| © Copyright 2004 Bill Pagum Bill Pagum Money for a Sustainable Community Synopsis Money is a mutual belief about value around which a community is built. It is a medium of exchange for goods and services. Creating a sound monetary framework is a prerequisite for creating a sustainable community. Money may be something that people worry a lot about not having enough of but few really understand its true meaning. Trying to tell someone how money works in a community is a little like trying to explain to a fish that he lives underwater. History Then the money system changed to favor the banks. The government discontinued printing greenbacks (although they remained in circulation) and issued bonds instead. Issuing bonds meant two things—the country had to go into debt to finance the war and other government spending and, secondly, the availability of country’s currency and credit was tied to the magnitude of the nation’s debt. In effect, paying off the national debt now meant a major withdrawal of currency from the economy, creating a serious depression. Thus a debt based money system was born. After a few failed attempts of farmers and workers to make the government switch over to an interest-free silver-based money supply in the 1890s, the US’s gold-backed debt-based money system was transferred to a private banking cartel called the Federal Reserve in 1913. Under the Federal Reserve, the dollar left the gold standard for citizens in 1933 and left convertibility to gold in international markets in 1971. Since 1993, the Fed has issued more money than all the dollars created from the combined years of 1913 to 1993. As a result, a dollar from 1933 bought 25 times as much “stuff” as one issued today—so much for the Fed keeping us safe from inflation. Also, note that the Fed has never been audited. Today’s Problem The current money system is based on debt and mutual convention. Gold-backing no longer exists. The debt generates enormous interest payments for taxpayers and even greater interest benefits for the Fed and its member banks through fractional reserve banking. This debt must be financed by ever more growth in the economy or by printing ever more dollars to use in the economy. The system is a gigantic pyramid scheme. Unregulated growth is straining the resources available to us on the planet even while it is creating harmful by products that will change the climate and adversely affect the health of its inhabitants. When the limits to growth are reached and market saturation is accomplished, the country (like any company) must either reinvent itself or collapse in on itself. The problem now is that we have an aging population, ever scarcer resources, an unstable fiat monetary system, and a buildup of waste that is contributing to the instability of our current social structures. We need to begin developing more equitable social structures and an essential first step is making the transition to a new kind of economy based on community. Possible options in a new economy in the post-petroleum age The framework for community in the post-petroleum era would develop along three lines: communal (5,000 acres or 0.5 square miles), local (8 mile diameter or 50 square miles), regional (25 mile diameter or 500 square miles). “National” or “state” borders, if they existed at all, might be about 100 miles in diameter (8000 square miles). A communal society would consist of a dozen or so families housed in a cluster of homesteads who would contribute their various skills and be willing to pitch in together to accomplish a task when needed. Similarly, monastic, traditional, and frontier societies built community through gifting, bartering, and mutual aid. The Latin root of community is “to give among each other.” Use of traditional money tends to break down community by making goods and services available only through a scarce resource—dollar bills. Add to that “interest,” and things worsen considerably. The bartering system of such a communal group could be based on service hours, teaching / learning a skill for the group, or an exchange of goods for services. At the next higher level, the local area, perhaps a community scrip would develop based on a commodity that dominates the economy of the area such as dried fish, timber, salt, fresh water, or coal. That commodity could then be traded to other local economies in the region to allow the cultures of each locality to develop synergistically. Traditional items of value, such as gold and silver, would regain their universal appeal and be actively traded where possible. To prevent hoarding and speculation, a regional or “national” consensus would introduce sustainability concepts such as demurrage and seventh generation living. The local scrips for the region would have a built-in demurrage based on the 3 % per annum fee required to store the commodities they are based on. This service charge to money is in effect a negative interest rate or sustainability fee to make people interested in the future impact their projects might have on our planet’s limited resources. Currently, people look at profitability over a two to five year discounted return. A scrip with a declining value over time would also give people a reason to spend rather than hoard—keeping the economy vibrant by encouraging transactions. (1) The other concept that the “elders” of a region would foster is seventh generation living. The idea, originating with the Native Americans, asks each person or group to consider how their action toward one another and the planet might affect their future children. Not their immediate children but the children from the seventh generation in the future. Given that a generation is about 20 years, seventh general living requires thinking a decision through a span of 150 years. That’s a lot of forethought when you realize most businesses today just look toward meeting their next quarterly earnings statements. Of course, the local or regional scrip could be based on nothing, simply fiat money like today (a bad example) or during colonial times (a good example). The amount of scrip would have to be increased “manually” and slowly in direct proportion to the growth of the economy. But the temptation with such currency is to print too much and it eventually becomes worthless. A scrip based on the value of a commodity, whether coal or gold, or a combination of a number of valued and needed goods in a “basket” has a tendency to be self-regulating in supply and nearly inflation proof. What can be done now: Please refer to the chart, “Buck Power in a Global Society,” where I illustrate how a consumer can use his or her dollars to foster cooperation and fair trade over competition and “free” trade. Simply by education, people can be convinced to spend their money in locally owned businesses and cooperatives that buy from local producers. They can save their money in locally owned credit unions and savings banks. They could invest in local companies and “green-type” companies. They could volunteer and support local charities. By patronizing companies that treat the environment, their employees, and their suppliers fairly, they can contribute to the overall health and well being of their community. There is a practical benefit from promoting transactions near the top of the chart rather than near the bottom. The community benefits from more prosperous