what bliss that would be).
The main ‘pointless restriction’, by the way, would be to prevent them from making money from other people’s work. That works for me.
‘I’ve been able to see that for a very long time, Dave – I certainly didn’t need Trump’s election to make it clear.’
You have. I take it back. However, we’re over 300 years since the Glorious Revolution, and this is where we’ve got to. Why do you think that continuing to try to reform this system is going to make things any better? I’ll answer that question myself – it’s because you think that power lies with Trump. It doesn’t. His cabinet is a clue to where it really lies. This is fundamental.
‘They already had the power – the introduction of money didn’t create it, it simply altered the way it operated. ‘
Agreed – the introduction of coins to pay taxes just consolidated their power and simplified the way it was applied.
‘which has effectively led to the people being acknowledged as sovereign’
You must be joking – but it doesn’t matter.
‘the kind of deliberate conspiracy that you think they engage in’
I don’t (bearing in mind I’m not talking about the same people as you). We have a system that concentrates wealth. Individuals and particular banks / corporations don’t need to conspire (although at times they will when it suits them), and are expendable.
‘Changing the world is likely to be a whole lot easier if we don’t make enemies unnecessarily.’
Agreed. Although you think I’m talking about the relatively wealthy middle classes and I’m not.
Malcolm, I could go on, but this exchange is taking a lot of our time, and ultimately, it’s a bit like arguing about how many angels can dance on the head of a pin. What we’re both doing is so far out on the margins anyway, that arguing about details is just wasting our time. Meanwhile this system trundles on. It doesn’t matter that I think ultimate power lies with the banks and you think it lies in the political system. Do you support people who are building a non-corporate economy? And would you support experiments with collaborative credit / credit commons, to see what happens?
By the way – your focus on the problematic nature of hoarding. I’m guessing you know about Silvio Gessell (sp?) and his demurrage ideas (‘rotting money – the currency loses value over time). A ‘negative interest’ – meaning that the currency was to be spent not hoarded. He saw interest as the root of all evil (ie hoarding). It was tried in the town of Worgl, and was very successful – but only (I think) because the legal tender was insane with inflation at the time. I think the Stroud pound tried it, but I don’t think it’s very successful apart from in a crisis.
“I don’t know what we’re arguing about. […] Money attracts money. You can theorise as much as you like, but in the real world, money concentrates to an absurd degree”
The only real world I’m familiar with is this one, in which money can be hoarded, and as far as I can see, that fact provides an adequate explanation for why money attracts money. You presumably think there’s some other monetary mechanism as well but you haven’t given me any idea what you think it is or why you think rentier interest isn’t sufficient to explain it. (Control over natural resources is another, non-monetary mechanism through which wealth attracts wealth but monetary reform isn’t going to change that in any way.)
“You wouldn’t need loans – you can go into credit up to (I believe) 3 months’ average income. If that’s not enough, you can contract to provide credits over a longer time period. No ‘interest’, although more credits could be provided over a longer period”
You’re saying we wouldn’t need loans – but then describing a basic mechansism for making them! And you’re saying ‘no interest’ but then describing something which is essentially no different from interest!
“It’s not going to be kept under a mattress.”
Yes it is, Dave. That’s why central banks haven’t introduced negative interest rates (which they would like to be able to do) because the amount of cash in circulation would dry up very quickly. What you probably mean is that the very rich wouldn’t keep their billions under the mattress, and you’re almost certainly right about that. But poorer people with a small amount of savings would hoard cash rather than pay a small charge for keeping it in a bank and that makes it very difficult for the banking system to charge richer people for what they hold in current accounts.
Unfortunately, everything else being equal, rich people will prefer to hold money ‘at sight’ rather than having to give so-many months or years notice before they can use it. And, even without statutory ratios, banks will not happily lend out large amounts of money if there’s a real danger that huge amounts might suddenly be withdrawn without warning – so they pay rent, in the form of interest, to rich people who are prepared to forego instant access. Effectively, small savers’ perfectly understandable instinct to preserve the value of their own savings makes it possible for the rich to ‘earn’ huge amounts in rentier interest.
“But if poor people – the vast majority of the world – can see the benefit of an exchange system that doesn’t require money that they don’t have, because it’s accumulated in the hands of people who don’t like the new system, and if they take it up in large enough numbers, they’ll remove the source of wealth from the ‘capitalist barons’”
As you say, ‘if they take it up in large enough numbers’ – but if there’s that much support for it then the numbers will be there to take over the government, through the ballot box, long before your credit commons has outcompeted the current financial system, which would mean laws could be passed to make the current system impossible.
And what makes you think the capitalist barons will accept your ‘credits’ as payment for land, or for land-rent?
“Why do you think that continuing to try to reform this system is going to make things any better?”
Because it clearly has in the past – or do you think modern society is more oppressive than it was a century ago?
“What we’re both doing is so far out on the margins anyway, that arguing about details is just wasting our time.”
The only way we’ll have any chance of bringing it in from the margins is if what we’re doing is coherent, and that’s going to mean working out a lot of detail. At the moment, though, all we’re discussing is basic principles.
“Do you support people who are building a non-corporate economy?”
If they’re building it to last, I certainly do. But that needs more than good intentions and a blueprint based on blanket rejection of everything the corporate economy does.
” And would you support experiments with collaborative credit / credit commons, to see what happens?”
I’d certainly support well-thought-out experiments conducted by people who seem to understand the basic principles.
Yes, I am familiar with Gesell (though I only found out about him after I’d come to the same conclusions myself). As I understand it, the Worgl experiment was halted by the government because, in the wake of the hyperinflation they’d just been through, they were afraid of losing control of the money supply. Alternative currencies were also banned in the USA for the same reason.
Absent a crisis, a currency that loses value is not likely to be successful if there’s an acceptable alternative currency that doesn’t. That’s why it needs to be either the official currency that a state requires taxes to be paid in, or the only currency that some highly desirable technology can be bought in.
Malcolm
I can’t think of anything else to say that I haven’t said already.
Yes, interest is the mechanism by which money attracts money.
Control of natural resources – also, yes. Changing the money system will change that too – if their money doesn’t attract money any more because the exchange system doesn’t contain interest, they won’t have the money to pump into the political system, give politicians jobs, pay lobbyists and ultimately, pay mercenaries to help them keep their land.
There is no interest in credit commons – it’s just credits in an account, with a credit limit and nothing to compound or to hoard.
I wasn’t talking about poor people hoarding money and I’m shocked that you are.
It doesn’t matter if people ‘take over the government’, even it it were likely (it isn’t) – because that’s not where the power is. Governments don’t do what the money power doesn’t want them to do, because they rely on their money, they don’t understand the money system (did you see Positive Money’s survey – less than 10% of politicians knew where money comes from), and they’re scared of capital flight.
Do I think that modern society is more oppressive than a century ago? Of course I do. Do you know how your phone is made? Or how most of our food is produced? Or what happens to the population of a country whose government shuns the petrodollar? There are many, many times as many people working in slave conditions than a century ago, and the means for the money power to retain its power is many times more ferocious. A revolution like 1917 would have no chance now. The corporate sector owns much more of the economy, surveillance is thousands of times more effective.
Good luck with your reforms Malcolm, once you have a plan to implement them – although I don’t think you have a cat in hell’s chance, because you don’t have class consciousness. A conversation with someone with class consciousness is a very different affair – and I’m not talking about accents or how you hold your knife – even if the proposed solutions are different. I can’t see me losing class consciousness – it’s not something that can be unseen; and I hope you get it at some point. I’ve tried to be conciliatory – to find ways to help each other, but your responses have been undeservedly snide, I feel. The hand of friendship is still offered – I’ll help you if I can see that you’re doing something useful to challenge the money power, and I hope you reciprocate. I don’t really have anything else to say. Even if you get to the top of the mountain you’re trying to climb, you’ll see another one loom in front of you, that you didn’t know was there.
Part of the misunderstanding might be that you’re using the word ‘money’ to refer solely to the medium of exchange whereas I’m using it to refer to every type of token within the monetary system. I’m suggesting that a healthy system would include a mechanism, separate from the medium of exchange, which people who want to accumulate some savings could use as a more convenient alternative to buying gold or jewels or whatever. It wouldn’t be transferable between individuals and, generally, it would have a carrying cost (i.e. negative interest). There won’t be any rentier interest in a system like that so we’d no longer be in a position where money attracts money.
A healthy system will also need to ensure that nobody can hold natural resources to ransom, because that’s another mechanism through which wealth attracts wealth. It may have become secondary to money-rent in the current system but, if money-rent is no longer possible, the rentier class will fall back on their control of natural resources. As I see it, to eliminate that as a source of inequality and political corruption, it will be necessary to radically change how ownership works. But you suggest that changing the money system will change that automatically.
