THE POLITICS OF MONEY

By Hazel Henderson and - - Reprint | | Print |

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ST. AUGUSTINE, May 1 2006 (IPS) - The word is out that economics, never a science, has always been politics in disguise, writes Hazel Henderson, author of Creating Alternative Futures and numerous other books and co-creator of the Calvert Group, the Calvert-Henderson Quality of Life Indicators. In this article, Henderson writes that civic action with local currencies, barter, community credit, and the more dubious rash of digital cybermoney all reveal the politics of money. Economics is now widely seen as the faulty sourcecode deep in societies\’ hard drives, replicating unsustainability: booms, busts, bubbles, recessions, energy crises, resource depletion, poverty, trade wars, pollution, disruption of communities, and the loss of cultural and biodiversity. Citizens all over the world are rejecting this malfunctioning code and its operating systems: the World Bank, the IMF, WTO, and central banks. As local groups and communities created their own local scrip currencies and exchange systems, they learned about economists\’ deepest secret: money and information are equivalent — and neither is scarce! Barter, dismissed in economic textbooks as a primitive relic, went hi-tech. The deconstructing of money systems, and the growth of all the healthy local, real world alternatives is propagating widely.

The word is out that economics, never a science, has always been politics in disguise.

Civic action with local currencies, barter, community credit, and the more dubious rash of digital cybermoney all reveal the politics of money. Economics is now widely seen as the faulty sourcecode deep in societies’ hard drives, replicating unsustainability : booms, busts, bubbles, recessions, energy crises, resource depletion, poverty, trade wars, pollution, disruption of communities, and the loss of cultural and bio-diversity.

Citizens all over the world are rejecting this malfunctioning code and its operating systems: the World Bank, the International Monetary Fund, the World Trade Organisation, and imperious central banks. Its hard-wired programme, the now derided ”Washington Consensus” recipe for hyping GNP-growth, is challenged by the Human Development Index (HDI), Ecological Footprint Analysis, the Living Planet Index, the Calvert-Henderson Quality of Life Indicators, and other indices.

As with politics, all real money is local, created by people to facilitate exchange and based on trust. The story of how this useful invention, money, grew into abstract national fiat currencies backed only by the promises of rulers and central bankers is being told anew. We witness how information technology and deregulation of banking and finance in the 1980s helped create today’s monstrous global casino where USD 1.15 trillion worth of fiat currencies slosh around the planet daily via electronic exchanges, 90 percent in purely speculative trading.

US President Bush embraced the opinion of new Fed Chairman Ben Bernanke that the mystery of low bond yields and interest rates was due to a ”global savings glut”. Former Fed Chairman Greenspan, whose zero real interest rates flooded the US economy with excess liquidity and helped create the dot-com, housing, and global asset bubbles, declared himself ”perplexed”. The anomaly involves the global economic imbalances between the US, the world’s largest debtor –borrowing the lion’s share of global capital– and the developing countries of Asia and those exporting oil as the world’s new lenders.

I doubt there is a ”global savings glut” or a ”Shift of Thrift” from indebted US households’ zero saving rates to thrifty Asian savers as claimed in The Economist editorial of Sept. 24, 2005. My view is that there’s a global flood of fiat paper money — mostly trillions of US dollars amplified by the pyramiding of financial ‘innovations’ (derivatives, hedge funds, offshore ‘special purpose entities’, currency speculation, and tax havens) vis-â-vis real production of goods and services in the real world.

Today, we see worldwide experimentation with local exchange, barter and swap clubs, such as Deli-Dollars, LETS, Ithaca Hours and other scrip currencies in the US and Canada. Billions of people still live in traditional non-money societies and the world’s mostly female voluntary sectors.

As local groups and communities created their own local scrip currencies and exchange systems, they learned about economists’ deepest secret: money and information are equivalent — and neither is scarce! Barter, dismissed in economic textbooks as a primitive relic, went hi-tech. eBay, the world’s largest garage sale, is an example of how to bypass existing markets.

People began to see how central banks and national money-systems control populations by macro-economic managing of scarcity, employment levels, availability of mortgages and car loans, via the money-supply, credit, interest rates, and all the secretive levers and spigots used by central bankers.

In spite of such mechanisms, the defrocking of economics, the deconstructing of money systems, and the growth of all the healthy local, real world alternatives is propagating widely. The World Social Forum launched in sunny Porto Alegre in 2000 by Brazilian reformers is one of many such worldwide movements. Argentina’s default in 2001 taught its citizens that they could trust their own local scrip, flea markets, and electronic swap systems more than the country’s official currency: the peso. Argentina, Brazil, and Venezuela have announced they will repay their IMF loans in full to free their economies from ”Washington Consensus” prescriptions.

So, today, as the global casino again reaches crises of abstraction, derivatives, currency futures, and financial bubbles, we have been here before. Today’s global imbalances, deficits, bouncing currencies, poverty, and debt crises require a systemic redesign of that faulty economic sourcecode. Worried finance ministers and central bankers call vainly for a ‘new international financial architecture’.

Before we fall into ‘either/or’ errors, we should avoid doctrinaire ‘smallness’, ideological localism, and knee-jerk libertarianism. None can protect local communities from the ravages of market fundamentalist-driven globalisation. Like it or not, we are all ‘glocal’ now. In today’s information-saturated world, communities need to understand anew which elements to reject and which to embrace. Wholesale rejection can lead to rigidity, xenophobia, and misreading of history. Wholesale acceptance of current unsustainable economic global trends will surely lead to loss of local culture, biodiversity, and resource-depletion. We humans have been adept at creating new scenarios and technologies that mirror our lack of systemic knowledge and foresight. From such social changes and unanticipated consequences, we must then learn and evolve — or suffer ecological collapse. (END/COPYRIGHT IPS)