Money: A New Beginning

This essay is the first in a two-part series.

An irremediable structural flaw lies at the base of our civilization. I call it Separation, and it has generated all the converging crises -- economic, health, ecological, and political -- of our day. It manifests as separation from each other in the dissolution of community, separation from nature in the destruction of the environment, separation within our selves in the deterioration of health. Science is its deep ideology, technology is its accomplice, and money is its agent.

Money as we know it today is intimately related to our identity as discrete and separate selves, as well as to the destruction that our separation has wrought. A saying goes, "Money is the root of all evil." But why should it be? After all, the purpose of money is, at its most basic, simply to facilitate exchange; in other words, to connect human gifts with human needs. What power, what monstrous perversion, has turned money into the opposite: an agent of scarcity?

For indeed, we live in a world of fundamental abundance, a world where vast quantities of food, energy, and materials go to waste. Half the world starves while the other half wastes enough to feed the first half. In the Third World and our own ghettos, people lack food, shelter, and other basic necessities, but cannot afford to buy them. Other people would love to supply these necessities and do other meaningful work, but cannot because there is no money in it.

Money utterly fails to connect gifts and needs. We pour vast resources into wars, plastic junk, and innumerable other products that do not serve human needs or human happiness. Why? It is not difficult to trace it back to greed, to the love of money. Ultimately though, greed is a red herring, itself a symptom and not a cause of a deeper problem. To blame greed and to fight it by intensifying the program of self-control is to intensify the war against the self, which is just another expression of the war against nature and the war against the other that lies at the base of our civilization.

Amidst superabundance, even we in rich countries live in an omnipresent anxiety, craving "financial security" as we try to keep scarcity at bay. We make choices (even those having nothing to do with money) according to what we can "afford," and we commonly associate freedom with wealth. But when we pursue it, we find that the paradise of financial freedom is a mirage, receding as we approach it, and that the chase itself enslaves. The anxiety is always there, the scarcity always just one disaster away. Greed is simply a response to the perception of scarcity. Money, which has turned abundance into scarcity, precedes greed. But not money per se, only the kind of money we use today, the kind of money that is evaporating as we speak, money with a very special characteristic that ensures its eventual demise.

This characteristic appears, in different forms, in the other substructures of our civilization as well. By understanding it, we can clarify the "irremediable structural flaw" of our civilization itself; more importantly, we can design new systems of money to supplant the old and that bear the opposite characteristic. The results will be the opposite as well: abundance, not scarcity; generosity, not greed; and sustainability, not ruin.

The defining characteristic of money today is usury, better known as interest. It is usury that both generates today's endemic anxiety and drives the world-devouring engine of perpetual growth. To explain how, I will quote Bernard Leitaer's now-famous parable The Eleventh Round, from his book The Future of Money.

Once upon a time, in a small village in the Outback, people used barter for all their transactions. On every market day, people walked around with chickens, eggs, hams, and breads, and engaged in prolonged negotiations among themselves to exchange what they needed. At key periods of the year, like harvests or whenever someone's barn needed big repairs after a storm, people recalled the tradition of helping each other out that they had brought from the old country. They knew that if they had a problem someday, others would aid them in return.

One market day, a stranger with shiny black shoes and an elegant white hat came by and observed the whole process with a sardonic smile. When he saw one farmer running around to corral the six chickens he wanted to exchange for a big ham, he could not refrain from laughing. "Poor people," he said, "so primitive." The farmer's wife overheard him and challenged the stranger, "Do you think you can do a better job handling chickens?" "Chickens, no," responded the stranger, "But there is a much better way to eliminate all that hassle." "Oh yes, how so?" asked the woman. "See that tree there?" the stranger replied. " Well, I will go wait there for one of you to bring me one large cowhide. Then have every family visit me. I'll explain the better way."

And so it happened. He took the cowhide, and cut perfect leather rounds in it, and put an elaborate and graceful little stamp on each round. Then he gave to each family 10 rounds, and explained that each represented the value of one chicken. "Now you can trade and bargain with the rounds instead of the unwieldy chickens," he explained.

It made sense. Everybody was impressed with the man with the shiny shoes and inspiring hat.

"Oh, by the way," he added after every family had received their 10 rounds, "in a year's time, I will come back and sit under that same tree. I want you to each bring me back 11 rounds. That 11th round is a token of appreciation for the technological improvement I just made possible in your lives." "But where will the 11th round come from?" asked the farmer with the six chickens. "You'll see," said the man with a reassuring smile.