“Control of natural resources – also, yes. Changing the money system will change that too – if [there’s no] interest, they won’t have the money to pump into the political system”
The rent paid to landlords constitutes a flow of money – how will introducing a voluntary credit commons change that? Unless you have some way of obliging them to use it, landlords are unlikely to accept it in payment of rent and they’re unlikely to sell their land for it. So how exactly do you think a credit commons will change their control over natural resources?
“I wasn’t talking about poor people hoarding money and I’m shocked that you are.”
I don’t know what there is to be shocked about. All I’m trying to do is look objectively at how people behave and what impact that behaviour has. Which bit of what I said are you objecting to? That poor people like to save? That they would save cash (which holds its nominal value) in preference to bank deposits that lose value? That large numbers of people keeping small amounts of cash under the mattress could significantly reduce the amount in active circulation? That reducing the amount of cash in active circulation would impact the amount of trade that could go on? Or that the possibility of that happening constrains central bankers’ ability to impose negative interest rates?
“I can’t see me losing class consciousness – it’s not something that can be unseen; and I hope you get it at some point.”
I’m trying to envisage how a classless society would work so I don’t see much point in me getting class consciousness. I’d assumed you were also wanting a classless society but you’re presumably anticipating that class divisions will persist.
I’m sorry you feel my comments are undeservedly snide but it’s difficult to highlight the holes in someone’s arguments without being pointed. I thought we were getting somewhere when you acknowledged that you ‘may need to back-pedal on […] interest requiring further debt’, but I think you still don’t appreciate how that original position undermines your credibility – particularly when it sits alongside your other claims of what the credit commons might achieve.
“I’ll help you if I can see that you’re doing something useful to challenge the money power, and I hope you reciprocate”
I’ve offered various reasons why the credit commons you’re promoting is unlikely to work as you expect it to and is unlikely to displace the established monetary system. For the most part, though, you’ve not responded to those points – nor to the point I made a couple of times that complementary currencies mitigate the flaws of the current system so, rather than undermining it, they actually help sustain it. I’ll maybe post some questions for Matthew but, so far, I’m not seeing this as something worth supporting.
I had been going to write more about the potential for disruptor technology to draw people into an alternative society, and about how we might try and tackle the inheritance problem. At the moment, though, there seems little prospect of us being useful to each other so that would probably be a waste of time.
I started to reply to your points, but this is taking too much time. I’m just repeating myself and if you don’t understand, you don’t understand. You’re missing some really basic points. In a healthy society there would be a means of exchange and a safety net, with no reason or means to accumulate wealth. Accumulation is a core part of the problem. It will never be enough for some people. You are seeing ‘class’ from a non-marxist perspective – i.e. working/lower-middle etc. rather than in relation to capital and the means of production. Look it up, but you’d need to put some hours in before you understand it. You’re not going to do that, so can we leave it now please? You’re right, we’re not going to be useful to each other.
But ask Matthew – you have access to someone who’s devoted his life to this. Maybe he can explain it in ways that I can’t.
And I know you’re not going to respond to this now Malcolm, but I’d just like to say for anyone else reading this – interest is still the problem. The problem (at least in terms of sustainability) with interest is that it requires more throughput (resource use and waste) to pay it, rather than more debt. In reality, there is ever-more debt, but in theory, there doesn’t have to be. But there either has to be more debt or increased velocity of money, resulting in more transactions. And it’s not possible to ring-fence the proceeds of those additional transactions so that they’re not spent on additional material things (which increases throughput).
The problem in terms of democracy is still and has always been easy. Interest concentrates wealth and concentrated wealth buys power.
I very rarely unsubscribe from threads I’ve commented in, Dave, so I’ll probably see anything you post here. (Though I don’t know how you found the time to post here with your ‘ethics of meat-eating’ debate in full flow!)
“The problem […] with interest is that it requires more throughput […] there either has to be more debt or increased velocity of money, resulting in more transactions”
If you’ve got any reasoning to support that, I’d be interested to see it; as it stands, it’s just an assertion that flies in the face of both reason and experience. As I pointed out in a previous comment, not only does interest not require an increase in debt, there doesn’t even need to be increased velocity – because interest can be paid through money being diverted from other transactions. If a borrower pays interest to a lender instead of buying some fancy new gadget then consumption will in fact be reduced.
Also, central banks have found, fairly consistently, that raising interest rates acts to dampen overall levels of economic activity, and lowering them acts to encourage it. (For many years, that was their most effective lever for maintaining price stability at what they regard as a healthy level of economic activity. They’re currently a bit desperate because they’ve hit what they call the ‘zero lower bound’: they’d like to introduce negative interest rates but can’t do so because of precisely the problem I’ve discussed in this thread.)
As it happens, low-to-zero interest rates stimulating economic activity is integral to the aims of community credit schemes: they exist in order to increase their users’ ability to buy and sell – i.e. to generate greater throughput. Over-consumption of natural resources isn’t a monetary problem, it’s a problem of people wanting stuff.
“Interest concentrates wealth”
More accurately, interest paid to savers concentrates wealth (and we’re agreed that’s pernicious). However, in a healthy system (where private individuals have no power to take the medium of exchange out of circulation), there’d be no reason why interest paid by borrowers needs to be passed on to savers – any surplus it generates (after paying reasonable brokers’ fees and insurers’ risk premiums) could just as well be channelled into socially beneficial avenues – and, where there’s competition for credit, interest offers a very simple way of determining who wants it most.
Rentier interest is one of the root causes of inequality. It’s pernicious. But interest as a mechanism for calculating fees and risk premiums, and discouraging over-consumption, is totally harmless and very useful.
I considered posting some questions for Matthew on your collaborative credit page but I ended up looking at his website and, after a short exchangewith him there, I’m going to write a governance proposal that he’s offered to look at.
I know (about the meat-eating debate). I wasn’t expecting that level of response, or at least I was worried that if there was such a huge response, a lot of it would be abusive. But it’s all been very respectful.
I was convinced by Greco, but then reading Keen, I saw that Greco may have slipped up when talking about the need for ever-increasing debt to be able to pay interest.
I’m not talking about interest concentrating wealth in savers, but in banks. Charging 200k interest on a 200k mortgage is immoral, unsustainable and concentrates wealth in the finance sector, which spills its wealth into politics and buy positions in cabinets and global institutions, and allows them to take politicians into their employ.
You compared the payment of interest with payment for a haircut. But the payment for the haircut comes from a stock of money already existing in the economy. The barber then passes it on for something he wants. Money gets shunted around, and if that were the only type of transaction that existed, the myth of the circular economy would be true. The barber could pay you £10 for honey every week (did I mention you were a beekeeper?), and you could pay the barber £10 per week for a haircut. If haircuts and honey were all you both needed to survive, everyone’s happy. But banks pull ‘money’ from out of their arses, that mortgage borrowers have to work hard, in the real world, to pay back. Once they’ve done (say) £200k’s worth of work and paid their loan off, it’s snuffed out. But there’s still the extra £200k of interest to pay – multiplied by the millions of mortgages all over the world. Now if Steve Keen says that no extra debt need be incurred to pay that interest, then that position needs to be taken seriously. But if true, then the borrower has to do double the amount of work that has to be done to repay the loan, to repay the interest. I’m assuming that most people still need to pay for all the other things they require in life, so to repay the interest (on loan of money that didn’t exist in the first place, but was snuffed out when paid), then extra work needs to be done over and above the amount of work that would have been done in a mutual credit (or any other interest-free) scenario. And work always carries with it an amount of throughput – and so thoughput would be increased, which is the killer of the biosphere, and therefore of us.
If interest can be paid without a) more debt, or b) more throughput – tell me how (I’m genuinely open to what you have to say). But in the real world (rather than our hypothetical one), debt is increasing beyond any hope of it being paid back, and throughput is increasing at such a speed that damage to nature will reach a cascade point that it won’t be possible to recover from. I’m not sure we disagree on this – it would be like saying that it’s possible to remove Jenga pieces forever without it falling over. Is it possible to have a stable economy with interest? You’re saying that it is, and I’m questioning that (I’m assuming that we agree on the need for a stable economy, too).
What if I’m wrong? If we remove interest from the equation, but throughput continues to increase, then we can look at other angles – restricting economic growth, which would require disincentives for capital flight from the first country to try it (or international agreements to sycnchronise); or restricting advertising. But those things won’t be possible (imho) as long as governments, homeowners and businesses are constantly required to increase transactions, or acquire more debt (allegedly) to pay ever-compounding interest on ever-increasing debt. Interest is still the source of the problem. But what if you’re wrong? What if we continue to try to live within nature’s means, but without addressing the potentially cancerous beating heart of the problem – until every other avenue has been explored and it’s too late. I think that you should at least be open to the possibility that interest is the villain of the piece here – because destruction of the biosphere is increasing (in the real world), and wealth is concentrating remorselessly (in the real world), with no end to those trends in sight, apart from annihilation. You can’t afford to be wrong.
