Economic
Common Sense
John David
(writer, Public Banking Institute)
johndavidmusic@gmail.com
6/9/13
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TABLE OF CONTENTS
CONSUMER IN A CORPORATE LAND
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A TALE OF TWO RECOVERIES
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WE CAN’T GROW FOREVER?
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OWNERSHIP IS THE KEY
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NO MORE FAIRY TALE ECONOMICS
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A TALE OF TWO ECONOMIES
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SECRET LIFE OF A FINANCIAL ASSET
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MONEY FOR NOTHING
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FINANCIAL OVERLOAD
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DERIVATIVES: THE FINAL FRONTIER
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THE SYSTEM’S FATAL FLAW
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WALKING A NARROWING TIGHTROPE
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WE PAY WITH A PROMISE-TO-PAY
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THE CONFIDENCE GAME
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WE’RE LOSING DETROIT
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INDIVIDUAL GOOD AND COMMON GOOD
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THE FREE TRADE CRUSADE
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DEMOCRACY’S LAST STAND?
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A CHANGING OF THE GUARD
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I SHOP, THEREFORE I AM
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THE DEBT BALLOON
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THE BUSINESS CLIMATE GAME
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PREDATORY LENDING TO CITIES AND TOWNS
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2008 DEATH AND ZOMBIE RETURN OF BIG FINANCE 15
AUSTERITY TO THE RESCUE?
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AUSTERITY FOR ALL EXCEPT THE BIG BOYS
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WE COULD HAVE PULLED AN ICELAND
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A CHANGE HAS GOT TO COME
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FROM EXTRACTIVE TO GENERATIVE
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COMMUNITY OWNERSHIP
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TEAM EARTH
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PROSPERITY FOR ALL
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RESOURCES
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CONSUMER IN A CORPORATE LAND
In 2012, ExxonMobil, the oil giant, made $41 billion in profit. On May 29, 2013 at their
annual meeting, Rex Tillerson, the CEO, asked, “What good is it to save the planet if
humanity suffers?” Tillerson then stated that poor people need to burn oil to lift them out of
poverty. To answer his question with another one, “How much will humanity suffer if the
planet becomes unlivable?”
In a Northern Irish county near the fabulous resort where a G8 meeting (leaders from the 8
wealthiest national economies) was being held, the local government paid for some much
needed improvements. Well… they paid for some pictures of much needed improvements
like active shops that were placed over boarded-up store fronts, and billboard-sized
pictures of beautiful scenery that were located in front of abandoned buildings and other
eyesores. The local Council Chief Executive declared, “We want to present the county as
best as we can and promote it in terms of industry and tourism.” He said the project was a
“phenomenal opportunity.”
As the two scenarios above illustrate, there’s a whole lot of fakin’ goin’ on. Humanity is
facing a choice between two futures: “prosperity for all” (if we truly get it together) and
“austerity for all but the mega-bankers and their corporate friends” if we don’t. The first
one, based on mutual trust and cooperation, is the other world that is possible. The second
one, based on mutual fear and competition, is what the financial/corporate elite has been
progressively imposing on the world, the famous “there is no alternative” regime. And let’s
be clear — this fear-based competition sacrifices our future on the altar of maximizing
short-term monetary gain.
A long, slow social earthquake is shaking us to the marrow. Enormous challenges face the
human project. Yet despair (while unavoidable at times) must not become our emotional
home. Being pushed to the edge may be overwhelming and daunting, but it also calls forth
our highest potential.
A TALE OF TWO RECOVERIES
In the USA, about half of we the people either live in poverty, or are one missed paycheck
away. So for many of us, “Forget the dreams, how do we make it to tomorrow?” is painfully
real. And yet the mainstream media cheerleaders flash a happy face and say “How about
that recovery? Housing prices and the stock market are up.”
They fail to connect that to the near-zero interest Fed lending rates that help maintain
those bubbles, or that more investors are borrowing to invest, and more of them are overborrowing. Half-told truth is used to maintain confidence that the economy is booming (or
about to be), and that we all still have a chance to climb the social ladder.
However, while corporate profits are way up since the 2008 crash — rising an average of
20.1 percent a year for four straight years, average household incomes have risen only 1.4
percent a year.
Is a “jobless recovery” really a recovery? In the USA, unemployment is well above the official
rate because that number doesn’t include the exceptionally high number of people who
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have been looking for work so long they’ve given up, as well as the many people who need
fulltime jobs but have only been able to find part-time work.
The job shortage is due to offshoring (thanks mostly to globalization), automation,
overworking current employees, and a growing workforce.
In addition, there’s been a dramatic increase in low-wage work to replace better-paying jobs
that were offshored. The safety net is being shredded as well.
More than one out of five families reported in 2012 that not one family member had a job.
Add to that one out of seven on food stamps, and recovery somehow doesn’t seem to fit.
While some financial manipulation experts now make over a million dollars an hour, for we
the people, the new normal keeps degrading. The pressure of multiple crises keeps
building. Us frogs are being slowly boiled.
The dream of people everywhere to live a good life is being threatened by the
financial/corporate elite whose only allegiance is to grabbing as much profit as they can,
anywhere on the planet they can, using the cheapest labor they can find. Regular people
just trying to make an honest dollar can no longer win by following the rules, because our
deposits (witness Cyprus), pensions, et cetera are being stolen. Politics-as-usual can’t touch
this. What’s going on?
WE CAN’T GROW FOREVER?
Making a profit in markets had been common for a very long time, when nearly 200 years
ago, the Industrial Revolution came along and institutionalized maximizing profit. This was
initially beneficial because it helped spread useful technology and raised the general
standard-of-living.
But like all “silver-bullet” solutions, the emphasis on one factor (profit) comes at the
expense of other factors (planet, communities and people). So instabilities crept into the
system over time that dramatically altered conditions.
Now this outdated economic system is hitting its limits, as all systems eventually do. Yet
our prime directive remains the Industrial-Age quest to “maximize profit,” a core system
rule that creates a “growth imperative” which has taken us to the edge of collapse.
What’s wrong with making a profit? Nothing, until we focus on maximizing profit. Then the
regenerative balance inherent in life — especially when we are seven billion strong and have
millions of massive machines and huge volumes of toxic chemicals at our disposal — gets a
bit overloaded.
Economic activity generally involves turning nature into things for consumption. When the
rate of extraction and amount of pollution exceed the Earth’s capacity to regenerate and
absorb, the resources we require to continue our technological civilization (as well as for
basic survival needs) begin to disappear. Many natural resources are already running low:
fresh water (because in the last 10 years global water use has increased 58%), forests, wildfish stocks, crucial elements and minerals (zinc, iron ore, phosphorous, copper, tin,
platinum, cobalt, also coltan and lithium for cellphones, and many, many more).
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Natural resources potentially are “endless,” but only if we use them at rates, and in ways
that do not compromise their integrity.
When profit is maximized, only profit matters, so whatever harm a business inflicts on
people and planet is simply “externalized,” which means left for others to worry about. After
nearly 200 years of maximizing profits and growth, our planet, our families and our
communities are showing the strain in multiple crises. Ten percent of global GDP growth
since the beginning of the Industrial Revolution occurred in the first 130 or so years. A
stunning 90% of this growth occurred between 1950 – 2008.
Until the Industrial Revolution, it was acknowledged that the economy is embedded in
society, which is embedded in the Earth. Then we the people (“labor”) and our planet
(“land”) became market commodities — things to be bought and sold, used and thrown
away. This allowed big business owners to exploit workers (many of whom were previously
artisans), and it allowed financiers (and others) to speculate on land values which raises
and destabilizes prices.
