BEYOND
GREED and SCARCITY
by Bernard Lietaer
From YES! Magazine #2 Spring/97
Few people are in and on [?] the money system in as many different capacities as
Bernard Lietaer. He spent five years at the Central Bank in Belgium, where his first
project was the design and implementation of the single European currency system. He
was president of Belgium's Electronic Payment System, and has developed technologies for
multinational corporations to use in managing multiple currency environments. He has
helped developing countries improve their hard currency earnings and taught international
finance at the University of Louvain, in his native Belgium. Bernard Lietaer was also the
general manager and currency trader for one of the largest and most successful
offshore currency funds. He is currently a fellow at the Center for Sustainable Resources
at the University of California at Berkeley. YES! Magazine editor Sarah van Gelder
talked to Bernard about the possibilities for a new kind of currency better suited to
building community and sustainability. He can be reached to discuss this topic via an
Internet conference at: http://www.transaction.net/money
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SARAH: Why do you put so much hope into the development of alternative
currencies?
BERNARD: Money is like an iron ring we've put through our noses. We've forgotten
that we designed it, and it's now leading us around. I think it's time to figure out where
we want to go - in my opinion toward sustainability and community - and then design a
money system that gets us there.
SARAH: So you would say that the design of money is actually at the root of much
else that happens, or doesn't happen, in society?
BERNARD: That's right. While economic textbooks claim that people and corporations
are competing for markets and resources, I claim that in reality they are competing for
money - using markets and resources to do so. So designing new money systems really
amounts to redesigning the target that orients much human effort. Furthermore, I believe
that greed and competition are not a result of immutable human temperament; I have come to
the conclusion that greed and fear of scarcity are in fact being continuously created and
amplified as a direct result of the kind of money we are using. For example, we can
produce more than enough food to feed everybody, and there is definitely enough work for
everybody in the world, but there is clearly not enough money to pay for it all. The
scarcity is in our national currencies. In fact, the job of central banks is to create and
maintain that currency scarcity. The direct consequence is that we have to fight with each
other in order to survive. Money is created when banks lend it into existence. When a bank
provides you with a $100,000 mortgage, it creates only the principal, which you spend and
which then circulates in the economy. The bank expects you to pay back $200,000 over the
next 20 years, but it doesn't create the second $100,000 - the interest. Instead, the bank
sends you out into the tough world to battle against everybody else to bring back the
second $100,000.
SARAH: So some people have to lose in order for others to win? Some have to
default on their loan in order for others to get the money needed to pay off that
interest?
BERNARD: That's right. All the banks are doing the same thing when they lend money
into existence. That is why the decisions made by central banks, like the Federal Reserve
in the US, are so important - increased interest costs automatically determine a larger
proportion of necessary bankruptcies. So when the bank verifies your "credit
worthiness," it is really checking whether you are capable of competing and winning
against other players - able to extract the second $100,000 that was never created. And if
you fail in that game, you lose your house or whatever other collateral you had to put up.
SARAH: That also influences the unemployment rate.
BERNARD: It's certainly a major factor, but there's more to it. Information
technologies increasingly allow us to attain very good economic growth without increases
in employment. I believe we're seeing one of the last job-driven affluent periods in the
US right now. As Jeremy Rifkin argues in his book, The End of Work, jobs are basically not
going to be there anymore, even in "good times." A study done by The
International Metalworkers Federation in Geneva predicts that within the next 30 years, 2
or 3 percent of the world's population will be able to produce everything we need on the
planet. Even if they're off by a factor of 10, we'd still have a question of what 80
percent of humanity will do. My forecast is that local currencies will be a major tool for
social design in the 21st century, if for no other reasons than employment. I don't claim
that these local currencies will or should replace national currencies; that is why I call
them "complementary" currencies. The national, competition-generating currencies
will still have a role in the competitive global market. I believe, however, that
complementary local currencies are a lot better suited to developing cooperative, local
economies.
SARAH: And these local economies will provide a form of employment that won't be
threatened with extinction?