‘Over-consumption of natural resources isn’t a monetary problem, it’s a problem of people wanting stuff.’
But in mutual credit, if you want stuff you have to work for it. In this interest-centred economy, you don’t – you just have to have accumulated money. And the people with the most accumulated money are the people who have done the least useful work.
‘private individuals have no power to take the medium of exchange out of circulation’
We agree on the pernicious nature of that.
‘where there’s competition for credit, interest offers a very simple way of determining who wants it most.’
No, not who wants it most – it’s not an auction – it’s about who the banks believe will generate most profit (social or environmental benefit don’t come into it).
‘But interest as a mechanism for calculating fees and risk premiums, and discouraging over-consumption, is totally harmless and very useful.’
Is the wrongest thing I’ve ever read. 200k on a 200k mortgage, for money they didn’t have, for doing zero work, that requires 200k’s worth of real work by somebody else to pay off and, multiplied by millions of mortgages, concentrates wealth in the banking sector – you think discourages consumption and is harmless. Words fail me.
‘I considered posting some questions for Matthew on your collaborative credit page but I ended up looking at his website and, after a short exchangewith him there, I’m going to write a governance proposal that he’s offered to look at.’
That’s great news. But I thought you didn’t like the credit commons idea – what happened? If you come up with a governance system for credit commons that satisfies Matthew, I’d be happy to promote it. Yes, he wants to build a new system, not fill in the cracks in this one. I agreed with everything you said in that exchange, btw. Do you have a condensed version of the local sovereignty idea? By the way, my job is to get this in front of as many non-expert people as possible, and if that requires a touch of ‘starry-eyed’ hyperbole, rather than jargon that would bore most people to death, then starry-eyed it is. We can’t use the kind of language that we’ve been using here (and that Matthew uses all the time – he readily admits that he finds if difficult to reach people) and hope to get many people on board. We have to say it in a way my mum understands (and gets enthused about) – so we might all have to get a bit starry-eyed.
Plus – there’s overlap between the owners of the means of exchange and of the means of production. So much so that the venn diagram may be a circle. Their interests certainly coincide. We’re not allowed to know who owns the Federal Reserve, so we can’t know for sure. Jenkin was talking about the means of exchange as the mechanism to achieve dominance – not that the owners of the means of production were a different, competing group.
“Charging 200k interest on a 200k mortgage is immoral, unsustainable and concentrates wealth in the finance sector”
The excessive profits the financial sector makes isn’t due to the way they calculate their charges, it’s due to the control they have over the exchange system. It’s rentier interest, which we’re agreed is pernicious. I’ve repeatedly distinguished between rentier interest and interest as a mechanism for calculating necessary charges; constantly bringing up the fact that banks make outrageous profits through that mechanism serves no purpose.
We both recognise that the monetary system needs to be structured in a way that does not allow anyone to hold the medium of exchange hostage, whether savers or financial intermediaries. We can move on from that. What we need to do is understand how a healthy system might operate. That means looking in detail about what will happen in a changed system.
“the payment for the haircut comes from a stock of money already existing in the economy […] But banks pull ‘money’ from out of their arses”
If you pay for haircut with a contactless credit card then you’re effectively paying for it with newly-created money, just as much as if a bank has made an explicit loan to you. And, strictly speaking, every payment comes from a stock of money already existing in the economy because bank loans don’t increase the amount of base money in circulation. The idea that banks create money is a useful fiction – useful because the whole banking system is so central to how current society operates that its private debt cannot be allowed to fail – but the reality is that most payments are made with private promises-to-pay rather than with true money.
But talking about what happens in the current system doesn’t help us understand how a healthy system would operate. So let’s look at what will happen in the system you’re advocating – a system in which a buyer and seller can, between them, agree to the creation of new credits (i.e. pull ‘money’ from out of their arses, as you put it). But that will only be possible if the wider community trusts them both – and there’s a lot of complexity in that, that I don’t think you’re taking into account.
If someone is buying something expensive, to be paid for over a long period, and the community is guaranteeing that the seller will receive full value even if the buyer defaults, then the community has to be satisfied that its potential liability is reasonable; not just for its own sake, but also for the sake of its trading relations with other communities. If there’s a meta-system in which communities at different levels are trading with each other using similar credit/debit creation processes, then they will all have to be satisfied that the other communities don’t have potential liabilities they won’t be able to meet.
So communities are going to have to approve transactions which create significant numbers of new credits – it won’t be feasible to treat it just as a matter for the buyer and seller. Now, as far as I can see, even in a small community of a couple of hundred people, trust is not something that can be taken for granted and in larger communities, of a couple of thousand, say, most people will not really know each other. Many members of the community will not want everyone else knowing everything about their affairs, and most of them won’t want to be dragged into examining whether others are creditworthy every time one of the community buys something expensive. In larger communities it wouldn’t even be remotely practical.
In practice, therefore, most communities will probably choose to delegate the job of approving credit creation to some trusted person. The job will involve having inside knowledge of the credit/debit status of everybody in the community, and of the community’s credit/debit status with respect to other communities, so it will be a position of power and responsibility and the community will have to ensure that the person doing it – the ‘credit controller’ – can’t take unfair advantage of that position. But before we look at the rules and procedures that’ll be necessary to ensure integrity, we’ll need to look at some of what will be necessary for the credit controller to do their job.
“the borrower has to do double the amount of work that has to be done to repay the loan, to repay the interest”
You’re forgetting that the borrower is not just buying the house, he’s also buying time to pay (and the fact that, in the current system, he’s being charged an outrageous price for that time is irrelevant to a discussion on how a healthy system would operate).
So, in the system you envisage, do you believe that someone who pays the full price immediately should have to pay as much as someone who pays it over ten years? And, similarly, should someone paying over ten years be expected to pay as much overall as someone paying over twenty years?
If you think the price should be the same regardless of how long the buyer takes to pay it, then we’re probably too far apart to ever agree. However, if you accept that the price should be higher the longer it takes the buyer to pay it, then we can turn to how the extra should be calculated and who should get the benefit of it.
There are various factors which have to be considered here. Obviously, the credit controller will need to be recompensed for the work involved so straightaway there’s the question of who will pay them. While some communities might decide to pay them from a general levy, others might decide that borrowers should pay – in which case there’ll be a fee, on top of the loan.
Then there’s the possibility of borrowers defaulting, whether through dying or running off or being incapacitated. In that case, somebody else will have to pay off those debits so we have a similar question: should it be the whole community, or should there be a fund that every borrower pays into through a ‘risk premium’ added to the loan? And how should such a risk premium be calculated? Should it be a flat rate, or should it be in proportion to the size of the risk? If it’s in proportion to the size of the risk, that implies a calculation based on the amount borrowed and the time it’s borrowed for – which is exactly what interest is.
They’re the two obvious factors but they’re not the only ones. If the community is to be trusted by other communities it trades with, its potential liabilities have to be limited. That means that if some people borrow a lot, others in the community might be prevented from borrowing until those other people’s debts are paid off. What if two potential borrowers would make the total loans too high and the credit controller has to choose which one to approve? How can they tell which one values the loan most highly? Everything else being equal, a simple and fair way is to set the price of the loan at a level where one of them decides it’s not worth it.
That one is different to the first two factors (the credit controller’s fee and the risk premium) which merely cover costs; the third one generates a surplus, which someone has to get the benefit of. But that’s only a problem if that surplus is allowed to go to someone who doesn’t deserve it. If it goes to the community, however, it can be regarded as compensation for lost opportunities (because every loan to a specific borrower reduces the availability of credit to every other member of the community).
All three of those factors involve decisions which different communities might choose to make in different ways. Some communities might choose to pay the credit controller’s fee and risk insurance through taxation and choose between competing borrowers by having some third party decide which project is more worthy. But those alternatives carry their own potential for unfairness and corruption, and many communities will feel that, since borrowers get the main benefit of loans, the fairest way is to make them pay the costs. Calculating those costs as a percentage of the loan – i.e. as interest – is a relatively straightforward way of determining them.
(Continued in separate comment)
“if Steve Keen says that no extra debt need be incurred to pay that interest, then that position needs to be taken seriously”
That’s not what he’s saying – because the interest itself is a debt. He’s saying that no new moneyneeds to be created to pay it. The problems you keep talking about are caused by excessive levels of debt and inflated prices for essential goods and services, rather than by the mechanism of interest.
“If interest can be paid without a) more debt, or b) more throughput – tell me how”
A farmer wants to build a bridge across a river to cut the journey to and from some of his fields by 60%. He can build it cheaply, without a loan, but then it’ll only last twenty years before he has to pull it down and build it again. If he builds a more expensive one, it could last a century or two but to do that he’ll have to take out a loan which, with interest, might take him ten or fifteen years to pay off.