Assuming that the population and its annual production remain exactly the same during that next year, what do you think had to happen? Remember, that 11th round was never created. Therefore, bottom line, one of each 11 families will have to lose all its rounds, even if everybody managed their affairs well, in order to provide the 11th round to 10 others.

So when a storm threatened the crop of one of the families, people became less generous with their time to help bring it in before disaster struck. While it was much more convenient to exchange the rounds instead of the chickens on market days, the new game also had the unintended side effect of actively discouraging the spontaneous cooperation that was traditional in the village. Instead, the new money game was generating a systemic undertow of competition among all the participants.

There are really only three ways this story can end: inflation, bankruptcy, or growth. The same choices face any economy based on usury. The villagers could procure another cowhide and make more currency; or one of each 11 families could go bankrupt, as Lietaer observes; or they could increase the number of chickens so that new "rounds" would have the same value as before. In a real economy, all three pressures operate simultaneously. The bankruptcy pressure drives a built-in insecurity, which in turn drives people and institutions to "make" more money through inflationary or productive means. Of these two choices, inflation is only a temporary solution (as we are discovering today). It can only push the grow-or-die imperative slightly into the future.

In other words, because of the money system, competition, insecurity, and greed are an inseparable part of our economy. They can never be eliminated as long as the necessities of life are denominated in usury-money. But this is only one reason why money destroys community. The other is related to the third pressure: perpetual growth.

As Lietaer's parable explains, because of interest, at any given time the amount of money owed is greater than the amount of money already existing. To make non-inflationary new money to keep the whole system going, we have to breed more chickens -- in other words, we have to create more "goods and services." The principal way of doing so is to begin selling something that was once free. It is to convert forests into timber, music into product, ideas into intellectual property, social reciprocity into paid services.

Would you like to get rich? Here is a business idea that, in one form or another, has worked spectacularly for thousands of years. Very simply, find anything that people do for themselves or each other for free. Then take it away from them: make it illegal, inconvenient, or otherwise unavailable. Then sell back to them what you have taken. Granted, usually no one does this consciously, but that has been the net effect of culture and technology over the last several thousand years.

Your 13th-century peasant ancestors rarely paid money for food, shelter, clothing, or entertainment (much less in a hunter-gatherer tribe). People were self-sufficient in all these things or, more likely, depended on elaborate gift networks, sharing, and reciprocity. Of these things is community built. Today, we pay strangers to meet most of our physical and cultural needs. You probably don't know the person who grew your food, wove your shirt, built your house, or sang the songs on your iPod. Abetted by technology, the commodification of formerly non-monetary goods and services has accelerated over the last few centuries, to the point today where very little is left outside the money realm. The vast commons, whether of land or of culture, has been cordoned off and sold -- all to keep pace with the exponential growth of money. This is the deep reason why we convert forests to timber, songs to intellectual property, and so on. It is why two-thirds of all American meals are now prepared outside the home. It is why herbal folk remedies have given way to pharmaceutical medicines, why child care has become a paid service, why drinking water is now the number one beverage sales growth category.

The imperative of perpetual growth implicit in interest is what drives the relentless conversion of life, world, and spirit into money. Completing the vicious circle, the more of life we convert into money, the more we need money to live. Usury, not money, is the proverbial root of all evil. Inducing competition and replacing personal relationships with paid services, it rends the fabric of community.

Community is closely linked to gift-giving; when anthropologists seek to understand a culture, they trace the flow of gifts. Unlike money transactions, in which no obligations linger after the transaction is completed, the giving of a gift creates a tie (which is the literal meaning of "obligation"). When gifts circulate, the community bonds. Lending money at interest is utterly contrary to the spirit of the gift. For one thing, a cardinal feature of an authentic gift is that we give it unconditionally. We may expect to be gifted in return, whether by the recipient or another member of the community, but we do not impose conditions on a true gift, or it is not really a gift.

More importantly, a universal characteristic of a gift is that it naturally increases as it circulates within a community, and that this increase must not be kept for oneself, but allowed to circulate with the gift. Interest amounts to keeping the increase on the gift for oneself, thereby withholding it from circulation in the community, weakening community for the benefit of the individual. It is no accident that many societies prohibited usury among themselves but allowed it in transactions with outsiders, who could not be trusted to recirculate a true gift back into the community. Hence the prohibition in Deuteronomy 23:20: "Unto a stranger you may lend upon usury, but unto thy brother thou shalt not lend upon usury."