BERNARD: As a first step, that is correct. For example, in France, there are now
300 local exchange networks, called Grain de Sel, literally "Grain of Salt."
These systems---which arose exactly when and where the unemployment levels reached about
12 percent*--- facilitate exchanges of everything from rent to organic produce, but they
do something else as well. Every fortnight in the Ariege, in southwestern France, there is
a big party. People come to trade not only cheeses, fruits, and cakes as in the normal
market days, but also hours of plumbing, haircuts, sailing or English lessons. Only local
currencies accepted! Local currency creates work, and I make a distinction between work
and jobs. A job is what you do for a living; work is what you do because you like to do
it. I expect jobs to increasingly become obsolete, but there is still an almost infinite
amount of fascinating work to be done. or example, in France you find people offering
guitar lessons and requesting lessons in German. Neither would pay in French francs.
What's nice about local currency is that when people create their own money, they don't
need to build in a scarcity factor. And they don't need to get currency from elsewhere in
order to have a means of making an exchange with a neighbor. Edgar Cahn's Time Dollars are
a classical example. As soon as you have an agreement between two people about a
transaction using Time Dollars, they literally create the necessary "money" in
the process; there's no scarcity of money. That does not mean there's an infinite amount
of this currency, either; you cannot give me 500,000 hours - nobody has 500,000 hours to
give. So there's a ceiling on it, yes, but there's no artificial scarcity. Instead of
pitting people against each other, the system actually helps them cooperate.
SARAH: So you're suggesting that scarcity needn't be a guiding principle of our
economic system. But isn't scarcity absolutely fundamental to economics, especially in a
world of limited resources?
BERNARD: My analysis of this question is based on the work of Carl Gustav Jung
because he is the only one with a theoretical framework for collective psychology, and
money is fundamentally a phenomenon of collective psychology. A key concept Jung uses is
the archetype, which can be described as an emotional field that mobilizes people,
individually or collectively, in a particular direction. Jung showed that whenever a
particular archetype is repressed, two types of shadows emerge, which are polarities of
each other. For example, if my higher self - corresponding to the archetype of the King or
the Queen - is repressed, I will behave either as a Tyrant or as a Weakling. These two
shadows are connected to each other by fear. A Tyrant is tyrannical because he's afraid of
appearing weak; a Weakling is afraid of being tyrannical. Only someone with no fear of
either one of these shadows can embody the archetype of the King. Now let's apply this
framework to a well-documented phenomenon - the repression of the Great Mother archetype.
The Great Mother archetype was very important in the Western world from the dawn of
prehistory throughout the pre-Indo-European time periods, as it still is in many
traditional cultures today. But this archetype has been violently repressed in the West
for at least 5,000 years starting with the Indo-European invasions - reinforced by the
anti-Goddess view of Judeo-Christianity, culminating with three centuries of witch hunts -
all the way to the Victorian era. If there is a repression of an archetype on this scale
and for this length of time, the shadows manifest in a powerful way in society. After
5,000 years, people will consider the corresponding shadow behaviors as
"normal." The question I have been asking is very simple: What are the shadows
of the Great Mother archetype? I'm proposing that these shadows are greed and fear of
scarcity. So it should come as no surprise that in Victorian times - at the apex of the
repression of the Great Mother - a Scottish schoolmaster named Adam Smith noticed a lot of
greed and scarcity around him and assumed that was how all "civilized" societies
worked. Smith, as you know, created modern economics, which can be defined as a way of
allocating scarce resources through the mechanism of individual, personal greed.
SARAH: Wow! So if greed and scarcity are the shadows, what does the Great Mother
archetype herself represent in terms of economics?
BERNARD: Let's first distinguish between the Goddess, who represented all aspects
of the Divine, and the Great Mother, who specifically symbolizes planet Earth - fertility,
nature, the flow of abundance in all aspects of life. Someone who has assimilated the
Great Mother archetype trusts in the abundance of the universe. It's when you lack trust
that you want a big bank account. The first guy who accumulated a lot of stuff as
protection against future uncertainty automatically had to start defending his pile
against everybody else's envy and needs. If a society is afraid of scarcity, it will
actually create an environment in which it manifests well-grounded reasons to live in fear
of scarcity. It is a self-fulfilling prophecy! Also, we have been living for a long time
under the belief that we need to create scarcity to create value. Although that is valid
in some material domains, we extrapolate it to other domains where it may not be valid.