He has a long list of tools and projects that would make his life easier (most of which will never get to the top of the list) and the money he uses to pay off the interest will be money he would otherwise have spent on something else, so I can’t see how the interest creates more throughput – it’s fairly obvious to me that it reduces it. And the total throughput from building a bridge that’ll last a century or two will be appreciably less than building one every twenty years, so there’ll be a double reduction. If he thinks it’s worth it, who’s in a position to tell him it’s not?
But he’s not sure what his future income is going to be so he doesn’t know exactly how long it’ll take him to pay it off. He accepts that he’ll pay more overall if it takes him fifteen years than if it takes him ten, but he still thinks it’s worth it – though he does need to know what the different costs might be. As long as there’s a formula that allows the credit controller to say how much he’ll have to pay in the different scenarios, he can make the decision. Fortunately, there is a formula, which has been used for centuries.
If you want to get agitated about floating interest rates, I’d have more sympathy for your argument. But then we need to get into talking about money as a unit of account, and the importance of keeping its value constant through time. That’s central to the reforms I’ve proposed, and it’ll be a major factor in inter-community trading, but I don’t think you’ve put much emphasis on it.
“in mutual credit, if you want stuff you have to work for it. In this interest-centred economy, you don’t – you just have to have accumulated money”
You haven’t thought that through, Dave. The people paying interest are the ones who haven’t accumulated money. They want stuff – enough to work for it – even though its price is inflated by the interest they’re paying.
Banks have no power to force anybody to borrow money from them – they make loans when people want to buy things that they can’t afford without borrowing. When people are obligedto borrow, to buy essentials like housing, it’s ownership laws which put them in that position, not the monetary system. Monetary reform is not going to put those underlying problems right (which is why I’ve proposed reforms to ensure that, in future, everybody inherits a fair share of all sectors of the real-estate market).
As for loans for things that aren’t essential, people aren’t going to stop wanting to buy those things. They make a calculation about whether the price, including interest, is worth paying and they decide that it is. You seem to think people will buy less if those things are cheaper but I regard that as absurd; on discretionary purchases, interest quite obviously reduces consumption.
You can rail against it all you like but interest, as a mechanism for levying necessary charges, is easy to defend for practical reasons. Unless you can come up with an argument against it that clearly distinguishes between rentier interest and functional interest, it’ll only ever be a minority who are convinced by what you’re saying, and they’ll be the ones who already see things through the same lens as you.
“I thought you didn’t like the credit commons idea – what happened? […] Do you have a condensed version of the local sovereignty idea?”
I looked beyond the claims that you made for it in your blog posts and saw that Matthew and Tim Jenkin are much more realistic about its potential than you are, and have a much better understanding than you of what people require from an exchange system. I’m still sceptical but pulling my ideas together into a proposal for a new society is a worthwhile next step for me, regardless of whether it goes anywhere. So far I’ve only presented it as a set of reforms to the existing UK system, rather than a proposal for new society. What I’ll write for Matthew is an overview of the essential structure of a governance system, along with a formal draft constitution.
“my job is to get this in front of as many non-expert people as possible, and if that requires a touch of ‘starry-eyed’ hyperbole, rather than jargon that would bore most people to death, then starry-eyed it is”
Putting things in terms ordinary people can understand is good but, if you haven’t understood it properly yourself – and at the moment, I don’t think you have – you’ll simply be spreading misinformation.
“there is an awful lot of overlap between the owners of the means of exchange and of the means of production”
There is indeed, and wresting control away from them is not going to be easy. My attitude is that we need to focus on attacking their weak points (which is where they’re vulnerable) rather than their strong points (which is where the poor feel the effects of their dominance).
So, on economic factors, I concentrate on pointing out that a) ownership laws are incompatible with generally accepted, uncontroversial principles such as equality of opportunity – and, in the case of land, are inconsistent with their own origins, because freehold ownership of land was originally administrative – and b) requiring that taxes be paid in money, rather than in labour (with an option to pay in money), is incompatible with principles of equality, because it makes the poor subservient to the rich. I’ve never had anyone seriously dispute those points but as long as I’m the only person pushing those arguments, I can be safely ignored.
‘constantly bringing up the fact that banks make outrageous profits through that mechanism serves no purpose.’
It does. They’ve bought power. Their outrageous profits allow them to do it. (do we disagree that power can be bought in capitalism, btw?)
‘That means looking in detail about what will happen in a changed system.’
I don’t feel strongly about this. We can surmise, but it will require systemic change (and a transfer of power, but not using violence – it’s happened before), and writing a blueprint will second-guess democratic decisions yet to be made by a truly democratic governance. I think it’s the democratic governance we should be aiming for, which (imho – don’t know about yours) will mean cutting off ways that power can be bought, currently.
But no, we don’t have to waste time on different critiques of the current system. If you see it differently to me (and I don’t know why you’re saying that banks creating money is a fiction), then let’s just leave it. We both think it’s shit – that will have to do. If you have governance ideas that will help the spread of mutual credit, that’s interesting. I’m curious as to why you’re now thinking of ways for mutual credit to succeed. What was it?
‘the fact that, in the current system, he’s being charged an outrageous price for that time is irrelevant to a discussion on how a healthy system would operate’
I’m just saying that doubling the amount of work required, just to fund banks’ profits, will also double throughput, which destroys the biosphere. Without the outrageous interest, the mortgage could be repaid over the same time period, without requiring so much work from the homeowner.
‘someone paying over ten years be expected to pay as much overall as someone paying over twenty years?’
No – just not double, and we can cut out the finance sector – it’s unnecessary.
‘we can turn to how the extra should be calculated and who should get the benefit of it.’
Yes. But why can’t we leave it to the parties concerned? If there’s no inflation in the new system (why would there be?), then there’s no need to add very much at all – especially as it’s a handy way for the builder of the house (say) to avoid breaching credit limits, and have ‘credits in the bank’ so to speak – if banks existed, which they wouldn’t.
I’m not knowledgeable enough about the credit commons to know where credit controllers fit in, or how they get paid, but I’d be very interested to know Matthew’s thoughts. For me, it’s a fascinating idea that’s worth a punt, in a ‘what’s the worst that could happen – we reduce banks’ profits a bit’ sort of way, rather than having a blueprint for a new system. That way (often) lies tyranny.
‘which is exactly what interest is.’
No – interest is banks’ profit, and banks are unnecessary. And the amount of interest is absurd.
But throughput IS going up. Your bridge example is a distraction – similar to just a tiny percentage of work done – most is to increase consumption unnecessarily for the vast majority of people who don’t live anywhere near a bridge or its throughput-reducing equivalent. It’s what the advertising industry is for, it’s why all governments are chasing perpetual growth, and why people need to do much more work to pay interest that is only required to keep bankers in the manner to which they’ve become very accustomed. Consume, consume, consume!
‘if you haven’t understood it properly yourself – and at the moment, I don’t think you have – you’ll simply be spreading misinformation.’
It’s not my thing – It’s Matthew, Jem and Tim’s. Pages that are always current on the site, like the collaborative credit intro – https://www.lowimpact.org/lowimpact-topic/collaborative-credit/, I run past Matthew, in the same way that I run every topic past specialists. I have to be a generalist. It’s my role. For me, it’s an extremely interesting idea that I want to help happen, by getting it in front of as many people as possible, as well as helping people to re-train to actually do something useful to their community, that credit can be provided on the basis of.
And you’re right that I fired off about credit commons before understanding enough about the need for trust / governance. I should go back and change that initial article.
I don’t feel as combative as you appear. We have different opinions about how power is gained and maybe who has it, but so what? If Matthew thinks that your idea helps the credit commons cause, we’re on the same team.
Is your future technocentric and commodity-based, with profit and interest? Why would you want that? Interest will always concentrate power in the hands of the interest-chargers. It’s inevitable. And that point has passed already.
Douglas Rushkoff says show don’t tell. So if someone shows me something that works, that I can join, that is doing something obviously good, like transferring wealth and power to the solidarity economy, I’ll do it, and I’ll tell other people about it. I’ll do it for your idea as well if it gets traction. And if it’s good enough, it will. I think Matthew’s approach could work, if we pushed it hard enough. There are other very impressive people saying similar things. Collaborative credit is a great idea, and I think we should try it anyway, whatever else we do. There are capable people everywhere, who could do this.