Fast forward to the 1930s and the profit engine was turned down to a dull roar by financial
regulation and the promotion of unions in FDR’s New Deal. Soon productivity gains were
shared with labor which led to the emergence of a sizeable middle class shortly after World
War II in the USA for the first time.
Ever since the late 1970s however, when neoliberal economics became the standard, it’s
been all about maximizing profit on steroids as finance and trade were deregulated step-bystep. In addition, nearly all productivity gains have gone to the owners since then, not to
the workers. That middle class is rapidly shrinking.
The Robber Barons of the late 1800s specialized in making things out of steel and concrete
and such. But the financial barons of the current era realized they could export skilled jobs
and technology to lower their costs, while expanding the field of financial manipulation
experts to extract enormous profits. To top it off, the government gives them massive
subsidies.
So the mega-bankers were generously bailed-out in 2008, and we the people were put on
an ever-tightening austerity diet. With big finance having captured both political parties,
and the quest to privatize everything moving steadily forward, this is not a partisan issue.
It’s about our survival, and the quality of life in communities worldwide.
OWNERSHIP IS THE KEY
Fortunately, renewing rivers are rising from the pain unleashed by the planetary megacrisis that surrounds us. As Marjorie Kelly writes in her inspiring book, Owning Our Future
(2012), the root change from our current “extractive” economy (that depletes life for shortterm gain) to the emerging “generative” economy (that feeds life for generations to come) is
in ownership models.
What’s so important about ownership models? As someone said at a gathering Kelly
convened, “Ownership is the initial system condition.” It sets the tone because the form of
ownership determines the system rules.
A cooperative bank, for example, can have a mission to serve the community, but once it
“goes public” and sells stock, the mission becomes maximizing returns for stockholders.
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Why? Publicly-traded corporations face market pressures that force them to get on
maximum profit’s endless growth train and give up their social mission. Over 75% of global
GDP comes from this ownership monoculture.
The architecture of ownership determines whether a business will operate as extractive or
generative. “Maximum profit” and “only take care of yourself” rule the extractive economy.
“Feed yourself by serving your community” and “prosperity for all” are the generative
guidelines. It’s about being of value to one’s community and establishing relationships to
optimize everyone’s well-being.
Kelly uses five features to distinguish extractive and generative ownership:
Purpose
Extractive – financial gain
Generative – improve well-being
Membership
Extractive – absentee
Generative – rooted in the community
Governance
Extractive – ruled by markets
Generative – guided by social mission
Finance
Extractive – casino-style
Generative – all stakeholders involved
Networks
Extractive – commodity (trade on price)
Generative – ethical (support for social and ecological goals)
Generative enterprises are emerging spontaneously, and are beginning to build networks
with each other. (More on that later.)
NO MORE FAIRY TALE ECONOMICS
Returning to historical background, here is the origin of neoliberal economics which
dominates the field today. After the Renaissance, few believed that God chose the ultra-rich
anymore. A new justification for the social split between the economic elite and we the
people was needed. So Aristotle’s “classical” economics was turned upside-down to support
the concentration of wealth at the top, and given the name “neoclassical.”
The neoclassical school propagated the myth that the more the wealthy accumulate, the
better off everyone else is. Apparently the “trickle-down” ruse goes way back. Bruce
Bartlett, who was an economist for President Reagan (the first president to promote
neoliberalism) agrees that, “It’s just made up,” as does Reagan’s Assistant Secretary of the
Treasury, Paul Craig Roberts.
In classical economics, the primary economic function is the production and trade of useful
items that improve our well-being, and a secondary function is the “art of money-making.”
But the neoclassical “theorists” declared pure monetary gain to be primary, so that its
unfortunate “side-effect” of inequality would be accepted as the inevitable consequence of
progress. This is the philosophy behind our money madness, an upside-down economic
“theory,” (which is one reason why economics, as currently practiced, is so confusing at
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first).
Neoliberal economics is a retooling of neoclassical nonsense. As Charles A.S. Hall, a pioneer
in biophysical economics likes to say, “Neoliberal economics gets an A for clever thought,
and an F for reality.” It’s a fairy tale in scientific clothing.
Neoliberals define economic output as Gross Domestic Product (GDP), which ignores the
waste and pollutants many businesses dump into our land, air and water.
They claim that labor and capital generate wealth. However the vast wealth that we all
share is created by nature— through the interaction of the sun and the materials of our
planet. Labor and capital only add value to the wealth originally created by nature.
The neoliberals also propose that capital and labor are the only economic inputs. This not
only leaves out the most important input of all — nature — it allows them to treat natural
resource depletion — the loss of real wealth — as wealth generation (in GDP numbers).
Clearly, using the GDP indicator is highly-misleading since it counts all economic activity
(even when it’s harmful) as a positive. And it only counts economic activity when money is
exchanged.
But none of that should be surprising when one realizes that neoliberal thinking underpins
the financial/corporate way. Unrestrained corporate exploitation of nature, families and
communities is about growing profits forever, which in reality means until system failure.
They are attempting to turn all of life into money. In the many “sacrifice zones” one can see
the end game for the “endless growth” of profit: the desertification of Appalachia by
decapitating mountains for coal (hundreds of thousands of acres that have become a
wasteland), the Bakkan oil fields of North Dakota, and many more.
Apparently some believe that money is the most precious resource on Earth. We destroy
ecosystems, digging up the Earth in excess to extract natural resources for big profits so we
can hoard more precious money. But money is only a claim against future resources. What
good will money be if our natural resources run out due to careless consumption?
A TALE OF TWO ECONOMIES
Our economy is a tale of two economies: the real and the financial. Initially, the stock
market served businesses by financing their real economy enterprises. However, the market
soon became a driver of endless growth, as financial gain became the central purpose of the
economy.
The publicly-traded corporation (and associated stock markets) is designed to “melt” the
wealth “frozen” in real assets, and thereby “liquefy” it (by extraction) into financial assets.
This is the process of capital formation.
SECRET LIFE OF A FINANCIAL ASSET
How is this economic wizardry accomplished? By the magic of private property. Once a real
asset is documented as being someone’s private property, they can (if it has market value)
turn it into a financial asset, a.k.a. capital.
How is it done? A property document can be used as collateral for a loan, which releases or
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liquefies capital from the property. If the loan is for a house, the “real estate” then takes on
a kind of second, “secret” life as a financial asset called a mortgage. And when the risk of
toxic mortgages is bundled, sliced, sold and resold, it’s a mystery who the owner actually is
until the dust settles after foreclosure.
Capital formation can also be done with shares or equity in a business. The business then
takes on a second life as a financial asset and can be sold to investors.
The amount investors will pay to own shares in a company with earnings (profit) of a
certain size determines its price-to-earnings ratio (P/E ratio). What’s called “the magic of
the multiple” occurs when this ratio goes up due to speculation which creates money solely
from the perception of more value in a company.
Whatever a business can save in cutting costs (wages, pensions, benefits, environmental
protection fees, etc) is multiplied in earnings for owners. And so the stock market became
the main push behind business decisions, making cost-cutting a top priority.
The unleashing of ownership power, or capital formation, is also known by the sexier name
of “wealth creation.” The problem comes when there are no limits, and wealth creation,
which is really financial extraction (from the real economy), exceeds the carrying capacity of
the real economy.
When too much wealth floods up to the financial realm, the real economy collapses from a
loss of jobs, failing infrastructure, and increased poverty.
MONEY FOR NOTHING
Financial assets can do more than “pour” out of property once liquefied. They can also
grow. How? By the exchange or trading of ownership shares, mortgages and such.
As Marjorie Kelly points out, most Wall Street firms went from being partnerships to being
publicly-traded during the eighties and nineties. Partnerships have built-in ethics, and
such firms tend to actually serve their customers (no, not for dinner).
