[R-G] [BillTottenWeblog] An end to monopoly money

[Bill Totten]

Creating cash should not be the responsibility of the private banking
system, but of the common wealth. Let's get mutual.

by Molly Scott Cato and Martin Large

The Ecologist November 11 2008)


As the financial vortex sucks down HBOS and Bradford & Bingley, many
ask, 'Where is a safe haven for our savings?' Trust between banks has
disappeared and they will no longer lend to each other as the credit
crunch bites. Ann Pettifor, executive director of Advocacy
International, guesstimates there is a $17.5 trillion tottering tower of
unsecured, dodgy debt, and that the $700 billion bailout for US toxic
debt agreed by Congress on 3 October may not halt 'debtonation'. While
hoping such measures work, how can the crisis also be used to reclaim
banking and money for people and society?

Fortunately, there are practical, tried and tested ways of reinventing
banking and the financial system, both nationally and locally.

Our financial system is a socially created and stewarded 'commons' that
should work for all of us, not just a private financial market enclosure
for the banksters. The light-touch regulation of successive governments
has allowed our commons to be stolen in the most grotesque credit bubble
in history. It is clear that we need a system redesign; in the interim,
government should use nationalisation and preference shares in banks to
secure the public interest. Only a publicly owned People's Bank should
be allowed to spend new money into circulation - say for permanently
affordable homes - rather than the Government continuing to allow
private banks the massive annual subsidy of GBP 21 billion from making
loans.

The 'greed is good' philosophy drove the casino financial markets, with
astonishing bonuses paid for dodgy deals. This neoeconomic liberal dogma
destroyed the ethical and social values, such as mutuality between
people, trust, confidence and interest, so essential for a healthy
financial sector. Once-proud member-owned mutuals such as Abbey
National, Alliance & Leicester, Northern Rock and the Halifax were
demutualised, benefiting directors, stockbrokers and current members at
the expense of thrifty previous generations. These are all now bust.

So people are switching to established mutuals like the Co-op Bank, to
building societies such as Nationwide, the Britannia and our own Stroud
& Swindon, or to an ethical bank like Triodos. Their money is safer
because mutuals are limited in what they can borrow from the inter-bank
market: the limit is fifty per cent, but the average proportion borrowed
only thirty per cent; they also have clear values and lend responsibly.
The foundation of mutuals is that we rely on each other - the very
principle that should be applied locally to reclaim money.

Mutualism is an approach to economic life that means co-operating rather
than competing, and it underpins an economy based in the heart of a
community. It is exactly 150 years since Robert Owen, the foremost
social and economic innovator of the 19th century, cashed in his labour
notes and took up residence in the ethereal Harmony Hall, whose earthly
equivalent he had spent a lifetime trying to create. When he is
remembered at all, it is as the founder of the co-operative movement,
but Owen's first economic experiment was with money itself.

Along with many political economists of his time, Owen held to a labour
theory of value, that is that the value of goods should be equivalent to
the labour invested in their manufacture. Although a capitalist manager
himself, the profiteering by middlemen enraged him. To address this
inequity, in 1830 he set up an Equitable Labour Exchange, where the
medium of exchange was 'labour notes'. These were denominated in hours,
and goods exchanged for the number of hours they took to make. The
scheme was an instant success among producers, and perhaps a thousand
artisans were involved in the Exchange.

Owen is also considered to be the founder of the co-operative movement,
and many of the forms of people's banking follow his tradition,
including the Robert Owen Credit Union in his birthplace of Newtown,
Powys. Credit unions form a growing movement that allows people to save
and borrow money within a defined community. This close connection
builds a sort of trust that is not possible in global financial
institutions.

There was no monopoly on legal tender 150 years ago, and there were a
huge number of banks that could issue money. The growth in monopoly
money began with the Bank Charter Act of 1844, but was not complete
until 1921. The design of new local currencies produced by Transition
Towns Lewes and Totnes is based on local money from the previous era.
The financial crisis makes clear how vulnerable we are when we allow
monopoly control over the issue of money.

When this money system fails - and its failure is inevitable given the
way money is created as debt - everyday economic exchanges cannot take
place and the real economy is forced to a standstill. This lesson was
clear from Argentina where, after the economic collapse of 2001, money
was sucked out of the economy. Within months, people in Buenos Aires had
pounced on a LETS currency called the arbol (tree), and it rapidly
became a significant medium of exchange. In the 1980s Stroud had a
thriving LETS economy that was killed by the Treasury not allowing tax
exemption and the DHSS docking benefits.

Stroud has its own Exchange, a sizeable Cotswold stone building that
Stroud Common Wealth is converting into a centre for social enterprises.
We are also working on plans for a local currency, which we hope will be
made available through the Exchange. We are more likely to follow the
model of the Chiemgauer (launched in the Bavarian region of Chiemgau in
2003) than the US BerkShares model followed elsewhere, and plan to use
the currency to build up local production of food and crafts to
substitute for the global products available on the supermarket shelves.

Stroud Community Assets is being set up for local people wanting to see
their savings receive a fair rate of return and be invested positively
for community benefit they can be proud of. Local people will be
encouraged to save a small amount regularly; like the original mutual
societies, because we are many this will eventually build a significant
fund. The aim is to build common wealth - for the benefit of individual
and community alike.

_____

Molly Scott Cato is a green economist Martin Large is a social ecologist

This piece first appeared in the Ecologist November 2008

http://www.theecologist.org/pages/archive_detail.asp?content_id=1992


TO POST A COMMENT, OR TO READ COMMENTS POSTED BY OTHERS, please click
on the word "comment" highlighted at the end of the version of this
essay posted at http://billtotten.blogspot.com/