[A Reflection on Money and the Mission of the Institute of the Commons (http://www.iotc-hub.org)]
One of the interesting things I’ve learned in my recent research into the emergence of "money" in western culture is how the discovery of the New World was a critical turning point. Starting in the 15th Century huge quantities of gold and silver were discovered in the Americas, especially in the Peruvian silver mines. With the funneling of these large quantities of precious metal back to Europe, there was a sudden explosion in the amount of money in the Old World. The sheer volume of coins in circulation increased many, many fold. And this had a huge consequence which may have been surprising on the face of it but in retrospect is less so: an enormous increase in productive activity in Europe, leading to the Renaissance and ultimately the development of today's market culture and the industrial revolution, and leading also to the development of modern banking and what has turned into the modern money-creation system. (Much of this story can be found in the relatively recent work of Fernand Braudel.)
[What if Money were in its Essence a Spiritual Thing?]
The reason I point to this historical development is that I believe we have hardly begun to learn, as a society, what recent history has to teach us about banking and about money itself. In the 1500s when these large quantities of precious metal started coming into Europe, money, gold and silver were more or less synonymous in the public mind. Today, however -- after having decades ago abandoned the gold standard and with it the (already by then hollow) notion that money gains its value from its relation to quantities of gold and silver or other commodities, and after having become familiar with "digital money" that exists only as bytes on our computer screens -- we are much closer to being able to understand the essence of money in a whole new way, and with this, we are closer to understanding the different ways in which money has been created in the past, how it is being created now, and how it could be created differently tomorrow. To put this in more exciting terms: we are also on the verge of understanding for the first time in history the huge stakes involved in deciding whether to continue with the current money-creation system or to begin using other systems; we are on the verge of understanding how the power of money-creation could be used by society as a very significant tool in creating a happier, healthier and more just world.
Because few people realize that money is a historical artifact, they don't realize that the present-day money-creation system is only one possible system among readily available and even already-tested alternatives. Today's money-production system is something that we ought to investigate and evaluate in terms of how good of a job it is doing at making our society prosperous, harmonious, happy and just. But today we don't even realize that there are critical decisions to be made about how we choose to create money. And we don't realize how enormous the stakes are for society, or that their lies sleeping before us an enormous opportunity. Instead, we go mindlessly on with the status quo. The public at large defers to the experts. And the experts are those who have a stake in preserving the status quo. Nothing today is more mysterious or more inducing of sleep than the language of the university-trained economists and bankers. Distracted by the sleep-inducing hocus-pocus of these academicians, the general public doesn't even realize how to begin the frank conversations it needs to have about the essential lubricant of productive human activity.
However there are signs now that thinking about money is starting to awaken far and wide. See, for example, the writings of Bernard Lietauer, Stephen Zarlenga, Thomas Greco, Paul Grignon, Ellen Brown and the renewed of interest in writers such as Henry George and Alexander Del Mar, and even in the monetary wisdom of the ancient Greeks and Romans. There are signs, also, that certain members of Congress are beginning to look again at how money is created today. Take, for instance, the recent bill put forth in Congress asking that the public have insight into the up-to-now secret doings of the Federal Reserve (that consortium of private bankers that considers to masquerade as a government agency).
Let me point to at least three lessons hidden in the story I have told about the 16th-century currency explosion.
The first lesson is that the sheer availability of money is directly related to the productivity realized by a society. The dark ages had lasted for centuries. The sudden presence of money unleashed astonishing human activity: industry, trade, exchange, art, science, learning. Within this story are hidden other stories and lessons. Yes, it was huge and unpredicted importations of gold and silver that showed what an abundance of money could mean for social productivity.
But what wasn't realized at the time - but is becoming clear today - was that in order to create an abundance of money, gold and silver weren't even necessary. Had the governments of the middle ages only understood money more thoroughly, they could have simply created it using tokens of almost any kind: for example, using cheap and abundant copper (the way the Romans had), or using paper, the way the Colonial Americans would do in later times. A lesson to be learned, then, is that the world in 15th century Europe had for ages lived under the conditions of a great and unnecessary scarcity of money. Once we realize this fact, we are also ready to realize that the western world today, also, lives under conditions of a great and unnecessary scarcity of money, and that the current money system needlessly allows money to be concentrated into private hands (so that most of humanity must line up beggarly at the doors of those who can offer salaries), which leaves the major portion of humanity's great potential for creative, productive activity unused and squandered, and leaves major portions of the world's population in unnecessary misery.