Going public (publicly-traded) shifted their intent to a laser focus on profit with no concern
for their clients’ well-being whatsoever. With the advent of high-frequency trading, which
occurs millions of times per second, along with trading on tiny time lags and price
differences, and issuing fake orders to see what the market will bear, now nearly threequarters of all stock trades in the USA are high-frequency trades done by robo-traders
(computer algorithms on autopilot). Ah the global casino! To keep profits rolling, it must
keep growing, more fees, faster trades… This financial economy looks like it might be the
endless growth machine of Wall Street’s dreams.
But the lure of infinite wealth led to too many bets, too many financial claims on real
wealth. Trick and deception came to dominate finance even more than usual, as
deregulation allowed the too-big-to-be, to be. This has enormous consequences because
one person’s financial wealth is another person’s debt. (In defense of deregulation: some
regulations are harmful, like the ones that the mega-banks wrote to regulate smaller banks
out of business.)
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FINANCIAL OVERLOAD
In 1980, the USA repealed usury laws that had limited interest charges to 10%.
Also in 1980, the financial sector made 16% of domestic corporate profits in the USA. Now
it makes over 40%. That’s called the financialization of the economy as production took a
back seat to financial manipulation. Finance generates vast mountains of debt, on the one
hand, and vast “mountains of “very thin air” money on the other. And it’s brought to us by
the makers of debt and bubbles — Wall Street.
The easy flow of credit built multiple bubbles of every kind all over the world from the
1980s until the 2000 dot-com crash (with a few bumps along the way). They picked up
again and crashed again in 2008. The assumptions of endless linear (ever-upward in this
case) growth are reaching the limits that every system inevitably meets. (Imagine if we all
kept growing taller!)
But the financial/corporate elite hate limits more than a tantrum-throwing two-year-old.
With all their financial wealth floating around, when growth started to stall, they
encouraged debt by making massive credit card mailings, offering easy deals for new credit
card “owners.” They also urged we the people to refinance our homes and to take out home
equity loans to cash in on those rising home values. Corporations issued more junk bonds,
and governments ran higher deficits. It was a debt parade, and a wealth charade.
Since the goal of extractive economies is to liquidate real world value to keep finance
rolling, the financial economy grew to four times the size of the real economy by 2008,
before the crash. That was more load than the system could bear, and the instability it
caused finally erupted in the crash.
DERIVATIVES: THE FINAL FRONTIER
The financial wizards also conjured up a crazy little thing called “derivatives” to minimize
any risk that might get in the way of their acquisition of vast riches. Financial securities
like stocks and bonds are one thing, but derivatives are derived from securities, as well as
from other things even further removed from reality.
Stock options are the vanilla of derivatives. Simple to understand, they are an option to buy
a certain stock at a preset price during a pre-chosen month. The curious thing is that
people rarely buy any stocks, instead they usually sell the option itself for a profit. Options
are something for traders to own and trade for financial gain. They allow profit to grow even
faster.
Derivatives are part of a vast sector of the financial economy that operates above the
financial securities sector. And the connections between the two grow more and more
tenuous as time goes on, making derivatives an endless frontier, the financier’s dream
market. Estimates put the value of the total derivatives market at… $1.2 quadrillion, or 10
times the size of the real economy!
In case you wonder why investors bought the toxic mortgage bundles when they know they
might default, the answer is another kind of derivative called a credit default swaps (CDS).
A CDS allows the holder to collect on what would have been a loss. It’s financial “fire
insurance.”
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But they didn’t stop there, with a naked CDS you can collect on defaulted mortgages
without even owning them. However, with multiple “insurance” claims, the payout becomes
problematic.
And the mischief continues into complexities that no one, even their makers, understands,
with computers on autopilot charting an economic course for no one knows where. This is a
system in decay. The relentless search for ever-increasing profits has painted us into a
corner.
THE SYSTEM’S FATAL FLAW
The root of our systemic economic crisis is extractive ownership in both the publicly-traded
corporation, and the private monopoly of currency and credit. (More about currency and
credit below.)
Extractive ownership, through corporations, sucks the wealth out of nature, and through
financial manipulation, sucks the wealth out of the real economy. When given enough time,
it inevitably leads to collapse.
Both the corporate model and private ownership of currency and credit create a growth
imperative that promotes greed and leads to a loss of integrity in ecosystems and
communities.
Another way to express the root flaw of the extractive economic system is that the common
good is left out of the system.
When maximum financial gain is the goal, if you run out of creditworthy borrowers, you
simply move to no-questions-asked mortgages to keep the financial flows growing. The
larger system, or common good, is considered an impediment, a “cost” to be avoided.
Only the isolated “self” matters in this system. But we the people are tiny specks unseen by
this system. The only “selves” they mean are the mega-banks and mega-corporations. Only
their well-being is considered important. They are busy desperately seeking profits while
the extractive engine sputters along, as it runs out of fuel.
WALKING A NARROWING TIGHTROPE
After three decades of profit primacy, the gap between rich and poor has become a vast
chasm, and the incredible shrinking middle class is in danger of disappearing.
How extreme has inequality become worldwide? The top 20% of 7 billion humans own 94%
of the wealth. The top 1% own 43%. And the top 300 people have as much as the poorest 3
billion. It’s worse than medieval times.
With such extremes, the center cannot hold, and we approach a tipping point. The
structural instability of our highly-interconnected economic system is clear.
One part of the solution, proposed by the highly-regarded conservative economist Henry C.
Simon, founder of the Chicago School of Economics, said that to preserve the free market,
since you can’t regulate or break-up the big banks, the only available option is to make
credit a public utility with public banking (more on that idea later).
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Most economic activity requires energy. Oil supplies two-thirds of the world’s energy, as it
did in 1970. Since humans use the best first, while there is still a lot of oil underground,
it’s of lesser quality. And technology is losing the race with depletion. We’re using two-tofour times more oil than we’re finding in new reserves, and current oil fields are steadily
shrinking. So oil quality and quantity is declining while its cost is going up. Once the cost
of energy equals the gain from using it, its value as an extractive resource disappears.
Fracking, the highly-toxic, water-polluting way of getting the harder to extract stuff, has
increased the natural gas supply, but the conventional natural gas supply is dropping fast.
And the tar sands plan is likely to be oil’s last stand. Don’t expect the media to say we’re in
peak oil though, because the stock market would fall.
In the days of cheap oil and sufficient, steady growth, the economy was able to keep rolling.
But after 2000, energy supplies stopped growing, and now with supplies and the amount of
energy-return for money spent steadily going down, the economy is sputtering. (Of course,
using renewable energy dramatically improves that equation in favor of life.)
Simultaneously, globalization (which was financed by ballooning debt for about 30 years)
has saturated world markets, and has nowhere to grow. That’s why the-powers-that-be are
pushing the frackin’ tar sands bubble.
So the cheap oil economy is closing. Yet we keep walking a narrowing tightrope by
continuing to pursue endless growth of profit on a non-growing planet.
WE PAY WITH A PROMISE-TO-PAY
It used to be that people created and maintained relationships through reciprocity —
mutual gift giving without precise tracking of “value.” And then along came money.
The core of the financial elite’s power is their monopoly on money and credit creation.
And the core conflict in our economic system is between creditors and debtors. We the
people are controlled through a system of ever-increasing debt created by the charging of
interest on loans.
The well-known loans are when we borrow from a bank. The money loaned out by banks is
created on-the-spot by keystroke entries into an account, and only about 10% of it is
covered by their capital holdings, if that.
A society-splitting double standard is in play for borrowing money. For we the people it’s
high interest, usually compounded (where you add previously-paid interest to the principle
every payment period). But for the bankers and their cronies, it’s low-interest (currently
near-zero for the mega-banks). Bankers and investors use a different name for borrowing
though, they call it leveraging.