businesses, better paid people, and a more equitable distribution of wealth. As a result, there are less social problems such as alcoholism, crime, and domestic violence. The tax base is broader, the schools are better funded and people become better educated citizens. One of the reasons for this occurrence is that the number of local transactions of a given earned dollar is multiplied by some factor, say two times over a dollar spent directly in a national or international chain—a dollar spent there leaves the community almost immediately. Because the dollar was spent locally in a small business that had local suppliers, it reverberates through the community like a pinball. Every extra transaction in the community generates additional wealth. If the number of local transactions doubled, the sales volume of the community will double. Because fixed costs rise slower than variable costs, the net profit could rise by as much as three times. If you assume a local business is worth about 3.3 times net profits, the result is the business now is worth 10 times as much as before. That extra wealth will be reflected in greater social benefits. There is an opportunity cost associated for consumers because the prices local businesses charge tend to be slightly higher than giant national chains. But the overall result is a great benefit to the local downtown and general quality of civic life. Politics: Maine has a growing fair trade movement, like California, and other states, which are forming alliances between the “Greens” and the “Blues”—environmentalists and workers. The main purpose is to guard against outsourcing, “free trade” globalization treaties, and misuse of resources as well as to raise awareness about fair trade issues by educating the public. Through such organizing, consumers may begin to seek out local products produced fairly and if products need to be purchased from overseas, they will ask questions. Was the environment properly treated and was the worker adequately compensated? Such basic questions at the grassroots level can still make big changes even though time is fast running out. …1) The Future of Money by Bernard Lietaer (Century Press, London, 2001) Global trends suggest the need for complementary currency. Additional Reading: About the Fed: Secrets of the Temple by William Grieder, Simon & Schuster (1987). Review of the Federal Reserve. The Creature from Jekyll Island by G. Edward Griffin. Origins of the Federal Reserve. The Case Against the Fed by Murray Rothbard, von Mises Institute (1994). History and workings of the Fed About doing more with less: The Ugly American by Wm. J. Lederer & Eugene Burick. Reads better today than then. Hope’s Edge (and Diet for a Small Planet) by Frances Moore Lappe. People power. More on local currency (summarized from The Future of Money by B. Lietaer) Use of a local currency to complement the national one as well as an integrated systems approach to solving problems unique to the local community will create a win-win situation. The community will improve its living standards, generate its own capital, refuse outside debt financing and move towards “sustainable abundance.” An example is Curitiba, Brazil, a third world city of two million, which refused outside debt financing and still grew—becoming a fairly prosperous first world community. Could perhaps the entire province? Even the whole nation? Complementary currencies create wealth, notably, additional wealth without government need for taxes, bureaucracy, or risk of inflation. The wealth becomes self-funding to address hard-to-solve social problems. Because the wealth is created out of human capital, no redistribution of existing wealth needs to occur. They help local businesses compete with large chains. They can apply to the needs of Switzerland (the WIR with 80,000 members and several billion euros annual trade) and the needs of Curitiba, Brazil. They build community and cooperation in an ever more competitive world. BL does admit it is still a proto-type idea and not the panacea of our economic ills. But in essence, money is just an idea too. Nothing more. Complementary Currency Current Examples: LETS—Canada and England “Le Grain de Sel”—France WIR—Switzerland used by 80,000 members exchanging 2 billion euros per year started in 1934. Time Dollars created by Prof. E. S. Cahn use hours of service as a basis of an IRS deemed tax-free business transaction. Ithaca Hours by Paul Glover where one hour equals $10. (not recommended for general use because of its fiat currency nature.) PEN Exchange by Olaf Egeberg where neighbors share unique skills. Curitiba: the Brazilian city that left the third world. (more below) Japanese Healthcare Currency where people provide hours of personal service to people that need care. In exchange, they can give the hours away, trade them for say parental care, or save for their own use later. Frequent Flier miles Coffee shop cards Past Examples: Numerous Depression era scrip from the US—FDR was warned against decentralizing the currency and outlawed the scrip. Wara—Germany—“commodity money” backed by Dr. Hebecker’s coal mine saved the town of Schwanenkirchen during hyperinflation, later adopted by 2000 corporations, became the centerpiece for “Freiwirtschaft” or Free Economy—the basis of Silvio Gesell’s work. Deemed illegal by Ministry of Finance in 1931—apparently too successful. GI’s use of cigarettes in WWII Bill Pagum 8 Cromwell Street Kittery, Maine 03904 Money for a Sustainable Community Presented at the UNH Bioneer Conference on October 16th 2004: Synopsis: By understanding money’s history in the US, exploring its role in a sustainable post-peak oil society, and presenting a guide for spending wisely today, we may learn how money may yet serve man rather than be his master. Detailed Description: The presentation briefly summarizes the history of the US money system from colonial to modern times. The presentation also explores a future society based on community and sustainability as a result of the effects of the upcoming peak oil and resource crisis, population graying, climate change, and unstable fiat money systems. That discussion introduces using concepts such as commodity based currency, demurrage of currency, and seventh generation living. Localities in a region would live together in synergistic harmony, each producing the goods they are best suited for and trading with neighbors for external needs. The final part of the presentation shows what can be done today using a chart that guides people toward better spending habits in their locality. As a result of those practices, the velocity of money increases and thereby generates a significant rise in community wealth using a multiplier effect. Such transactions encourage cooperation, independence, and self-realization among people, fostering nurturing families and healthier communities. I will also touch on the growing fair trade movement and some of its activities in Maine. About the Author: Bill Pagum has a degree in chemical engineering from Cornell University and work experience in the petrochemical and nuclear propulsion fields. He is an author and environmentalist who is concerned about the health of local economies and has studied the works of Catherine Austin Fitts, Naomi Kline, Bernard Lietaer, and Murray Rothbard |
Bill Pagum 8 Cromwell Street, Kittery, Maine 03904 |