A second lesson, related to the first, has to do with the insights it can provide into the nature of today's money-production system, the banking system. With the great increases in the amount of currency in 16th-century, with the concomitant increase in trade and industry, modern banking and modern currency systems were developed. Banking grew largely out of accidental discoveries. Goldsmiths who regularly stored heavy gold coin for those who owned them developed into a new unexpected thing called bankers, and a number of accidental discoveries by these goldsmiths. [Among these accidental discoveries were the fact that the "receipts" they gave their customers for gold on deposit started being traded by their customers as if these receipts had value themselves; similarly, they discovered that when they made loans to trustworthy individuals, they could issue such "receipts" to the borrowers to use as money; additionally, they discovered that, since their customers only rarely came to the bank to exchange their receipts for actual gold held on deposit, the bankers could lend out much, much more in "receipts" than they actually needed to have on hand in gold. (They could make the illusory claim that all the receipts, i.e. money, that they issued was backed by gold, when in fact the amount of gold held in reserve was only a small fraction of the money that was said to be backed by it.)] In short, bankers discovered that they could create money out of thin air simply by issuing loans and writing a corresponding debt into their books for the dollars that they created and lent. Money issued by banks in the form of debt is still the chief form of money-creation that we have in the world today.
Understanding how this privately-controlled, debt-based system robs the public and creates unnecessary, devastating economic depressions is a knowledge that today lies just beyond the public grasp. A great hope for the world today is that, as the public at large begins to reflect upon how money and modern banking came into being over the past several hundred years, they will begin to perceive both the great injustices that have were inadvertently built into the current system and, more importantly, the tremendous hidden opportunities that the current system hides from view, that are coming ready for the world to benefit from. We have before us the potential for a new era of human learning about how to produce money and unleash the productivity and creativity of people everywhere in the service of a healthier and more harmonious world.
A third lesson could said to be hidden in the first two. This lesson lies behind my statements above, that we have discovered how money does not indeed depend for its value from any commodities or precious metals that might be said to "back it." With the almost accidental extraordinary surplus of coinage that came about due to the discovery of the Americas, Europe suddenly became the scene of an accidental discovery and experiment: the discovery that human promises (e.g. to return services or goods in exchange for services or goods, or better, to collaborate and coordinate activities in pursuit of individual and/or shared desires) could be “abstracted” and not only represented in oral language but be made durable on bits of metal that were neither consumed or used in themselves, but only traded for usufruct of the “promises” that they signified.
The discovery we are becoming more clear on today is that the content of the promise, the essence of the money itself, in fact has no relationship whatsoever to the commodity value of the material that might carry it — i.e. the value of money, as money, has nothing whatsoever to do with the value of the underlying gold or silver on which it is stamped, but is entirely a reflection of something else, something intangible, i.e. the degree to which a culture or society had developed its capacity for productive collaboration and exchange in answer to shared desires; this capacity for collaboration can be summed up in a few words, chief among which might be the word “trust” and “inter-reliance” (which I prefer to the word “inter-dependence” -- to “depend” is to “hang upon” another and has for me connotations of co-dependency; to feel trusting and capable of relying on another does not necessarily connote dependence).
This is related to another aspect of money, viz: The value of money reflects the quantity of goods and services that are available in a culture for exchange. An increase in the number of goods and services available in a culture reflects an increase in the collaborative capacity of a culture. (Note: How this relates to the QUALITY of the particular goods and services available is a very important question that I am not addressing right now.) Hence a shortage of money results in a stunting of potential growth in a culture, it inhibits the ability of people to actively fulfill their needs and pursue their desires – a shortage of money is what we call a “depression” or “recession.” An excess of money in a culture leads to inflation. The art of money-generation which civilization has yet to learn would include development of skill in the regulation of the quantity of money in a culture.
Now, returning briefly to the question of the “quality” of the particular goods and services available. This is equivalent to the QUALITY of the collaborative capacity of a culture, i.e. the quality of human relationships in a culture, which is to say the moral makeup of community, the degree to which it is a community where love is prevalent, and not domination. Under our present culture the money-making power is under the control of private interests; this inherently public power has been usurped.* This is equivalent to the people not recognizing or taking up their own self-empowerment. This failure of the people to take up the power that is within themselves and instead leave it to the control of others outside themselves, remaining dependent on “external” forces is ultimately a political failure. This is where the neighborhood assemblies idea comes in, and where the kind of environment for speech and mutual coordination that we bring into being through our processes comes in. Ultimately, it is all about the coordination (and not merely the “dialogue and deliberation”) of all the players within the system with one another in an environment of mutual respect, transparency, public love.