The mega-banks can leverage money for about 1% less than other banks. That’s because
investors know that the government will bail the big banks out if they fail. The big boys
leverage to multiply the winning potential of their financial bets, but of course the losing
potential is also multiplied.
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And it’s all made up out of thin air. Interest floods-up, the opposite of the supposed trickledown. All along the value chain, interest costs are passed on and add roughly 40% to the
cost of most goods and services.
The Fed (Federal Reserve) is our privately-owned-but-pretending-to-be-part-of-thegovernment central bank, some call it quasi-governmental. It’s involved in another lesserknown interest charge we pay. That’s the interest we pay the Fed to create our currency.
The Fed buys (with money created out of thin air) government bonds (which are unsecured
debt, meaning there’s no collateral) that pay interest. That debt (bond) becomes our
currency, instead of our currency being directly issued interest-free by the U.S. Treasury
department.
That means the federal government has abdicated our national sovereignty to the big bank
boys. A group of investors became the Bank of England by reviving this scam in 1694 when
the king was short of cash to fight a war. It’s an old trick the priests of Babylon used to
pull. This kind of debt money, does work for a while, like any pyramid scheme, especially
when the power of law supports it.
But it is unnecessary; a nation doesn’t have to borrow its currency from private banks, it
can simply issue its own currency and eliminate the interest payments. Then what deficit?
What fiscal cliff? What sequester? They would not exist.
Thomas Edison put it very clearly:
If the Nation can issue a dollar bond it can issue a dollar bill… It is absurd to say our
Country can issue bonds and cannot issue currency. Both are promises to pay, but
one fattens the usurer and the other helps the People.
(A small percentage of our money is actually printed by the government as Federal Reserve
Notes, a.k.a. dollars, but about 97% of it only exists as data in computer networks of bank
accounts. Coins are the only money issued directly by the federal government without
borrowing.)
The Fed monetizes government debt (transforming it into base money, a.k.a. reserves) and
lends it to commercial banks who lend bank credit to individuals and businesses. So each
dollar is a fancy, official I.O.U. from the government. Since we all agree to accept these
pieces of paper (or their digital equivalents), the debt has been monetized (turned into
money) — that means we pay with a promise to pay, a debt.
The interest on all these loans keeps growing and flowing up to those who hold the credit
monopoly, those who create money out of debt through the magic of interest-bearing loans.
Will Rogers, the great humorist-philosopher said:
[I]f you notice… nobody ever puts [a bill] through [Congress] to do something about
interest. No sir, you couldn’t do that, because then you are getting into the business
of the boys that really hold the hoops while the jumping is going on.
When a government creates money by borrowing it from a private central bank at interest,
money to pay the interest isn’t created, so that sets up a pyramid scheme. When the
interest comes due, more loans must be taken out, and each round adds more debt to the
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system. This establishes a second growth imperative. Paying ever-growing interest on debt
that is never paid off keeps our money flooding-up to the big boys.
THE CONFIDENCE GAME
Will Rogers, reported in 1929, shortly after the crash that the newspapers of the day
said it would have a demoralizing effect on the country for so many to have their
paper profits all rubbed out at once. That it would have the effect of making people
more careful with their money, and thereby make it bad for speculation. That if
people didn’t trade in stocks, Wall Street couldn’t exist. So I says, what can we do for
‘em, so they will keep on existing? “Why, restore confidence!” … I never could
understand what the price of the stock had to do with keeping the company working
and turning out their product… Course they explained it off some way. They said:
“Trading [stock] was good for the country, and it kept things a-circulating.”
Will also had an infallible stock market tip: “If it don’t go up, don’t buy it.”
WE’RE LOSING DETROIT
One warning sign of systemic economic crisis (and a crisis of democracy) is that Detroit is
in deep debt (many other cities are also in trouble), and a Financial Manager has been
appointed by Michigan’s governor to facilitate what amounts to the theft of the city’s
property. (Of course that’s not how the governor characterizes it.) The cities’ elected officials
are allowed to meet, but not to make decisions. The citizens have been stripped of their
political and civil rights.
“Restructuring” Detroit is a euphemism for destroying city jobs, cutting wages and
pensions, gutting social services from sanitation and firefighting to health care and
education, and handing over city assets to private bankers and speculators. Those
responsible for the city’s present state are using the crisis they created to accelerate the
theft of public resources and further redistribute wealth from the bottom to the top. It’s a
citywide mega-banker’s dictatorship.
INDIVIDUAL GOOD AND COMMON GOOD
Martin Luther King said, “We may not have arrived together, but we’re all on the same boat
now.” Our destinies are interwoven; no one goes their way alone.
We’re totally dependent on parents and/or caretakers for the first several years of life, and
on the massive interconnected web of social infrastructure as long as we’re here. And yet,
we live in a culture where the individual reigns supreme (or so the story goes).
Of course, community is also a major player in our history. The roots of the word
“community” mean “giving among each other.”
The struggle between individual rights and common good, community responsibilities is an
old one. The choice usually offered is a false one: the individual versus the common good.
In the land of the corporate consumer, it’s about maximum profit versus the common good.
And the real question is: will we allow a few individuals to dominate the many by squeezing
out as much profit as they can, or will we foster the common good while preserving
individual freedom?
A strange loop connects the individual and society. There is no distinct boundary between
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the two, they co-create each other. You can’t have one without the other. Babies who don’t
receive enough nourishment or touch will die, for example. We need each other. There is no
separation, as systems science shows. Damage to the whole is damage to each individual.
That’s why the common good matters.
The desire to gut the common or public good is about privatizing it for maximum profit. An
army of over 12,000 lobbyists writes most legislation, decides our budgets, and is
decimating the public sector.
In Adam Smith’s The Wealth of Nations, he mentions the often-quoted “invisible hand of the
market” that organizes the self-directed pursuits of individuals to benefit the common good.
In theory, the market is free competition, but the relentless tendency is toward
concentration of wealth, monopoly, and in its final phase, the growth of mega-corporations.
Ironically, Smith warned against letting corporations get too big because then they tilt the
market in their favor. His invisible hand metaphor was an endorsement of local and
regional markets, and a warning about globalization (which he said undermined the
common good). It seems he was somewhat misunderstood.
THE FREE TRADE CRUSADE
Starting with NAFTA, free trade agreements have put incentives in place to offshore our
manufacturing (and other) jobs and to depress wages in the USA (not to mention the
devastation they have caused in the third world, along with the gutting of environmental
protections, and labor and human rights).
With a glut of workers to choose from, corporations are able to minimize employee benefits
and take-home pay. So productivity gains have mostly flooded-up as have capital gains and
performance bonuses. Meanwhile, the middle class ladders of upward mobility have mostly
been quietly removed.
DEMOCRACY’S LAST STAND?
The too-big-to-be, now bigger than ever, are seeking to complete their global domination
over national sovereignty with the TransPacific Partnership (TPP). Mainstream Media in the
USA is not covering this crucial turn of events.
The TPP is being called “NAFTA on steroids.” Wall Street aches for this one like a 50s teen
for Marilyn Monroe. And Washington sees it as the answer — along with the Fossil Fuel
Export Bonanza — to our economic impotence. It would allow the USA’s businesses (really
multinational corporations) to feast on the emerging Pacific region by making an end run
around all domestic environmental, civil/human rights, and labor rights laws, restrictions
and rules that might interfere with profit. Multinationals and private investors would be
free from any form of public accountability.
Kristen Beifus in Yes Magazine (5/9/13) wrote,
Although trade deals have potentially huge effects on the economy, environment, and
food sovereignty of communities throughout these 12 countries, the TPP negotiations
are being held in secret between unelected government officials and representatives
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from more than 600 of the world’s most powerful corporations [and are scheduled to
finish in October, 2013]. The United States has plenty of interests clamoring for the
trade advantages of the TPP, while developing countries like Vietnam see the TPP as
an opportunity for economic development.