The ramifications of this injunction when combined with Jesus' teaching that all men are brothers are obvious: interest is forbidden entirely. This was the position of the Catholic Church throughout the Middle Ages, and is still the rule in Islam today. However, starting with the merger of Church and state and accelerating with the rise of mercantilism in the late Middle Ages, pressure mounted to resolve the fundamental tension between Christian teaching and the requirements of commerce. The solution provided by Martin Luther and John Calvin was to separate moral and civil law, maintaining that the ways of Christ are not the ways of the world. Thus spirit became further separated from matter, and religion retreated another step toward worldly irrelevancy.

Abandoning the prohibition on interest was a key step in religion's complicity in the desacralizing of the world. After all, it is interest that drives the conversion of all that is sacred about the world -- its beauty, uniqueness, and living relationships -- into something profane. Why do we intuitively know money is profane? Because it is the one great exception to the irreducible uniqueness of all beings.

In my last Reality Sandwich essay, I described how each drop of water, even each electron, is unique and sacred. But not so each dollar. Money is by design standard, generic. Your dollar is the same as my dollar. Money today lacks even a unique serial number: It is bits in a computer, an abstraction of an abstraction of an abstraction. A forest is unique and sacred; not so the money from its clearcutting. Convert two distinct forests into money and they become the same. Applied to cultures, the same principle is fast creating a global monoculture where every service is a paid service.

When money mediates all our relationships, we too lose our uniqueness to become a standardized consumer of standardized goods and services, and a standardized functionary performing other services. No personal economic relationships are important, because we can always pay someone else to do it. No wonder, strive as we might, we find it so hard to create community. No wonder we feel so insecure, so replaceable. It is all because of the conversion, driven by usury, of the unique and sacred into the monetized and generic.

Because money is identified with Benthamite "utility" -- that is, the good -- this entire process is considered rational in traditional (neoclassical) economic theory. Quite simply, whenever anything is monetized, the world's "goodness" level rises. The same assumption appears in the euphemism "goods" to describe the products of industry. The very definition of a "good" is anything exchanged for money. In other words, Money = Good. Got that?

By definition, when we buy bottled water instead of tap water too polluted to drink, that is good. When we pay for day care instead of caring for our babies at home, that is good. When we buy a video game instead of playing outdoors, that is good.

In terms of conventional economics, it may actually be in an individual's rational self-interest to engage in activities that render the earth uninhabitable. This is potentially true even on the collective level: given the exponential nature of future cash flow discounting, it may be more in our "rational self-interest" to liquidate all natural capital right now -- cash in the earth -- than to preserve it for future generations. After all, the net present value of an eternal annual cash flow of one trillion dollars is only some twenty trillion dollars (at a 5% discount rate). Economically speaking, it would be more rational to destroy the planet in ten years while generating income of $100 trillion, than to settle for a sustainable level of $3 trillion a year forever.

If this seems like an outlandish fantasy, consider that it is exactly what we are doing today! According to the parameters we have established, we are making the insane but rational choice to incinerate our natural, social, cultural, and spiritual capital for financial profit. Amazingly, this end was foreseen thousands of years ago by the originator of the story of King Midas, whose touch turned everything to gold. Delighted at first with his gift, soon he had turned all his food, flowers, even his loved ones into cold, hard metal. Just like King Midas, we too are converting natural beauty, human relationships, and the basis of our very survival into money.

Yet despite this ancient warning, we continue to behave as if we could eat our money: David Korten once spoke of an East Asian minister who said his country's forests would be more valuable clearcut, with the money put in the bank to earn interest. Apparently, the effects of destroying the planet are of little concern to economists. William Nordhaus of Yale proclaims, "Agriculture, the part of the economy that is sensitive to climate change, accounts for just three percent of national output. That means there is no way to get a very large effect on the US economy." Oxford economist Wilfred Beckerman echoes him: "Even if net output of agriculture fell by 50 percent by the end of the next century, this is only a 1.5 per cent cut in GNP."

Must we, like King Midas, find ourselves marooned in a cold, comfortless, ugly, inhospitable world before we realize we cannot eat our money?

Because it builds exponentially, interest feeds a linearity that puts humankind outside of nature, which is bound by cycles. Subtly but inexorably, it drives the assumption that human beings exist apart from natural law. As well, interest drives a relentless anxiety by demanding always more, more, more, propelling the endless conversion of all wealth into financial capital. Part of this anxiety is encoded in the very word, "interest," which implies that self-interest too is bound up in ever-lasting increase.

Interest is a necessary counterpart to the mentality of externalization. Like interest, externalization involves a denial of nature's cyclicity by treating it as an infinite reservoir of resources and an infinite dumping ground for waste. Interest is also akin to fire, the foundation of modern technology. To keep it going requires the addition of ever more fuel, until the whole world is consumed, leaving but a pile of dollars or ash.