For example, there's nothing to prevent us from freely distributing information. The
marginal cost of information today is practically nil. Nevertheless, we invent copyrights
and patents in an attempt to keep it scarce.
SARAH: So fear of scarcity creates greed and hoarding, which in turn creates the
scarcity that was feared. Whereas cultures that embody the Great Mother are based on
abundance and generosity. Those ideas are implicit in the way you've defined community,
are they not?
BERNARD: Actually it's not my definition, it's etymological. The origin of the word
"community" comes from the Latin 'munus', which means the gift, and 'cum', which
means together, among each other. So community literally means to 'give among each other'.
Therefore I define my community as a group of people who welcome and honor my gifts, and
from whom I can reasonably expect to receive gifts in return.
SARAH: And local currencies can facilitate that exchange of gifts.
BERNARD: The majority of the local currencies I know about have been started for
the purpose of creating employment, but there is a growing group of people who are
starting local currencies specifically to create community. For example, I would feel
funny calling my neighbor in the valley and saying, "I notice you have a lot of pears
on your tree. Can I have them?" I would feel I needed to offer something in return.
But if I'm going to offer scarce dollars, I might just as well go to the supermarket, so
we end up not using the pears. If I have local currency, there's no scarcity in the medium
of exchange, so buying the pears becomes an excuse to interact. In Takoma Park, Maryland,
Olaf Egeberg started a local currency to facilitate these kinds of exchanges within his
community. And the participants agree that is exactly what has been happening.
SARAH: That raises the question of whether local currencies can also be a means
for people to meet their basic needs for food and housing, or would those sectors remain
part of the competitive economy?
BERNARD: There are lots of people who love gardening, but who can't make a living
from it in the competitive world. If a gardener is unemployed, and I'm unemployed, in the
normal economy we might both starve. However with complementary currencies, he can grow my
salads, which I pay for in local currency earned by providing another service to someone
else. In Ithaca, "Hours" are accepted at the farmer's market; the farmers can
use the local currency to hire someone to help with the harvest or to do some repairs.
Some landlords accept Hours for rent, particularly if they don't have a mortgage that must
be paid in scarce dollars. When you have local currency, it quickly becomes clear what's
local and what's not. K-Mart will accept dollars only; their suppliers are in Hong Kong or
Singapore or Kansas City. But Ithaca's local supermarket accepts Hours as well as dollars.
By using local currencies, you create a bias toward local sustainability.
SARAH: Local currencies also provide communities with some buffering from the
ups and downs of the global economy. You've been in the business of monitoring, dealing
in, and even helping to design the global finance system. Why would communities want to be
insulated from it?
BERNARD: First of all, today's official monetary system has almost nothing to do
with the real economy. Just to give you an idea, 1995 statistics indicate that the volume
of currency exchanged on the global level is $1.3 trillion per day. This is 30 times more
than the daily gross domestic product (GDP) of all of the developed countries (OECD)
together. The annual GDP of the United States is turned in the market every three days! Of
that volume, only 2 or 3 percent has to do with real trade or investment; the remainder
takes place in the speculative global cyber-casino. This means that the real economy has
become relegated to a mere frosting on the speculative cake, an exact reversal of
how it was just two decades ago.
SARAH: What are the implications of this? What does it mean for those of us who
aren't transacting deals across international boundaries?
BERNARD: For one thing, power has shifted irrevocably away from governments toward
the financial markets. When a government does something not to the liking of the market -
like the British in '91, the French in '94 or the Mexicans in '95 - nobody sits down at
the table and says "you shouldn't do this." A monetary crisis simply manifests
in that currency. So a few hundred people, who are not elected by anybody and have no
collective responsibility whatsoever, decide what your pension fund is worth - among other
things.