This treaty, if passed, might be the last trade agreement ever needed, because it essentially
cedes all national sovereignty to corporate control, and all nations are welcome to sign at
any time. It would outlaw two of the key proposals mentioned in the solutions section of
this paper: public banking and boosting local economies, as unfair competition.
And lucky investors would be given principal control over public land and resources “that
are not for the exclusive or predominant use and benefit of the government.”
In order to push the bill through, the Obama administration is trying to limit congressional
authority by operating under “fast-track authority” (a trade provision that assures foreign
partners that the agreement, once signed, will not be changed during the legislative
process).
Go to TPPxBorder.org to learn more and join the movement to stop TPP.
A CHANGING OF THE GUARD
The federal government may also be pushing for the TPP because of concerns over the
dollar’s world reserve currency status, which it has held since the 1970s. Issuing the
world’s reserve currency allows the USA to consume as much as it wants by simply
creating more money (rather than by producing), since the dollar is accepted everywhere.
That’s why the USA went from the world’s biggest creditor in the mid-70s, to a debtor by
the mid-80s, and has been the world’s largest debtor since the late-1990s.
A strong challenge to the dollar’s privileged position is growing as several other nations
(including China, India, Brazil and Russia) have been making agreements to trade with
their own currencies for the last few years. The International Monetary Fund (IMF) recently
issued a paper calling for a new reserve currency (issued by them) as well.
The shift to a different world reserve currency would devalue the dollar considerably, as
demand for dollars would plummet.
I SHOP, THEREFORE I AM
Consuming and shopping have become a patriotic duty to keep the economy moving, since
70% of GDP involves consumer spending. The nonstop daily onslaught of mass media
entertainment (including the news) still holds multitudes in thrall, but the numbers are
shrinking steadily as the global crisis deepens.
Leanne Simpson, a native Canadian activist with Idle No More, points out that for many,
saying we will have to shop less is like saying:
…your life is going to end because consumerism is how we construct our identities in
this culture. The role of consumption has changed in our lives just in the past 30
years. It’s so much more entwined in the creation of self.
Many of us see shopping less as being less, and panic at the thought. However, as Simpson
reminds us,
[I]f you have a rich community life, if your relationships feed you, if you have a
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meaningful relationship with the natural world, then I think contraction isn’t as
terrifying. But if your life is almost exclusively consumption, which I think is what it
is for a great many people in this culture, then we need to understand the depth of
the threat this crisis represents.
THE DEBT BALLOON
Deregulation of finance re-opened the way for systemic corruption. In 1999, President
Clinton, Newt Gingrich, and other leaders from both parties promised that if we repealed
the Glass-Steagall Act, the country would have great prosperity. Glass-Steagall (part of
FDR’s New Deal) had kept mega-bankers in check by separating commercial banks (where
many of us deposit our money) and investment banks. That kept things from getting too
out of control from the late 1940s through the 1990s.
Those leaders knew that repealing this act would open the door for the destruction of our
economy while enriching themselves and their cronies. Clinton also refused to regulate
derivatives, another key component of the 2008 crash. President Bush, of course,
continued the rush to deregulate finance and trade.
And then the wizards of Wall Street, “the smartest guys in the room,” waved their magic
wands and transformed mountains of debt into securitized financial instruments, with
official fraudulent investment grade ratings. Of course they didn’t tell the multitude of
investors all over the world about the fraudulent part. It seemed so… inconsequential.
Unfortunately, that means we now have a staggering amount of household, corporate, and
government debt.
THE BUSINESS CLIMATE GAME
Another reason that states, in particular, are so deeply in debt is the business climate game
they’ve been playing for four decades. This race to the bottom, involves states offering tax
breaks and such to attract corporations to locate in the state. However, instead of
revitalization, the states end up losing huge amounts of tax revenue, and usually gain lowwage jobs that don’t help communities. Corporations engage in bidding wars to lower tax
rates to almost zero and gain subsidies with no strings attached. Some companies even lay
people off after promising to bring in more jobs.
PREDATORY LENDING TO CITIES AND TOWNS
The neoliberal model has spread debt financing of cities and towns across the USA. Ann
Larson reports in “Wall Street, Coming to You Town! (and Destroying It)” (Dissent Magazine,
11/19/12):
Municipalities across the country are grappling with declining local tax revenue and
reduced federal funding... This… has produced a $3.7 trillion municipal debt market,
a revenue juggernaut for Wall Street. Municipal bonds are issued by virtually every
city, county, and development agency in the United States. The number of taxpayerbacked bonds in circulation is five times higher than only ten years ago. This means
that the world’s largest financial firms now hold the purse strings for everything from
essential services like sewage treatment plants to large-scale developments such as
sports arenas. Municipal bonds are extremely profitable for investors because they
are tax-exempt and, like mortgages, can be packaged into securities.
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The mega-banks have been offering “auction rate securities” and “interest rate swaps”
which they present as sophisticated financial wizardry to save local governments money.
Both schemes, of course, have the opposite effect. The corruption of finance is systemic,
including the rigging of various interest rates.
2008 DEATH AND ZOMBIE RETURN OF BIG FINANCE
Chunking out cash on bigger cars and highly-intelligent phones may appear to keep the
consumer economy healthy, however that ocean of debt we spent for the last 30-some years
greatly fattened the cats on Wall Street who love to manage our debt. So now they basically
call the shots in this country. The crash of 2008, instead of being the demise of megabanks, further consolidated their power.
The financial system basically died in 2008, and was then resuscitated by “recapitalizing”
the banks (translation: saving their bankrupt butts). That makes it a zombie economy. Wall
Street calls it, “pretend and extend.”
In September 2008, the inevitable break in the chain of payments when the house of cards
fell, led to the big boys demanding a bailout. They had already captured the regulatory
agencies who aided the wave of fraud (unlike anything since the 1920s), and it was time to
receive their tribute from we the people for winning the financial war.
The USA and European governments got to create lots of new debt to give to the megabanks, to the tune of something like $16 trillion in the USA. Unlike what reason would
predict, saving the bankrupt mega-banks was not called a threat to economic stability.
Instead, it was hailed as preventing a global economic collapse.
Now if they had actually solved the multiple problems with the economy that would be true.
But what the bailout really did was kick the can down the road with a temporary fix. The
casino was jumpstarted again, and the big salaries, bonuses and dividends roll on… for a
while.
AUSTERITY TO THE RESCUE?
Now Main Street has less, public assets are being sold on the cheap, and austerity is
further robbing we the people.
The “populations” of the world are being told by big finance to make “great efforts” and to
take some “strong medicine” by accepting “the deal.” These are code words for the reviled
“austerity,” a slashing of the safety net, and a worldwide theft of the commons by the
financial/corporate elite.
Austerity further contracts a failing economy, causing a rise in unemployment, but for the
neoliberals, that’s the only “medicine” in their bag. The IMF (International Monetary Fund)
did a study proving how harmful it is, so it’s not that they are unaware of this. Nonetheless,
they maintain that it will inspire confidence. In what, no one knows.
The latest trick by big finance is the bail-in they pushed on Cyprus. That’s where they take
a portion of most people’s bank accounts to recapitalize the banks.
In the USA we get stealth austerity, with things like the “fiscal cliff” and “sequester.” The
sequester is not felt fully because it is time-release, targeted at thousands of local
programs, mostly cuts of programs for the poor, and instead of firing people they are getting
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“furloughs,” which means shorter workweeks and correspondingly less pay.