Money is a most peculiar kind of property, for unlike physical inventories of goods, "rust doth not corrode nor moths corrupt" it. Cash does not depreciate in value; on the contrary, in its modern, abstracted form of bits in a bank's computer, it grows in value as it earns interest. Thus it appears to violate a fundamental natural law: impermanence. Money does not require maintenance like a plot of farmland to maintain its productivity. It does not require constant rotation of stock like a store of grain to keep it fresh. No accident, then, was money's early and enduring association with gold, the metal most famously impervious to oxidation. Money perpetuates the fundamental illusion of independence from nature; financial wealth endures without constant interaction with the environment. Other forms of wealth are bothersome, because they require a continuing relationship with other people and the environment. But not money, which is now wholly abstract from physical commodities and thus abstract as well from natural laws of decay and change. Money as we know it is thus an integral component of the discrete and separate self.

It is a curious fact that most people are extremely unwilling to share their money. Even among relatives, sharing money is bound by strong taboos: I know countless poor families whose brothers, cousins, or uncles' families are very wealthy. And how many friendships have disintegrated, how many family members have shunned each other for years, over issues of money? Money, it seems, is inextricably wrapped up in the very essence of selfishness -- a clue to its deep association with self. Hence the intense sense of violation we feel upon getting "ripped off" (as if a part of our bodies were being removed) when from another perspective all that has happened is pieces of paper changing hands or bits turning on and off in a bank computer.

We do not usually share our money because we see it almost as part of our selves and the foundation of our biological security. Money is self. Meanwhile, conditioned by science and the origins of separation underlying it, we see other people as essentially just that, "other." Mixing these two realms invites confusion and conflict. The problem is, the more of life we convert to money, the more territory falls into one of these dichotomous realms, mine or yours, and the less common ground there is to share life and develop unguarded relationships. The conversion of life to money reduces everything to an economic transaction, leaving us the loneliest people ever to inhabit the planet. The propertization of the whole world means that everything is either mine, or someone else's. No longer is anything in common.

The violation we feel at being ripped off is much akin to the violation an indigenous hunter-gatherer must feel at witnessing the destruction of nature. When "I" is defined not as a discrete individual but through a web of relationships with people, earth, animals, and plants, then any harm to them violates ourselves as well. Even we moderns sometimes feel an echo of this violation when we see the bulldozers knocking down the trees to build a new shopping center. That is because our separation from the trees is illusory. The buried connectedness can be resisted through ideology, narcotized through distractions, or intimidated through the invocation of survival anxiety, but it can never die because it is germane to who we really are. The love of life that Edwin Wilson has named biophilia, and our natural empathy toward other human beings, is ultimately irrepressible because we are life and life is us.

The regime of separation has deadened us to the self-violation inherent in the despoliation of the planet and the degradation of its inhabitants. In an attempt to compensate for our lost sense of beingness, we transfer it to possessions and particularly to money, setting the stage for disaster. How? Because money (bearing interest) is an outright lie, encoding a false promise of imperishability and eternal growth. Identified with self, money and its associated "assets" suggest that if we stay in control of it, the self might be maintained forever, impervious to the rest of the cycle that follows growth: decay, death, and rebirth.

Obviously, there is a problem when something that does not decay but only grows, forever, exponentially, is linked to commodities which do not share this property. The only possible result is that these other commodities -- social, cultural, natural, and spiritual capital -- will eventually be exhausted in the frantic, hopeless attempt to redeem the ultimately fraudulent promise inherent in money with interest.

They are almost exhausted already. What more of community or of nature can we still commoditize, before the very basis of life and sanity crumbles? All of today's crises originate in the conversion of natural, social, cultural, and spiritual capital into money. Yet even usury is not the deepest root. It is not an accidental feature of our system that, if only someone had made a wiser choice, could be different. It is implicit in our Newtonian-Cartesian cosmology in which, by definition, more for me is less for you. As this cosmology rapidly becomes obsolete, we can glimpse an emerging new money system embodying a very different conception of self and world. Until we transition to it, there is no hope that the current conversion of social, cultural, natural, and spiritual capital into money will ever abate. Under an interest-based money system, it is inevitable that we will cash in the earth.

In Part 2 of this essay, I will describe what the currency of Reunion will look like. When it reflects the new human identity and relationship to nature that is emerging from the present convergence of crises, money will have the opposite effects it has today. It will be a force for sharing, not competition; for generosity, not greed; for community, not division; for conservation, not liquidation. Can you imagine a world where money is the ally of all our best impulses? That is the promise of the new money I will describe in Part 2.

Photo by TW Collins courtesy of Creative Commons License