By the way:
“ “in mutual credit, if you want stuff you have to work for it. In this interest-centred economy, you don’t – you just have to have accumulated money”
You haven’t thought that through, Dave. The people paying interest are the ones who haven’t accumulated money. They want stuff – enough to work for it – even though its price is inflated by the interest they’re paying. “
You’ve misunderstood me. People either get what they need to live through their capital or through their work. All value comes from people doing useful work (if you don’t agree with the labour theory of value, that could be the basis of all our disagreements). In a mutual credit system, if you don’t do useful work, you don’t get the things you need. That’s why I’m an anti-capitalist, and think that mutual credit is worth a punt – but I’m a free-market anti-capitalist, which is a difficult sell (on both left and right) until people get it.
and
‘it’ll only ever be a minority who are convinced by what you’re saying, and they’ll be the ones who already see things through the same lens as you.’
is a) not true I don’t think. Ask people what they think of banks. When they realise that interest it the mechanism by which they get their power, it’s an easy step, and
b) what they almost definitely said to people campaigning against the slave trade, for votes for women, for decriminalising homosexuality etc. etc. If you believe something, you can’t not say it just to be popular.
“writing a blueprint will second-guess democratic decisions yet to be made by a truly democratic governance. I think it’s the democratic governance we should be aiming for”
As far as I can see, it’s the essence of how democratic decisions are arrived at: people who are interested in a particular problem debate what rules should be in place to resolve it, then draw up proposals which the public vote on, either directly or through their chosen representatives.
But my primary focus is governance – I don’t expect significant monetary and land reform to happen until we have somehow managed to change the way we’re governed.
“I’m curious as to why you’re now thinking of ways for mutual credit to succeed. What was it?”
I’ve never used the term ‘mutual credit’ myself but communities creating enough money for their own needs has been central to my thinking for a very long time. That’s why my own page on monetary reform proposes changes which ‘would essentially allow local authorities limited powers to create local currencies, associated with their revenue-raising power’ and refers to ‘the fact that money going out of a community can no longer stimulate trade within it, so there has to be some means of ensuring that outward flows are balanced by inward flows’. On that page, I summarise by saying ‘In this scenario, creation of the medium of exchange would be shared between local communities and central government, with local authorities deciding how much to issue, and central authorities regulating how soon it would start to lose value and also setting exchange rates’.
I approached the problem of establishing a healthy exchange system from the central perspective, and concluded that it needs a good deal of local autonomy. Matthew has approached it from a local perspective and concluded that local exchange systems need a central clearing system. Basically, we’ve come to similar conclusions from different angles.
“Without the outrageous interest, the mortgage could be repaid over the same time period, without requiring so much work from the homeowner”
One of the core arguments of the Land Value Taxation brigade is that rents always rise to the maximum that renters are able to pay. Currently, interest is a convenient mechanism for the rentier class to capture that value but, if that route were closed (and everything else remained the same), all that would happen is that asking prices would rise. Fundamentally, in the kind of competitive economic environment we currently have, the overall price is determined by what people are prepared to pay.
If house prices were truly determined by the costs of supplying them, then the homeowner would indeed have to work much less – but in the absence of something like the ownership reforms I’m advocating (which would giveeveryone a fair share in the real-estate market), that’s not going to happen.
“why can’t we leave it to the parties concerned?”
If a transaction is being underwritten by the exchange system (i.e. if the seller is going to receive his credits even if the buyer defaults) then the whole community is concerned. And the seller is often simply the end point of a supply chain, every member of which is concerned. Most expensive purchases aren’t the work of a single individual. They’re nearly always the result of combining the work of many different people – that’s what makes them expensive – so deferring payment to the seller will often not be practical. And expecting the buyer and seller to work out the whole complex web of liabilities could be horrendously complicated. That’s why exchange systems exist, to simplify it all.
“If there’s no inflation in the new system (why would there be?)”
For the same reason there is in the current system. When there’s too much money/credits in active circulation for the amount of goods and services on current offer, then prices will rise. It can also work the other way, but sellers tend to be more ready to raise prices than lower them so, in practice, there’s a ratchet effect. If the creation of new credits is not constrained, there will almost certainly be inflation.
“we can cut out the finance sector – it’s unnecessary. […] I’m not knowledgeable enough about the credit commons to know where credit controllers fit in, or how they get paid”
The Credit Commons and the management of all the local exchange systems is the financial sector ; and it is necessary because there will be a whole lot of decisions to be made that would be impractical for most of the population to be involved in, even if they wanted to be (which they almost certainly won’t).
“interest is banks’ profit”
Banks provide payment services, and money storage, for many millions of people. The costs of providing those services are met from the interest paid by borrowers. Any alternative exchange system will also have those costs which will have to be paid somehow; there’s no good reason not to pass them on to borrowers, in proportion to what they owe.
“the collaborative credit intro […] I run past Matthew”
I didn’t post any questions on that page because, apart from one or two relatively minor points, there wasn’t much there that I objected to. My assessment of your understanding is based on what you’ve written in your blog posts and your responses to me here.
“Your bridge example is a distraction – similar to just a tiny percentage of work done”
That sort of thing might be only a tiny percentage of work done currently, but it’s part of what a financial system exists to facilitate – if the basic structure of the exchange system makes things like that difficult then it’s not fit for purpose. I can’t see the work that will need to be done in a healthy society as a distraction.
“You’ve misunderstood me. People either get what they need to live through their capital or through their work. All value comes from people doing useful work”
No, I haven’t misunderstood you, Dave. I’m well aware that all value comes from people doing useful work and that some people in the current system get the benefit of others’ work. But that’s irrelevant to the overconsumption you’re concerned about. What matters there is how much work people will choose to do, in a changed system, in order to acquire stuff that they don’t need for pure subsistence. We know, from the current system, that people will work to pay for things they don’t positively need, even when the price of those things is inflated by interest. Your suggestion that overall throughput will decrease if those things are cheaper is hard to take seriously.
“Is your future technocentric and commodity-based, with profit and interest?Why would you want that?”
I’m probably no more technocentric than the Luddites were, in that I’m very much in favour of technology when it serves people and against it when it undermines or enslaves them. I think human beings will continue to invent things and I see a possibilty for technology to help a transition to a healthier society, but I certainly don’t see it as central to a mature society – though I’m very conscious that many things we take for granted (paper and steel tools, for example) are technologies which profoundly affect the way society operates. I don’t anticipate those kinds of technology disappearing, but I’m not taking the continued existence of electricity supply grids or the internet for granted (and I’m definitely opposed to any monetary or governance proposals that rely on them).
It won’t be ‘commodity-based’, in two ways: a) the monetary reforms I’m proposing would make passive labour the basis of our unit of account and medium of exchange, and everybody would have the option of paying taxes in labour; and b) I don’t envisage society continuing to run on fossil fuels (though I don’t get exercised about climate change the way many people seem to).
‘Profit’ is merely a name for the difference between what it costs you to do work and the benefit you receive from it – I see no problem with that at all. And I’ve already explained why we might want functional interest: to pay the running costs of the exchange system, to insure against borrower defaults and to limit demand for loans to a level that’s consistent with monetary stability.
‘But my primary focus is governance – I don’t expect significant monetary and land reform to happen until we have somehow managed to change the way we’re governed.’
Are you open to the suggestion that it might be the other way round? Maybe the focus should be on what’s immediately doable – building the solidarity economy, the components of which already have governance systems? Why not network them and see step-by-step improvements instead of writing a rule-book that may never get to be used. I’m not saying that your rules aren’t good, I’m just saying that something better might emerge from networking existing co-operative / free / commons institutions.
‘Basically, we’ve come to similar conclusions from different angles.’
I’m not sure. Local groups forming autonomously, then developing central institutions is different from the initiative coming from local and central government. I just don’t see what their incentive is.
‘in the kind of competitive economic environment we currently have’
But it’s a rigged economy. Without state assistance for corporations (Trump’s just drastically reduced their tax requirements – and they’ve never really been taxed properly, plus states build national and international infrastructure that benefit the corporate sector much more than small businesses, they allow them into government, give them privileges because they ‘create jobs’ [they actually do the opposite] donate funds and lobby them mercilessly, preferential treatment with state contracts – and so on) I’m not sure their ‘economies of scale’ would work. They’re bloated, bureaucratic, centrally-planned dinosaurs. But they dominate everything due to their cozy relationship with states. Let’s try a really free market for a change.
‘If a transaction is being underwritten by the exchange system (i.e. if the seller is going to receive his credits even if the buyer defaults) then the whole community is concerned.’
Sorry, I misunderstood. I meant that prices can be decided by the parties involved in the transaction, not that the system doesn’t need governance.
‘When there’s too much money/credits in active circulation for the amount of goods and services on current offer, then prices will rise.’
It still feels like we’re thinking of very different animals. In the system I’m thinking of, the above can only happen if enough people renege on their promises to provide goods and services to the market. In a well-run system, that shouldn’t happen. Inflation can only happen in this system if it isn’t working properly – and if that’s the case, it’s time to throw the towel in. There can’t be an excess of credit in a properly-functioning system, because someone can only obtain credit when someone else goes into an equal amount of debit. Problems can only occur if people renege, not if it’s working properly.