The government is deeply in debt because of borrowing our currency at interest; the wars,
massive waste, and “black” budget (undisclosed) of the Pentagon; the aftermath of the
crash; and because the Treasury was robbed by Wall Street, as were we the taxpaying
people. And so they call for austerity to reduce the deficits. Instead let’s have a universal
jubilee! That’s a forgiving of all debts, like they used to do in Old Testament days every 50
years.
AUSTERITY FOR ALL EXCEPT THE BIG BOYS
Before we consider solutions, here’s a look at what life on Earth might be like if we continue
to pursue the extractive economy for another 10 years…
Living as we do in the twenty-third year of the 21st Century, it’s tragic to think about how
different things could have been had we listened to the cries for international cooperation.
Instead we charged headlong into deeper and deeper crises of every kind imaginable and
then some, selling the same old story.
The rest of Europe soon followed Greece in a collapse that pushed workers across the
continent into severe poverty. The mega-banks and mega-investors were bailed-out, further
consolidating their power.
A year later global finance declared the IMF’s Special Drawing Rights (SDR) to be the new
global reserve currency. The loss of reserve status for the dollar led to rapid devaluation as
hyperinflation ravaged the USA.
Both Europe and the USA were hit with austerity, privatization, massive layoffs in the
public sector, reduction of employee benefits and pensions, lower corporate taxes and
higher personal income and sales taxes, and on and on.
The neoliberal structural-adjustment program which the IMF used to strip the third world
of its resources, came back to bite the developed world. Once again humanity’s overlords of
finance reaped their harvest of destruction. Hedge funds and private-equity firms used the
crisis to buy a wide array of state assets on the cheap. The impact on public health has
been devastating, and social unrest is brutally met with a militarized police force.
Then there are the massive storms and record-breaking droughts and… Ok! That’s more
than enough of that. How about some solutions?
WE COULD HAVE PULLED AN ICELAND
Unlike the USA and the austerity-hit countries of Europe, Iceland refused to burden future
generations for the failures of the financial powers-that-be. Instead they let the creditors
(investors) who had been priming the pump cover their own losses, and they let their big
banks go bust. Because they prosecuted the perpetrators, trust is being restored in
Iceland’s financial system.
While everyone else was bowing to international investors (bondholders), Iceland
temporarily controlled the movement of capital to give itself room to adjust. Capital controls
would be outlawed by the TPP of course.
Because those who caused the crash paid for it, instead of facing a “fiscal cliff,” Iceland
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expanded its social safety net. “If we’d guaranteed all the banks’ liabilities, we’d be in the
same situation as Ireland,” said Arni Pall Arnason, Iceland’s minister of economic affairs.
Even the IMF had to admit Iceland has achieved an “impressive” recovery.
Joseph Stiglitz, the Nobel Prize-winning economist said, “Iceland did the right thing by
making sure its payment systems continued to function while creditors, not the taxpayers,
shouldered the losses of banks…”
Deena Stryker in “Iceland’s Ongoing Revolution” (dailykos.com, 8/1/11) filled in more of
the story:
In the March 2010 referendum, 93% voted against repayment of the debt. The IMF
immediately froze its loan. But the revolution (though not televised in the United
States), would not be intimidated. With the support of a furious citizenry, the
government launched civil and penal investigations into those responsible for the
financial crisis. Interpol put out an international arrest warrant for the ex-president
of [one of the failed banks], as the other bankers implicated in the crash fled the
country.
But Icelanders didn’t stop there: they decided to draft a new constitution that would
free the country from the exaggerated power of international finance and virtual
money…
To write the new constitution, the people of Iceland elected twenty-five citizens from
among 522 adults not belonging to any political party but recommended by at least
thirty citizens.
That’s why it’s not in the news anymore.
A CHANGE HAS GOT TO COME
Corporate/consumer culture severs our social connections leaving community withering on
the vine. The hyper-individual molded by lifestyle advertising is encouraged to be satisfied
within an ever-changing private world of content provided by mega-corporations, and this is
called “freedom.” Naturally, it fosters growing isolation and fear. Humanity will fail without
systemic transformation soon.
Patch Adams, medical doctor, social activist, author and clown, is clear about the central
change required to make humanity successful:
For 5,000 years, we’ve had a global value system invested in money and power —
that’s why no political systems have worked. They’re all hungry for money and power.
What we need is a value system invested in compassion and generosity.
Compassion and generosity are called weakness by holders of the dominator worldview. It’s
true that in the short run being a dominating number one allows the winner to prosper.
But since it comes at the expense of others, blowback happens. It’s the old what-goesaround-comes-around effect. We can do way better.
And we need each other more than ever — in this time of civilization-threatening crisis — to
design and to walk a path that restores vitality to both community and ecosystem, and
establishes a direct democracy worldwide for solving planetary issues.
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FROM EXTRACTIVE TO GENERATIVE
How do we move from an extractive economy to a generative one? The transition requires
that we shift from growing in quantity to growing in quality. It requires expanding our
knowledge and skills, and building connections that form a regenerative network of
cooperation.
While we need both cooperation and competition, if we wish to prosper for the long-term,
cooperation needs to be the core value, and competition needs to be secondary and based
on mutual improvement, not on mutual fear.
In addition to a universal debt jubilee to forgive all unpayable debt, we must move toward a
steady-state (non-growing) economy or we will overshoot the planet’s capacity and crucial
resources will collapse. In other words, exponential growth will soon run out of the
resources it depends on to keep growing, so we would be wise to shift gears.
Supplying food, clothing, housing, and energy (electricity, transportation and heat) for 7
billion humans in our current highly-wasteful fashion is a dead-end.
The shift from an overly competitive society to a more cooperative one involves recognizing
that we’re all on the same team. Imagine if our brain declared war on our heart. If our brain
wins that war, it loses. The same applies to the way we compete with each other. If instead
we combine our resources and insights, we will create an ever-improving society that
optimizes all our lives.
A crucial systemic change is to restore national sovereignty by shifting the power to create
currency to national governments, as well as local regions. The private monopoly on
currency and credit doesn’t give democracy a chance. Of course, a public monopoly is no
better. We need currency diversity.
Corporations are structured to benefit distant financiers with no connection to employees.
However worker-owned cooperatives eliminate that separation, and maximize value for their
members and the local community as well.
We need economic systems based on cooperation and ecology: an economy of enough. The
market does not belong to the prime directive of maximizing profit. The market could be
committed to social good, to the well-being of all. Cooperation and reciprocity are key. It’s
the ongoing circle of giving.
Carrying that idea forward, what if we had a universal basic income to cover the basics for
everyone? That would help solve unemployment, free us to volunteer more, limit misery and
crime, and reduce social service costs. Those who wish to make more would of course be
free to do so.
Living interdependently activates an unlimited capacity for imagination, inspiration and
cooperation. The key is to include, as well as transcend, individual capacity; to network our
communities; and to establish right relations with our planet. We have been conditioned to
seek the quick buck. Let’s reorient to seek long-lasting, universal prosperity.
At last, a brief tour of the renewing rivers of the generative economy.
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COMMUNITY OWNERSHIP
To end the destructive practice of externalization, foster community ownership. Mexico
grants community ownership rights for local forests which has reduced deforestation and
illegal logging. It also employs locals to harvest timber, make wood furniture, and care for
the forest. Stewardship is given to those with a long-term interest in caring for the
commons. The lobster fishing families of Maine keep thriving with similar agreements. The
ocean is held in trust by the state for all citizens.
To prevent land development in areas like wetlands, private owners keep the property and
let an environmental group or the state hold the development rights with a conservation
easement. It’s cheaper than buying the land and gives the owners tax breaks. Communityowned energy generation is another way to go.
TEAM EARTH
In the long run, if we find our commonality and build cooperative relationships based on
mutual trust and generosity, we will all prosper beyond our dreams, without the constant
fear of violence and war. One of the keys is not allowing any one person or group to acquire
too much power. Transparency in government is another. Cooperative structures build
mutual benefit into our relationships so that everyone’s basic needs are met.