SARAH: You've also talked about the possibility of a crash in this system...
BERNARD: Yes, I see it now as about a 50/50 chance over the next five or 10 years.
Many people say it's 100 percent, and with a much shorter time horizon. George Soros,
who's made part of his living doing what I used to do - speculating in currencies -
concluded, "Instability is cumulative, so that eventual breakdown of freely floating
exchanges is virtually assured." Joel Kurtzman, ex-editor at the Harvard Business
Review, entitles his latest book: The Death of Money and forecasts an imminent collapse
due to speculative frenzy. Just to see how this could happen: all the OECD Central Banks'
reserves together represent about $640 billion. So in a crisis situation, if all the
Central Banks were to agree to work together (which they never do) and if they were to use
all their reserves (which is another thing that never happens) they have the funds to
control only half the volume of a normal day of trading. In a crisis day, that volume
could easily double or triple, and the total Central Bank reserves would last two or three
hours.
SARAH: And the outcome would be?
BERNARD: If that happens, we would suddenly be in a very different world. In 1929,
the stock market crashed, but the gold standard held. The monetary system held. Here, we
are dealing with something that's more fundamental. The only precedent I know of is the
Roman Empire collapse, which ended Roman currency. That was, of course, at a time when it
took about a century and a half for the breakdown to spread through the empire; now it
would take a few hours.
SARAH: So local currencies could provide some resilience for a community that
could help it survive a currency melt-down or some other international breakdown. You've
also mentioned that local currencies help promote sustainability. What's the connection?
BERNARD: To understand that, we need to see the relationship between interest rates
and the ways we discount the future. If I ask, "Do you want $100 now or $100 a year
from now," most people would want the money now simply because one can deposit money
risk-free in a bank account and get about $110 a year later. Another way of putting it is
that if I were to offer you $100 a year from now that would be about equal to offering you
$90 today. This discounting of the future is referred to as 'discounted cash flow'. That
means that under our current system it makes sense to cut down trees and put the money in
the bank; the money in the bank will grow faster than trees. It makes sense to
"save" money by building poorly insulated houses because the discounted cost of
the extra energy over the lifetime of the house is cheaper than insulating. We can,
however, design a monetary system that does the opposite; it actually creates
long-term thinking through what is called a "demurrage charge." The demurrage
charge is a concept developed by ilvio Gesell about a century ago. His idea was that money
is a public good - like the telephone or bus transport - and that we should charge a small
fee for using it. In other words, we create a negative rather than a positive interest
rate. What would that do? If I gave you a $100 bill and told you that a month from now
you're going to have to pay $1 to keep the money valid, what would you do?
SARAH: I suppose I would try to invest it in something else.
BERNARD: You got it. You know the expression, "Money is like manure; it's only
good when it's spread out." In the Gesell system, people would only use money as a
medium of exchange, but not as a store for value. That would create work, because it would
encourage circulation, and it would invert the short-term incentive system. Instead of
cutting trees down to put the money in the bank, you would want to invest your money in
living trees or installing nsulation in your house.
SARAH: Has this ever been tried?
BERNARD: There are only three periods I have found: classical Egypt; about three
centuries in the European Middle Ages, and a few years in he 1930s. In ancient
Egypt, when you stored grain, you would receive a token, which was exchangeable and became
a type of currency. If you returned a year later with 10 tokens, you would only get nine
tokens worth of grain, because rats and spoilage would have reduced the quantities, and
because the guards at the torage facility had to be paid. So that amounted to a demurrage
charge. Egypt was the breadbasket for the ancient world, the gift of the Nile. Why?
Because instead of keeping value in money, everybody invested in productive assets that
would last forever - things like land improvements and irrigation systems. Proof that the
monetary system had something to do with this wealth is that it all ended abruptly as soon
as the Romans replaced the Egyptian 'grain standard' currency with their own money system,
with positive interest rates. After that, Egypt ceased being the grain- basket, and became
a "developing country" as it is called today. In Europe during the Middle Ages -
the 10th to 13th centuries - ocal currencies were issued by local lords, and then
periodically recalled and reissued with a tax collected in the process. Again, this was a
form of demurrage that made money undesirable as a store of value. The result was the
blossoming of culture and widespread well-being, corresponding exactly to the time period
when these local currencies were used. Practically all the cathedrals were built during
this time period. If you think about what is required as investment for a small town to
build a cathedral, it's extraordinary.