‘Any alternative exchange system will also have those costs which will have to be paid somehow; there’s no good reason not to pass them on to borrowers, in proportion to what they owe.’
I think we might agree on this. We need transaction fees or some method of funding governance, admin, insurance etc. Just not the kinds of interest/profits we have in the current banking system.
‘No, I haven’t misunderstood you, Dave….. Your suggestion that overall throughput will decrease if those things are cheaper is hard to take seriously.’
No, that’s still not what I mean. Let me put it another way – no individual will own a lear jet or a super-yacht, because you can’t get one through work, only by owning capital (or by going hugely into debt – but that’s not how a working person gets a lear jet – they just don’t get a lear jet).
‘I’m probably no more technocentric than the Luddites were….. etc.’
Agreed. (and although mutual credit would be an online phenomenon, it could also work using pen and paper. If the internet fell over today, almost everyone in the UK would be dead in a month, as food and water supply, energy, transport, health and finance would fall over as well).
‘‘Profit’ is merely a name for the difference between what it costs you to do work and the benefit you receive from it’
Again, I think our difference is down to Marx. Profit doesn’t go to people who do work – they get wages. Profit goes to people who own capital, rather than do any work. Yes, self-employed people can make profit, but their surpluses usually cover wages and business expenses. The vast majority of profit goes to capitalists and is generated by other people’s work, not their own – we’re back to the labour theory of value.
Lots of people I talk to these days have big ideas to bring about wholesale change. Using Douglas Rushkoff’s ‘show don’t tell’ principle, maybe we should treat it as a free market or a game of musical chairs – give them all a go and see which ones are left standing at the end. If they can attract people and start to grow, great, let’s get behind them. If they can’t (or if they’ve already been tried and resulted in totalitarianism, gulags and ecological destruction), then let’s acknowledge that and move on. I’m happy to blog other people’s ideas to help them get a bigger audience, and some traction if possible – yours included, if you have a summary.
“Are you open to the suggestion that it might be the other way round? “
Sure, that’s why I’m going to put forward a governance proposal for Matthew. As I’ve said before, I fully recognise that transformation might have to come through the establishment of a new society, rather than through reform of the current one. However, alternative exchange systems or land ownership won’t have any significant impact without displacing the current system and, without a governance framework, I can’t see much prospect of them even getting properly established.
“Local groups forming autonomously, then developing central institutions is different from the initiative coming from local and central government”
My focus is on how a mature system would operate – how we get there is a separate issue – so I’m not suggesting the initiative would come from currently established local or central government. Nor would the local monetary authority necessarily be the same as the local executive authority, though they would almost certainly share the same democratic overseer. But having the value of a currency under-pinned by the tax-raising authority is a huge advantage so, in the ideal situation, they would undoubtedly have a central role – which I’m pretty sure Matthew would agree with.
“prices can be decided by the parties involved in the transaction”
As I pointed out, the whole community is involved. They’re the people who will foot the bill if the buyer defaults, so they’re the ones who need to determine what risk premium should be added to the seller’s price. They’re also the ones responsible for the costs of deciding whether the buyer and seller are trustworthy, and they’re the ones who will pay if the transaction creates more credits than the community can absorb.
“There can’t be an excess of credit in a properly-functioning system, because someone can only obtain credit when someone else goes into an equal amount of debit. Problems can only occur if people renege, not if it’s working properly. “
Whether there’s an excess of credit is a function of supply and demand. It’s not just a question of people reneging, it’s whether they have something to offer that the people with credits want to buy. If they haven’t, then the credits which are in circulation will compete for the goods and services that the people holding them do want.
The community as a whole will want the debtors to do work to pay off their debts but it’s for the community as a whole to coordinate that. It’s not something that can be expected to happen automatically through private individuals spending the credits they’ve earned.
“Inflation can only happen in this system if it isn’t working properly – and if that’s the case, it’s time to throw the towel in.”
What I’m saying is that inflation is likely to happen unless there’s a certain amount of management and management will involve certain monetary tools, the simplest of which is varying the price of loans. Without management, any monetary system is likely to be unstable, simply because economic activity varies unpredictably. If you think it’s better to abandon a system that’s not working, rather than implement some basic management … well, I think that would rule out ever getting a satisfactory system established.
In the current system, varying the price of loans is pretty much the only lever the monetary authorities have and their use of it is constrained by the demands of savers. In a healthier system, they would have that lever, plus they would be able to vary the cost of savings (i.e. negative interest on bank deposits) and they would be able to vary transaction charges for converting to and fro between the medium of exchange and the medium of saving.
“But it’s a rigged economy”
I have to say, I’m getting a bit tired of this kind of thing, Dave. We both recognise that the current system is flawed; the only point in discussing it is to understand what features of it cause problems and what features are worth keeping.
You argued that interest causes home-buyers to pay much more than they should need to. I pointed out that, if loans at interest were banned and everything else remained the same, asking prices for houses would probably rise to absorb what people are prepared to pay, in an environment in which house-buyers compete with each other. You’ve responded with a diatribe about corporations. What does that contribute to the discussion?
As for how you get to lear jets and super-yachts from your concern about the extra throughput associated with work borrowers are obliged to do to pay interest … I’m not even going to try and work that one out. I’ve offered you some reasoning for why getting rid of interest on loans wouldn’t help reduce overall throughput at all. If you don’t want to engage with that reasoning, that’s fine.
been ill. will reply soon.
Hi Malcolm. Here’s my take, after thinking about it on my sick bed over xmas.
I think that you and I are coming at this from very different political perspectives, and our argument arises from that, and not from anything inherent in mutual credit / credit commons, which is just a tool. I’m coming from a mutualist / solidarity economy position. I don’t want power to reside in a strong, centralised state; but also, I don’t want some people to get so rich that their money allows them to assume control. And that’s the situation now in the West. And the fact that it damages nature doesn’t bother them. They think there will be a technological solution – if they think about it at all. We differ on this point I think. In fact, we might differ so much that you think that I’m an impossible idealist. But unless we build something new (and the solidarity economy is already being built, by brilliant, committed people), then the coming battle between concentrated powers – the Chinese state and Western money – will be a battle that it’s unlikely we’ll survive. It has to be avoided somehow. And even if we build a solidarity economy in the West (or your governance system somehow gets implemented and turns things around), similar developments will have to happen globally, especially in China, or they will be bulldozed in the West.
Back to our political perspectives. I fundamentally disagree with making money from someone else’s work – only from your own. And the fruits of your own labour can never be too much, because you’ve worked for them. This is why you didn’t understand the Lear jet reference – because you’re not looking at it from the same political perspecitve as me. No-one will have a Lear jet in a mutualist system, because you can’t earn enough from your own work to get one. Lear jets can only be obtained on the back of other people’s work – via rent, profit (my definition) or interest. Excessive spending is curbed in a mutualist system because you’d have to work for it. And if you’ve worked for it, it won’t be excessive. We differ on this too, I think.
Interest, rent, profit, dividends, share prices are all ways to make money from someone else’s work, and they inevitably concentrate wealth in the hands of the lenders, landlords and shareholders. If your governance system doesn’t cut that out like the cancer it is, it won’t work for me. You don’t have to think of an economic system – it’s the solidarity economy / mutualism with a mutual credit exchange system, plus new governance and landholding systems. If your governance system works for this – why not? Let’s see what Matthew thinks when you’ve written it up.
I’m thinking of mutual credit / credit commons as a tool for mutualism / the solidarity economy (in fact, the strapline for Matthew and Tim Jenkin’s credit commons white paper is ‘a money for the solidarity economy’). If it’s used for anything else, its benefits will be minimised. Without mutualism / SE, yes, interest can be charged, factories and businesses will be owned by individuals or majority shareholders, and land will be held by large landowners who rent it to tenant farmers. In all those cases, profit will be made by people who do no work, generated for them by people who do, and wealth will remain concentrated. The idea that the power of concentrated wealth can be curbed via regulation is absurd. Again, we differ I think.
In mutual credit, members have liquidity / credit limits for everyday transactions. This carries no interest. Some people will be a little bit in credit, some a little bit in debit. That kind of credit doesn’t ‘cost’ anything. But ultimately, no form of credit needs to cost anything. The means of exchange doesn’t need to be rented – it can be shunted around and no-one loses anything. There can be funds – ‘savings’ if you like, that don’t need to bear any interest – they can just serve as a place to park extra credits for a ‘rainy day’ as you say. If there’s no inflation (and inflation just reduces the value of people’s money – it’s an unnecessary evil), then they don’t need to grow, and so there’s no requirement for interest payments. Loans can be offered from these funds for items that would break liquidity credit limits (like a house, for example) and yes, there needs to be some sort of (co-operative, for my money) insurance premium to cover risk of default (but if the loan is for a house, that’s covered anyway – it would only be business loans that require the premium – and even then, equity could be used instead of interest – the Islamic way[in theory]). But no-one wants to pay a compounding percentage of a credit extension, that has to come from their own hard work, for a roof over their head – including the builders who build it. And if no-one wants it, why have it?