As competitive social structures self-consume, they will be replaced by a succession of new
and retooled cooperative ones, in the same way that a forest recovers from a fire. Each new
structure alters the economic and social landscape in ways that allow the next iteration to
succeed.
To make that happen, step-by-step, one-by-one, let us become a movement to free
humanity from financial/corporate domination, and form a self-organizing network, a
planetary partnership, call it Team Earth, to transform society for the good of all. Imagine
the astonishing culture we could create…
PROSPERITY FOR ALL
Living as we do in the twenty-third year of the 21st Century, brings gratitude for the
emergence of a peaceful, equitable, and regenerative society with economic common sense.
It’s awesome to contemplate the scope of the rapid transformation that swept across the
Earth in only 10 short years. The successively shorter duration of each historical age,
called the telescoping of time, at least gives some comprehension.
It certainly seemed like the financial-corporate regime would reign forever. The powerful are
not known for giving power away, and the extent and concentration of power, combined
with surveillance and military weaponry of unprecedented capability appeared
insurmountable. As did the ecological and social threats, but we also had unprecedented
access to knowledge, and to tools to build a better world, and that’s what we did.
We decided to take democracy into our own hands, and at last made it real by
democratizing the economy to prevent any one group from using economic monopoly to
establish a monopoly on political power.
As the crisis deepened, and enough people understood what was going on, they mounted a
legitimacy challenge to the mega-banks, their political puppets, and the endless-growth
economy in which they operated. The challenge was based on the failure of these
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institutions to achieve social well-being, and instead creating privileges for the few
sustained off the pain of the many. The obvious inadequacy of purely economic values led
us to adopt the triple bottom line of planet, people, and profit. Then the demand for a
worldwide debt jubilee passed the tipping point and the jubilee became a reality.
Fast forward a few years and welcome to a world where credit is a universally-available
public utility. In the USA, all 50 states have their own state bank, and they’re even more
effectively-designed than the famous Bank of North Dakota.
Public banks, offering zero- and low-interest loans, have also been established by counties,
cities, and many co-operatives and associations. They have democratized our banking
system, as their charter mandates that they serve the public interest, instead of
speculators, CEOs, and stockholders. They are a vital tool for growing local economies and
promoting general economic health, returning most of their profits back to the co-operative,
municipality, county or state. This makes them able to lower interest rates on loans, and to
lower taxes (if owned by a government). In addition, a public bank saves governments the
30-50% interest cost they have to pay private banks when they finance public projects.
The price- and interest-fixing monopolies have been banished. The same is true for other
essential social functions like energy and healthcare. “Profit or perish” has been replaced by
“cooperate or perish,” as a matter of survival. People still make a profit, but now that
cooperation is on the rise, we get how much wealthier we are with a rich community life,
and the mutual support we give each other. Price wars are a thing of the past.
The shift started to emerge as little things like volunteer groups doing a seed swap, that
then began planting vegetable gardens all over town. Soon cities were planting urban
forests to supply some of the people’s subsistence needs.
Ten years of Team Earth’s bottom-up, ever-accelerating, transformative education,
networking, and action has crystallized the vision of a new economy into a self-organizing,
worldwide, cooperative web.
As always, things begin well before we imagine they do, and the seeds of this
transformation had been sprouting for many years in various types of co-ops, non-profit
land development, and such.
In contrast with the monopoly economics of scarcity and control, permaculture provides a
context for the economics of sufficiency and diversity. It’s about optimizing all our
relationships to best meet everyone’s needs, the ultimate win-win philosophy.
Permaculture is founded on three ethics: caring for the Earth, caring for people, and
sharing surplus. By using Nature as a model, relationships are designed with attention to
achieving the elegance and efficiency of a mature ecosystem. That means regeneratively
benefitting all species, including humans.
Essential flows are given multiple pathways, and multiple benefits are gained from every
action and design element. Waste streams become closed loops by turning them into
resources which improve one’s quality of life. The maximum benefit is sought from the least
possible intervention at an appropriate scale.
Permaculture also recognizes that everything on Earth is originally a gift. And reciprocity is
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everywhere. So we create gardens that self-generate fertility and catch their own rainwater.
It is a way to restore the life-support systems of the Earth on which we are utterly
interdependent. The result is diversity, resilience and abundance because when one works
with nature, she returns the favor. These principles can be applied to the economy (and
other social domains) as well.
Mass adoption of permaculture happened as globalization unraveled, sped by the rise in
fossil fuel costs. Many national economies which were specialized to depend on exports fell
apart. So we relocalized, regionalized, and spread the use of permaculture.
Everyone has a place to call home, and sufficient clothing, food and access to education
and medical services. The blight of unemployment was eliminated by issuing a Universal
Basic Income (UBI) which is mostly paid for by money which used to pay for social services
like treatment centers and prisons. This has also swelled the number of volunteers who
perform a wide range of community services.
Associations of businesses (producers and distributors) and consumers that consciously
collaborate to meet each other’s needs have helped us move beyond competitive national
economies. These associations use money as a bridge to connect people in relationships of
service.
Here’s a typical day in the life of the emerging generative economy:
How wonderful to be able to walk outside and simply pick much of your next meal if you
like, can’t beat the freshness and flavor. Friends and neighbors usually make enough extra
of their favorite recipes to trade with each other.
Where are the associations? There goes a community-supported-agriculture truck
delivering some fresh produce. This 500-acre nature preserve is a community land trust
(owned by a non-profit) that was partially funded with social finance and local currency.
There are thousands more that are less visible.
The peer-to-peer revolution has taken hold as well. Most intermediaries, or “middlemen,”
have been eliminated by the internet. Open source software is one example.
Top-down, centralized distribution and production have given way to less expensive,
simpler systems. Commercial barter networks, mutual credit clearing and more are
reducing spending on financial services. Information economy services are everywhere.
Lenders and borrowers who don’t use public banks connect online through sites like
Prosper and LendingClub whose rigorous scrutiny of would-be borrowers is a critical part of
their success. It’s a way for people to align investment with individuals or causes they
support.
Mutual-credit systems, like the WIR (which goes back to 1934) are very popular. These
associations give members access to credit without going through a bank. There’s no need
to “buy” money with an interest-bearing loan, people can create their own credit as a free
social good for all who earn the community’s trust. The mutual credit co-ops have been
making exchange agreements (as Charles Eisenstein predicted) and are learning to balance
convertibility with protecting their currencies from speculation.
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The commons (the air, ecosystems, wildlife preserves, the internet, language, scientific
knowledge, public services, and so on) which were nearly all privatized, have been returned
to their rightful owners — no one, and their rightful users — everyone.
People are designing and making various agreements that ensure co-operative, mutual
benefit from the commons. As long as the users are involved in managing and monitoring
the resource, sanctions are used against abusers, group boundaries are clear, and
inexpensive conflict resolution is available, people take good care of the natural resources
they depend on for survival and recreation.
Jay Walljasper’s suggestions for commons sector institutions are flourishing: trusts to
protect air, water, forests, and habitat; a mutual fund that pays dividends to all; a trust
fund that provides start-up capital for every child as they reach adulthood; a risk-sharing
pool for health care that covers everyone, and a fund (based on copyright fees) that
supports local arts.
Cities and states are enthusiastically supporting democratic business models like co-ops
and worker-owned enterprises. Cleveland was an early adopter with the Evergreen
Cooperatives. One of their businesses is a solar laundry that uses a hospital as an anchor
institution to provide steady work. The individual businesses (which are all green) also pay
into a fund to help more cooperative businesses get started to further stabilize the
cooperative network.