SARAH: Because cathedrals take generations to build?
BERNARD: Well, not only that. Besides the obvious symbolic and religious roles -
which I don't want to belittle - one should remember that cathedrals had an important
economic function; they attracted pilgrims, who, from a business perspective, played a
famimilar role to tourists today. These cathedrals were built to last forever and create a
long-term cash flow for the community. his was a way of creating abundance for you and
your descendants for 13 generations! The proof is that it still works today; in Chartres,
for instance, the bulk of the city's businesses still live from the tourists who visit the
cathedral 800 years after it was finished! When the introduction of gunpowder technology
enabled the kings to centralize power in the early 14th century, the first thing they did
was to monopolize the money system. What happened? No more cathedrals were built. The
population was just as devoutly Christian in the 14th or 15th century, but the economic
incentive for collective long-term investments was gone. I use the cathedral simply as an
example. Accounts from 12th century estates show that mills and other productive assets
were maintained at an extraordinary level of quality, with parts replaced even before they
wore out. Recent studies have revealed that the quality of life for the common laborer in
Europe was the highest in the 12th to 13th centuries; perhaps even higher than today. When
you can't keep savings in the form of money, you invest them in something that will
produce value in the future. So this form of money created an extraordinary boom.
SARAH: Yet this was a period when Christianity was supreme in Europe and so
presumably the Great Mother archetype was still being repressed.
BERNARD: Well, actually a very interesting religious symbol became prevalent during
this time: the famous "Black Madonna." There were hundreds of these statues
during the 10th to 13th centuries, which were in fact statues of Isis with the child Horus
sitting on her lap, directly imported from Egypt during the first Crusades. Her special
vertical chair was called the "cathedra" (which is where the word cathedral
comes from) and interestingly this chair was the exact symbol identifying Isis in ancient
Egypt. The statues of the Black Madonnas were also identified in medieval time as the
"Alma Mater" (literally the "Generous Mother," an expression still
used in America to refer to someone's 'mother university'). The Black Madonnas were a
direct continuity of the Great Mother in one of her most ancient forms. She symbolized
birth and fertility, the wealth of the land. She symbolized spirit incarnate in matter,
before the patriarchal societies separated spirit from matter. So here we have a direct
archetypal linkage between the two civilizations that spontaneously created money systems
with demurrage charges while creating unusual levels of abundance for the
common people: ancient Egypt and 10th-to-13th century Europe. These money systems
correspond exactly to the honoring of that archetype.
SARAH: How interesting! What potential do you see for local currencies to bring
this Great Mother archetype of abundance and generosity into our economic system today?
BERNARD: The biggest issues that I believe humanity faces today are sustainability
and the inequalities and breakdown in community, which create tensions that result in
violence and wars. We can address both these issues with the same tool, by consciously
creating currency systems that will enhance community and sustainability. Significantly,
we have witnessed in the past decades a clear re-awakening of the feminine archetype. It
is reflected not only in the women's movement, in the dramatic increase in ecological
concerns, or in new epistemologies reintegrating spirit and matter, but also in the
technologies that enable us to replace hierarchies with networks (such as the Internet).
Add to these trends the fact that for the first time in human history we have available
the production technologies to create unprecedented abundance. All this converges into an
extraordinary opportunity to combine the hardware of our technologies of abundance and the
software of archetypal shifts. Such a combination has never been available at
this scale or at this speed: it enables us to consciously design money to work for us,
instead of us for it.
I propose that we choose to develop money systems that will enable us to attain sustainability and community healing on a local and global scale. These objectives are in our grasp within less than one generation's time. Whether we materialize them or not will depend on our capacity to cooperate with each other to consciously reinvent our money.
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