‘(Inflation is) not just a question of people reneging, it’s whether they have something to offer that the people with credits want to buy. If they haven’t, then the credits which are in circulation will compete for the goods and services that the people holding them do want.’
Yes, too much credit might cause inflation, but without interest, the problem might be minimised or removed. If you know more about this than me, put me right – but when usury was banned in the middle ages, there were huge stretches without inflation? But yes, good governance is required to control inflation, if it happens. This is where you come in, maybe?
But we need a semblance of democracy for any governance system to be more than window dressing. If it’s ok to make money from other people’s work, via interest, profit or rent (bearing in mind that it’s fine to be recompensed for work put in to build a business), how do you stop wealth concentrating to the point that real democracy is impossible? (i.e. the situation now)? This is where our politics are different – you don’t see that democracy is impossible in a system in which wealth concentrates, and you don’t see the evils of making money from other people’s work – either that or you don’t recognise interest, profit and rent as inevitably doing that (tell me if I’m misrepresenting you).
I guess you’d say that regulation / governance can solve this problem (if you see a problem). But how do we get to a place where effective regulation and governance can happen – because it can’t happen now. If it’s tried via the current political system, algorithmic capital flight will remove any government that tries it, and the next, pro-corporate, government will reverse their policies. And violent revolution will destroy any hope of democracy. Which leaves only one option – building a solidarity economy to replace capitalism. This has to happen first, before effective governance can work. But if interest, rent and profit are part of that new system, then it will mean that making money from other people’s work IS still possible, which is both morally wrong, and it will ensure that wealth will slowly start to concentrate again, and sustainability and democracy will again be impossible.
I don’t really see any significant political differences between us, Dave. From my perspective, our disagreement is based more on semantics and different approaches to understanding socio-economic mechanisms. You seem to be insisting that certain words only have very narrow meanings, whereas I treat words as having the full range of meaning that people give them in practice. And you judge mechanisms by the effects they have under current circumstances, whereas I judge them by the effects I expect them to have under changed circumstances.
That’s compounded by your making assumptions about my position that don’t reflect what I actually think, and a tendency on your part to overlook gaps and contradictions in your own thinking.
“I don’t want power to reside in a strong, centralised state; but also, I don’t want some people to get so rich that their money allows them to assume control. […] We differ on this point I think” […]
“if you’ve worked for it, [spending] won’t be excessive. We differ on this too, I think. “ […]
“The idea that the power of concentrated wealth can be curbed via regulation is absurd. Again, we differ I think. “
No, I don’t think we differ on any of those points. However, the first and third look to me like contradictions in your thinking, because you seem to be proposing a number of discretionary regulations (which would have to be centrally enforced) aimed at preventing wealth concentrating. (By discretionary I mean regulations whch aren’t necessitated by unavoidable circumstance, in contrast to intrinsically necessary rules – like inheritance law for example, where there have to be some rules about what happens to property when its holder dies, and different ways of formulating those rules shape society in very different ways.)
“if the loan is for a house, [risk of default is] covered anyway” […]
“(bearing in mind that it’s fine to be recompensed for work put in to build a business)”
It’s easy enough saying those things but there’s a whole lot of detail in how it happens. If you go into the detail, and explore all the avenues, I think you’ll find that most of the mechanisms you’re against are essentially harmless and useful. If you avoid the detail, it’s easy to keep your prejudices intact but it also makes it easy to build an incoherent mental model of the world.
“Interest, rent, profit, dividends, share prices are all ways to make money from someone else’s work, and they inevitably concentrate wealth in the hands of the lenders, landlords and shareholders.”
“This is where our politics are different – you don’t see that democracy is impossible in a system in which wealth concentrates, and you don’t see the evils of making money from other people’s work – either that or you don’t recognise interest, profit and rent as inevitably doing that (tell me if I’m misrepresenting you)”
I certainly don’t recognise interest, profit and rent as inevitably doing that – for the reasons I’ve already given you in previous responses. They, along with things like dividends and share prices, are merely flexible mechanisms for distributing wealth whose basic allocation is determined by a set of deeper rules. If those deeper rules create a tilted socio-economic landscape, as they do currently, then any mechanism for distributing wealth will produce unjust outcomes. But that’s a problem with the underlying rules, not with those processes. If we amend those underlying rules so that the landscape is level (as the reforms I propose would do) then they’ll simply be effective mechanisms for enhancing people’s freedom.
You keep insisting that those mechanisms (interest, profit etc) in themselves lead to wealth concentrating. But the only reason you’ve given is that they do currently – even though you acknowledge that underlying laws give control over essential resources to a minority, thus tilting the socio-economic landscape. You haven’t offered any analysis to support your view that those mechanisms will still have that effect in a changed system. It’s like arguing that, because round balls always naturally roll towards one end when the playing-field is tilted, we should ban round balls even on level playing-fields.
Fundamentally, my position is that wealth concentrates because certain intrinsically necessary laws (of ownership and inheritance, in particular) are formulated in ways which encourage it to. Relatively simple re-formulation of those laws would remove the tendency for wealth to accumulate naturally. As far as I’m concerned, banning people from using certain methods of transfering rights that they’ve earned (for example, not allowing someone to rent out a house they’ve worked to buy) would be both pointless and unnecessarily restrictive.
“you don’t see that democracy is impossible in a system in which wealth concentrates”
I’ve pointed out, in a previous response, that ‘Private interests are able to distort the way government works because the political system is full of holes – money might be at the front of the queue to take advantage of those holes but it’s hardly alone’. If we fix those flaws (which the reforms I advocate on my website would do), then we would almost certainly implement reforms that would also level the economic landscape. If you’ve got some reasoning to support your view that wealth accumulation would actually prevent honest government, even if we had proper systems of democratic accountability, I’d be interested to hear it. But if your only reasoning is that money distorts government in the current set-up therefore it inevitably will in any set-up, then we’re unlikely to reach agreement.
“If your governance system doesn’t cut that out like the cancer it is, it won’t work for me.”
As far as I’m concerned, a healthy governance system will do no more than establish a satisfactory framework of authority that makes rulers and representatives properly accountable to the public. Unless your idea of a democratic system is one that imposes your prejudices on everybody else, you have to accept that the public might adopt laws that you don’t agree with.
I do have proposals for land reform and monetary reform but they aren’t part of my manifesto because, for all their importance, they’re not directly relevant to the process of how government is structured, how its different branches hold each other in check and how power is delegated to individuals (and reclaimed from them).
“If you know more about this than me, put me right – but when usury was banned in the middle ages, there were huge stretches without inflation?”
As I understand it, the reason there were huge stretches without inflation is that money was based on commodities whose supply is naturally limited (in contrast to fiat money which can be created at will). It is expansion of the money supply that causes inflation, so it only happened when coinage was debased (through rulers mixing other metals in with the precious metals that the coins were supposedly made of, thus allowing more coins to be minted) or when new sources of the precious metals were discovered (the economy of Spain was apparently wrecked by the huge amounts of gold and silver it brought back from South America). On its own, banning usury would have caused deflation (when prices fall because there’s not enough money actively circulating) because money would simply have been hoarded instead of being lent (though it’s possible that the rulers who banned usury were the same ones who debased the coinage). My impression is that, in societies which prohibit lending at interest, the wealthy exercise power more directly, through patronage, rather than through increasing their wealth.
“This is why you didn’t understand the Lear jet reference – because you’re not looking at it from the same political perspecitve as me. No-one will have a Lear jet in a mutualist system, because you can’t earn enough from your own work to get one.”
I certainly do understand that, in a healthy system, no-one will earn enough to buy that kind of privilege. But if you think that’s relevant to your concern about the extra throughput associated with work that borrowers are obliged to do to pay interest, please explain how – because that’s the context that you raised it in. When you first mentioned it, it seemed like you’d thrown it in to avoid answering the point I’d made.
Incidentally, I find links to particular comments don’t work for me on this site – it jumps to the top of the page instead. I don’t know if that’s that my Firefox/Ubuntu setup or your website. Has anyone else remarked on that?
‘you judge mechanisms by the effects they have under current circumstances, whereas I judge them by the effects I expect them to have under changed circumstances.’
I accept that. But my main issue is your mechanism for bringing about the changed circumstances. I don’t see it. Rushkoff says ‘show don’t tell’, so if you show me, I’ll believe it.
‘you seem to be proposing a number of discretionary regulations (which would have to be centrally enforced) aimed at preventing wealth concentrating.’
