our lack of power over money matter? For anyone who gets a sinking feeling from reading their credit-card statements, this probably doesn’t need spelling out, but there are wider implications. A Wall Street collapse today, says the historian Jean Gimpel, would probably mark the end of our civilization. As I write, commentators are peering at the plummeting markets of the Far East, wondering whether they will bring down our economies with them. But even if the system totters along, as it probably will, the international money system is certainly successful at some things – building motorways and superstores for example. It doesn’t work very well in other areas.
After 200 years or so of economic growth, the planet is showing distinct signs of age, many people are still just as poor, and the ones that are richer are not obviously happier. For all the accepted cures peddled by politicians and experts, the system neither works as it should, nor is under their control, and still less is it under the control of ordinary people like you and me.
The problem is that money is partially blind. It draws a circle around the financial economy, and just can’t screw its eyes up enough to see anything else – myopically peering at the instruments which register ‘success’, and failing to see beyond its own narrow interpretation of what wealth is. Economics is full of hidden costs, trading the health of communities and the environment for motorways and the promise of better times around the corner. Economic growth began by devastating the British cities in the nineteenth century, then started on the rest of the world. Forests have now disappeared, many people live with air which is barely breathable, dams have devastated thousands of square miles, chemicals have destroyed livelihoods and now many of us doubt whether the earth can sustain life for another century or so. Americans now spend over $400 million a year breaking into malfunctioning automatic car door locks: economists call this ‘growth’.
Tropical rainforest, on which we all depend, continues to disappear at the rate of over 30,000 square miles a year, because money provides incentives for its removal. As a result, the deserts grow by six million hectares a year. All this is driven by money. In the long run, a blind economic system which takes no account of raw materials or waste disposal or happiness must go head-to-head with the systems that sustain life on earth. ‘Man talks of a battle with nature,’ said the pioneering economist E. F. Schumacher in Small is Beautiful, ‘forgetting that if he won the battle, he would find himself on the losing side.’
The amount of money in the world is now staggering, but it is very badly distributed. Donald Trump and his casinos have far too much, while someone like me – to take a random example – doesn’t have nearly enough. And even with my letters from the bank and rickety car, I am considerably better off than the 60,000 British pensioners who die from cold-related illness every winter because they can’t afford the heating.
Peasants in 1495 had to work about fifteen weeks a year to earn the money they needed to survive. By 1564 it was forty weeks, and soon they were having to move to uncertain futures in factories just to get by. Now those of us who can find work never seem to stop working. The majority of us in the West now have luxuries unimagined by our grandparents, but despite astonishing economic growth between the year I was born, 1958, and 1980, Americans reported feeling ‘significantly less well-off’ by the end of it.
I don’t want to be dishonest about this. I want to be richer as much as anybody, but the money system is not serving us all very well at the moment, especially if you are excluded by it – or lie awake worrying that you might be. ‘It is in the brain and soul that lack of money damages you,’ wrote George Orwell in Keep the Aspidistra Flying. ‘Mental deadness, spiritual squalor – they seem to descend upon you inescapably when your income drops below a certain point. Faith, hope, money – only a saint could have the first two without having the third.’
III
I claim to be an alternative economist. As such, I am interested in searching for ways of making money more available to everyone and to help them avoid Orwell’s ‘spiritual squalor’. Alternative economists have their own institutions. One of them, TOES (The Other Economic Summit), met for the first time when the G7 leaders of the seven richest nations held their summit in London in 1984. The thought of all those conventional economists getting together in limousines to ruin the planet so annoyed the alternatives that they held their own show. TOES 1984 was an enormous success, attracting a strange mixture of futurists, greens, renegade economists, new age businessmen, hippies, social critics and complete crazies. The media took no notice at all, but some of the ideas which emerged – green taxation, new ways of measuring success – are now on every politician’s agenda, whether they like it or not.
Economists, with some notable exceptions, regard us alternatives with suspicion. Radicals get irritated because we don’t think the world’s problems are absolutely hopeless, and it spoils their pessimism. What Keynes called ‘plain men’ regard our ideas as bizarre perversions of the natural order of things. Alternative economists say the current world of money is quite bizarre enough already: the idea of fractional reserve banking, for example, means that banks create most of the money we use simply by lending it – anything up to ten times the deposits which they hold as backing. This is the real ‘funny money’. ‘The process by which banks create money is so simple,’ said John Kenneth Galbraith, ‘that the mind is repelled.’
There is a traditional critique of the money system, with a pedigree that goes back via Major C. H. Douglas – the inventor of ‘social credit’ – to Abraham Lincoln, Robert Owen and William Cobbett, and it now seems to have almost completely disappeared underground, though it pops up every so often on the right and left of politics, in US militia groups, or in strange men with carrier bags who shout ‘Fraudsters!’ from the back of the hall during political meetings.
This tradition is enraged by the way banks are allowed to create money, loading us all up with unrepayable debt. They argue that only governments should be allowed to do so, and they should do it interest-free and debt-free. Both Britain and America have experimented with ideas like this to stave off a banking crash: Lincoln by printing ‘greenbacks’ during the American Civil War and Lloyd George with ‘Bradburys’ during the First World War. Both were rapidly wound up under pressure from the banks, who were afraid they would create inflation.
But there needs to be money in circulation for the wheels of the economy to keep turning, and these arguments raged on both sides of the Atlantic until a century ago. In the USA this led to the great battle between gold and silver – between reliable money backed by gold, and available money backed by the much more plentiful silver. Now these ancestral battles are all but forgotten, ridiculed out of existence by the coruscating wit of George Bernard Shaw, and shunned because so many of the people who believed in an international bankers’ conspiracy also believed it was Jewish. The changes they called for are now extremely unlikely to take place.
The issues remain, but this book is not about them – there are other people far better qualified to write about them than I am. But I do want to write about creating money, because if its creation is so simple that banks and governments can do it, we may now be entering a world where we can all do the same thing for ourselves – which is the idea behind Local Exchange and Trading Systems.
LETS is a whole new kind of money altogether. What do you do, asked the people who came up with the idea, when you are in a community which is rapidly running out of cash? You have the people with skills and the time on their hands, and you have the jobs that urgently need doing – but no money to bring the two together.
The traditional definitions of money – a medium of exchange, a store of value and a unit of account – all apply equally well to LETS. Accepting money instead of a direct swap is a kind of agreement to accept something which is not useful in itself, but which you know can be exchanged later for something which is. It’s the same with LETS, but with LETS you simply imagine a new kind of money and start trading in it. You go into debt to your neighbour, and denominate that debt not in pounds or dollars, but a whole new currency of your choice which you agree about. The first LETS currencies were called ‘green dollars’, but you can probably do better than that. And hey presto! The money exists, the job gets done, and somebody has to pay off the debt by doing something else in exchange for the