(*In part this usurpation came about through somewhat of an accident - simply because out of unplanned developments and unexpected discoveries in early modern Europe, the private banking system gradually emerged as goldsmiths stumbled upon the money-creation power in the form of the issuance of credit and the creation of debt — they stumbled upon the system of “fractional reserve banking”; subsequently those who stumbled upon it grew this power, pursuing their own interests of course, until it became what we know as the modern-day banking industry; it is largely only in retrospect, as more people begin to realize that, in effect, this inherently public power to issue money was discovered and appropriated by private hands, that it looks as if the public has been “robbed.” In fact, the public is being robbed every minute of every day, as public and private debts to banks grow by the minute, but it becomes a robbery only to the degree to which the perpetrators and victims are aware that it is such. (Because the essence of money is so elusive to current modes of understanding, this awareness is quite elusive and easily displaced by other ways of constructing the matter.) -- Otherwise, it looks simply like “the way money works”; and in many respects it’s true and evident that “better with than without money”; it’s only when the question can move out of the domain of this “either/or,” with or without money, that we become free to move in a new direction. The question then is no longer stuck in you have money or you don’t have money, but can become “what is money and how could it be otherwise?”, what kind of money do we want with what consequences? Until we realize that this is a question, the public power to release its own capacity for collaboration in just and democratic ways remains frozen. We have a hunch that small communities, e.g. those empowered through neighborhood assemblies (communities that can work as closed feedback loops for taking responsibility, experimenting with actions and consequences) might be necessary as innovative laboratories of thinking and experimentation that can move society as a whole forward on these issues. Still, important work can possible be done at higher levels of government — but I don’t know how possible this is under current political conditions.
(In respect to the importance of small, cohesive communities - empowered by institutions that enable them truly to THINK together as wholes, which Neighborhood Assemblies as we envision them are intended to do - to serve as laboratories for monetary innovation, we can look at the example of the Ancient Greeks and the polis. Some of Aristotle's insights about money, for instance, are being cited today as containing great insights that, if widely understood, could dramatically change how we think of money in the modern world (and how the institution of modern economics thinks of money). Aristotle understood what we do not, that the essence of money derives from the public, i.e. from the cohesiveness and collaborative capacity of a community, i.e. from the degree to which the public has trust in itself, its laws, its public agreements. If we understood this we could take back our public power into the hands of the people and realize a truer and more just democracy.
The question concerning the nature of money has direct parallels to, and is a form of, what Martin Heidegger early in the 20th century referred to as the question concerning the essence of Being. Heidegger recognized that western culture had since its beginnings understood the nature of Being on the model of present objects that can be pointed at. He recognized that one of the most common of all words in our language, the word "to be" and its forms (like "is," "are"), was also one of the words we least understood. How ironic that a concept we so relied on was also fundamentally so puzzling! So it is with money. We rely on it daily, people dedicate their lives to its pursuit, we talk about it all the time, and yet it is very little understood.
What Heidegger realized was that their was a form of Being that was quite obvious, but had never been noticed by western philsophy. He pointed out that there was a form of being that we recognized all the time in common language and usage which philosophy, however, had never accounted for. He at one time indicated what he meant through the example of a hammer. From the point of view of western philosophy, a hammer was only wood and metal. But the hammerness of the hammer, Heidegger realized, came into being only through the networks of relationships that came into play when the hammer was put into use: nowhere in the wood or metal that composed the hammer was the "hammer" to be found; the hammer became what it was only in relation to hammering, to building a house, to pounding a nail, etc. Hence the essence of the hammer was in a coordinated network of human relationships, invented through human activity and imagination and purpose. Similarly with money, an artificial invention like the hammer. We try to think of money in terms of its objectness - is it gold or silver? is it the dollar bills we hold in our hands? is it the digital representations in our online banking accounts? No. It is an invention that carries within itself the reflection of our relations to one another and to the earth; money is a reflection of the moral quality of our world. When we get money right, we will get human relations right - we will live in harmony with one another and with the creation, the natural living world bequeathed to us.
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