No, I don’t think this is possible. Centralised power will always be (and has always been) seized by undemocratic forces. The trick is to keep power decentralised. What I’m advocating is the solidarity economy, built from grassroots, getting help from governments where possible (albeit temporarily). This is the only option, imho. Violent revolution always makes things worse, and voting – well, you can see where voting has got us – Trump with his Goldman Sachs cabinet.
‘It’s easy enough saying those things but there’s a whole lot of detail in how it happens. If you go into the detail, and explore all the avenues, I think you’ll find that most of the mechanisms you’re against are essentially harmless and useful. If you avoid the detail, it’s easy to keep your prejudices intact but it also makes it easy to build an incoherent mental model of the world.’
Sure – we can swap insults. Your model of the world is one in which (national) governments have the power to regulate (multinational) banks and corporations. That to me is an incoherent model. In the platform co-operative movement, they are doing a lot of work to provide recompense for the entrepreneurial work involved in setting up co-ops and co-operative platforms. They can be paid from future revenue of the company, but they will not, and they have no interest in, having control over and making profit from other people’s work in perpetuity (and the ability to pass on those rewards to their children) in exchange for the work they put in to start the company. It’s a different mindset.
‘I certainly don’t recognise interest, profit and rent as inevitably doing that – for the reasons I’ve already given you in previous responses. They, along with things like dividends and share prices, are merely flexible mechanisms for distributing wealth’
Sorry, that’s laughable. If you’d said concentrating wealth rather than distributing wealth, it would have made sense. And as long as wealth is concentrated, there is no mechanism for regulating the system to stop it being concentrated. I think your position is incredibly naive – as though banks and corporations are going to roll over and allow their wealth and power to be siphoned away from them. We have to build a system that doesn’t concentrate wealth in the first place.
‘You haven’t offered any analysis to support your view that those mechanisms will still have that effect in a changed system.’
That’s not my view. They won’t have the same effect in a changed system. But if you post again, I want you to describe to me the mechanisms involved in bringing effective regulation to bear on the corporate sector, or let’s stop having this conversation. However, if you can explain to me how those regulations can be imposed: a) in one country, with a capitalist press, banking system, energy sector, food sector etc; with government ministers sitting on corporate boards; with many times more corporate lobbyists than politicians in every capital city; with politics awash with corporate money; with governments reliant on corporate banks to cover necessary expenditure; and with 90% of the economy consisting of the derivatives market, controlled by corporate algorithms that will bankrupt any country that tries to curb corporate power; OR b) internationally, in a world where global institutions with any bite at all, like the WTO, IMF, World Bank etc. are corporate-controlled, and we have a continuous stream of trade deals that will increase their control; and where there are absolutely no global institutions that that have the power to control the corporate sector in anything but a very cosmetic way – if you can do that, you’ve got yourself a convert.
‘not allowing someone to rent out a house they’ve worked to buy’
I’m not saying that that will be the case. Much cleverer people than me can work out the details. But for me, it’s a slippery slope. How about a house they haven’t worked to buy? How about ten houses? How about 100,000 acres? If people need to rent houses, what’s wrong with doing that from a co-operative? But I don’t want to labour this point – it’s detail. My main point is the impossibility of challenging corporate power with regulation. It would be like Burundi bringing in a law to curb the power of the US. They can do it, sure – but it won’t make any difference in the real world, because they haven’t appreciated how power works.
‘the economy of Spain was apparently wrecked by the huge amounts of gold and silver it brought back from South America’
Yes, in the 16th century, it was looking as though the future was going to be Iberian. Spain and Portugal were busy dividing the world between themselves, and bringing the world’s treasures back home. But in less than 100 years, they were backwaters, with their power in tatters. As I understand it, they were bringing back enormous amounts of bullion at exactly the same time that northern Europe was developing its manufacturing and banking – which Spain and Portugal spectacularly failed to do, thinking that their new wealth would ensure their power. Iberian bullion was soon spent on luxury goods bought from the rest of Europe, the proceeds of which were deposited in the new banks. After they’d spent their bullion, and the new fleets of France, England and the Dutch were busy raiding Spanish galleons, they were forced to borrow at interest from northern Europe. From that point, it’s been clear that wealth and power concentrate via lending at interest, which is why we now live in a global financial empire that will be remain amused by any attempt to control it without the mechanisms to do so.
‘I certainly do understand that, in a healthy system, no-one will earn enough to buy that kind of privilege. But if you think that’s relevant to your concern about the extra throughput associated with work that borrowers are obliged to do to pay interest, please explain how – because that’s the context that you raised it in. When you first mentioned it, it seemed like you’d thrown it in to avoid answering the point I’d made.’
Last attempt: excessive throughput today is fuelled by debt; plus the extra work that has to be done to pay the interest on that debt; plus the overconsumption made possible by the ownership of capital, which has accumulated via profit, rent and interest (aka ‘making money from other people’s work). You seem to have a blind spot on this one I find difficult to understand.
‘Incidentally, I find links to particular comments don’t work for me on this site – it jumps to the top of the page instead. I don’t know if that’s that my Firefox/Ubuntu setup or your website. Has anyone else remarked on that?’
Yes. I’m talking to our web guy about it. It’s quite complicated to fix retrospectively I think, and a new system might mean losing all existing comments. We might have to bite the bullet though.
“we can swap insults”
I haven’t offered you any insults, Dave, and I haven’t taken anything you’ve said in that spirit. I’ve just said what I think.
Thank you for the discussion. It’s been an interesting experience.
Fair enough – I accept that it was just my (mis)interpretation. Thank you too. I shall applaud you and chastise myself when your proposed solutions begin to work. Still unsure as to why you’re so shy about revealing your implementation mechanisms.
“Still unsure as to why you’re so shy about revealing your implementation mechanisms”
I don’t think I’ve been shy about revealing my implementation mechanisms. I’ve said plenty in previous comments about how I think change mightcome about, and I’ve acknowledged that none of the routes I can envisage look very promising at present – including the building-a-new-society route that you favour. And, as well as what I’ve said explicitly in this thread, I’ve linked to my website, where I outline the political reforms I think are necessary to make the UK properly democratic and the economic reforms I think necessary to break people’s subservience to the rentier class.
You think the reforms I’m proposing wouldn’t be enough to break the corporate stranglehold and that there’s no chance of them ever being implemented, and you think a new society would need to implement a whole lot of restrictions that I think would be unnecessary and unenforceable. So we disagree. That’s fine – I have other avenues to explore, and I doubt the gods would expect me to spend any more time trying to reach agreement with you than I already have.
You need an elevator pitch.
Mine is (more-or-less), ‘let’s build a new society, based on the ‘solidarity economy’, which includes co-operatives of various kinds (including housing co-ops), community land trusts, credit unions, the ‘commons’ (inc. wikipedia and free/open source software), employee-owned businesses and self-employment, where no-one is rewarded for anyone else’s work but their own. I think this is basic morality.’
This new society would not ‘need to implement a whole lot of restrictions that I think would be unnecessary and unenforceable’ by the way, in the same way that a co-operative doesn’t need to implement ‘restrictions’ to prevent hierarchy and extraction. If you want hierarchy and extraction, work outside the solidarity economy.
‘You think the reforms I’m proposing wouldn’t be enough to break the corporate stranglehold’
Not true.
‘and that there’s no chance of them ever being implemented’
True, unless you can prove otherwise.
‘none of the routes I can envisage look very promising at present – including the building-a-new-society route that you favour’
True.
Good luck.
I had no idea you were trying to reach agreement with me, btw. I thought you were trying to point out why I’m wrong.
I’m back-pedalling on my back-pedal. I met Arthur Brock the other day (https://medium.com/h-o-l-o and http://artbrock.com/), along with other holochain designers (holochain is being developed to support mutual credit schemes and help them spread and connect). He said that interest can’t be paid back in a stable economy, and is therefore the engine of ecological damage. I said that Steve Keen disagrees, and he said that he’s wrong, as did other people in the discussion. Keen’s mathematical explanations work in theory, but in the real world, banks don’t spend enough back into the economy to allow it to happen (as you say, hoarding rather than spending is a problem). People have to work much more than they would otherwise need to because of interest, and that increases throughput. You only have to look at what’s happening in the real world to see that a) interest is excessive – banks not only charge 200k interest on a 200k house, but they insist that you pay the interest first – that’s where they make their huge profits (for doing nothing), after which you can repay the loan, which is snuffed out; and b) we can’t stop the global human economy growing cancerously and suicidally. Those two things are intimately connected.
Ultimately, providing credit doesn’t cost anything. We can all offer each other free credit within a mutual credit system, and for large purchases, people can borrow from ‘savings’ accounts – using stored value that people aren’t using. As long as it’s there when people need it, they don’t need to worry who’s borrowed it to do useful things in the meantime.
So, if we’re going to survive as a species, we need to stop destroying the biosphere, and to do that we need to stabilise the economy, and to do that we need to make interest history.