Team Earth helped spread the open collaborative model that revives what a group of miners
did (who developed the Cornish Steam Engine) back in early days of the Industrial
Revolution — share the design of new technologies to spur more rapid innovation, instead
of patenting.
Following the lead of Ray Anderson, the founder and former CEO of Interface carpet tile
company, businesses worldwide began climbing Mount Generativity, by first eliminating
waste, and then using the savings from that to fund further development.
[R]eimagine the antiquated, linear, take-make-waste industrial system and instead…
become part of a thoughtful, cooperative, cyclical system that mimics nature in the
way that we design, source, manufacture, sell, install — and eventually reclaim and
recycle — our products…
wrote Anderson in Business Lessons From A Radical Industrialist (2011).
Some say we can’t afford to do it differently. But what if we took into account the
value of the services that nature provides? What if the balance sheet and profitand-loss statement required that we account for the cost of creating air; water
purification and distribution (the hydrologic cycle); soil creation and maintenance,
thus food, energy and raw materials (at their full costs); climate regulation;
pollination; seed dispersal; nutrient cycling; an ultraviolet shield; flood and insect
control; and net primary production, the product of photosynthesis? Surely,
without any of these, there would be no economy in the first place
His book inspired many others to action as the ecological challenges intensified. More and
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more business practices aligned with life to ensure humanity’s survival. As he promised, we
found that aligning with life saves money, and even increases profits sustainably after an
initial adjustment period, but the endless growth of profits was left behind. As oil continued
to get more expensive, we weened ourselves from it as a feedstock resource, switching to
renewable sources.
Again from the radical industrialist:
[T]aking a sledgehammer to conventional wisdom has thrown innovation into
overdrive. We’ve patented machines, processes, and products that do a whole lot
more with a whole lot less, and better, too. Each year, more of our products take
their inspiration from nature, exhibiting nature’s beauty as well as benefitting
from her genius for design that has been perfected over billions of years…
We will reach the summit when we have cut our last umbilical cord to the mines
and the oil wells, when we no longer dump any waste into the landfills or pollution
into the air or water. When we no longer take anything from the earth that the
earth cannot renew rapidly and naturally… Then… we’ll… make Interface a
restorative enterprise. To put back more than we take from the earth and to do good
for the earth, not just no harm…
Anderson’s seven faces of Mount Generativity are:
1) move toward zero waste and benign emissions, working up the supply chain; 2)
increase efficiency and use more and more renewable energy; 3) do closed-loop recycling,
copy nature’s way of turning waste into food; 4)
resource-efficient transportation, from commuting to logistics to plant siting;
5) ease employees, suppliers, customers, and our own communities out of old habits of
doing things and into a new habit of continuous improvement; 6) create a corporate
“ecosystem,” with cooperation replacing confrontation; 7) redesign commerce, teaching a
new Economics 101 that assesses accurate costs, sets real prices, and maximizes
resource-efficiency.
As Anderson also proposed, we initiated a worldwide effort to:
insulate our homes; invent energy-efficient appliances and industrial machinery;
develop benign chemistry to eliminate toxics from our waste streams and products;
invent, build, install, and operate recycling technology to get rid of the waste streams
and give precious energy-intensive molecules life after life; tap into and distribute the
unlimited, renewable power from that marvelous fusion reactor in the sky, our sun;
build an electrical “interstate highway system” for direct current (low line loss)
electricity; and rethink and redesign our financial system.
A final quote from this great pioneer:
A [generative] society will develop a system of economics that gets the prices right
ecologically and economically by internalizing the externalities, and thus lovingly
protects the parent, nature — the goose that lays all the golden eggs…
As Margrit Kennedy advised, we developed flexible regional currencies that served us well,
allowing many regions to cooperate together, when the major currencies became unstable.
They also helped us avoid privatization in the final push before the legitimacy challenge
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succeeded.
Local manufacturing replaced many of the offshored jobs. One of the ways is with 3-D
printing a vast array of goods. Once they stopped using the plastics made from oil, and
other toxic materials, 3-D printing became a boon for local economies everywhere. By
printing only what is needed in thin layers, less energy and 90% less material is used,
compared to traditional methods. This greatly reduces cost, so many small entrepreneurs
were able to open shop. The savings in transporting from only a few centers of industry is
huge.
We also created waste-as-raw material business loops where the byproducts of one
industry become the feedstock of another. And many networks of businesses formed that
use recycled materials reclaimed from local landfills.
We gradually built local production networks, following the advice of Paul Glover. He
pointed out that almost all of what is used locally,
can be made locally, by small, energy-efficient shops that use regional resources
(including components of discards), and which control and recycle all emissions and
byproducts. Specialty materials shops (such as foundries and sawmills) can be linked
to each other and to micro-industrial assembly shops.
This can be done without waiting for external capital, and without harming the
environment.
As for cost, Glover notes that as local production networks extend, “the unit price for local
artisanry and manufacture gradually becomes competitive with mass-produced imports.”
Yet locally-made goods have a built-in savings that makes them a magnificent bargain from
the get-go: “buying local goods in locally-owned stores produces local jobs that save money
by reducing unemployment’s costs of social services, vandalism, drug use, violent crime,
and jail.”
There has also been a move away from money in
restoring the reciprocity, compassion, generosity
generate prosperity for all. Perhaps the best part
communities that foster individuals thriving and
the rapidly expanding gift economy that is
and love which empower a society to
of all this is the restoration of
playing together.
It certainly seemed impossible when we started, but as Nelson Mandela noted, “It always
seems impossible, until it’s done.”
RESOURCES
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The Business Alliance for Local Living Economies, or BALLE (livingeconomies.org), is a
network of socially responsible businesses across the U.S. and Canada, that empowers
bottom-up, networked change to catalyze, strengthen and connect networks of locally
owned independent businesses dedicated to building strong Local Living Economies.
International Co-operative Alliance (ica.coop)
Paul Glover (paulglover.org) is founder of Ithaca HOURS local currency, the Ithaca Health
Alliance, Philadelphia Orchard Project, and Citizen Planners of Los Angeles. After 35 years
of community organizing on behalf of grassroots economic development and ecological
repair, he started a consultancy called GreenPlanners.
Institute for Local Self-Reliance (ilsr.org)
The Rudolf Steiner Foundation offers loans (and sometimes grants) to socially relevant and
ethically responsible initiatives (rsfsocialfinance.org).
American Independent Business Alliance (amiba.net), a non-profit organization helping
cities and towns organize effective pro-local business campaigns and alliances. AMIBA also
provides a free monthly email bulletin (mim.io/67c28) with localization news and tools.
Community-Wealth.org
publicbankinginstitute.org
Green For All (greenforall.org) uses the power of cooperation and team action to build an
inclusive, strong green economy.
The Write Choice Network (thewritechoicenetwork.com) works on revitalizing economic,
ecological and personal health.
Successful models of worker-owned cooperatives include:
1. Mondragon Corporation: the world’s most successful worker-owned enterprise, a
multi-billion dollar hi-tech, education, service, finance, and retail operation in Spain.
2. Arizmendi Bakeries: a group of enterprises in the San Francisco Bay area, inspired by
Mondragon.
3. Isthmus Engineering and Manufacturing: a full-service engineering company in
Wisconsin.
4. Evergreen Cooperatives: green businesses in Cleveland, also inspired by Mondragon.
5. Equal Exchange: highly successful fair-trade worker co-op network.
6. SLICE (Strengthening Local Independent Co-ops Everywhere): co-ops building a
regional cooperative economy in the Pacific Northwest.
7. Wheatsville Co-op: consumer co-op in the Austin Cooperative Think Tank.
8. Cooperation Works!: a network of cooperative development centers around the USA
focused on helping others launch co-ops and creating a cooperative economy.
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