Right now, the global financial system is crumbling, in exquisite slow-motion. While politicians and pundits proclaim that “recovery” is on the horizon, the truth is we will never return to the era of growth. Once we understand what’s happening, we can see this as a good thing.
Over the last decades, nations increased their Gross Domestic Product (GDP) by finding new markets and resources, and by turning previously non-monetised services into business opportunities. For instance, our ancestors used to make their own clothes, create their own entertainment, and take care of their own kids. The logic of the market, seeking ever-greater profit and an increased GDP, mandated that such activities eventually got outsourced and capitalised upon. We have now reached the limit where there is nothing left outside of the market that can be turned into money. We have completed the process of globalisation, meaning that we have no new markets left to penetrate (although they did find one last uncontacted tribe in the Amazon). At the same time, we have reached the limit of our resources, facing peak oil, “peak water”, with about three fish left in the ocean, and so on.
Our current financial system was designed at a time when people could not imagine a limit to growth, when they thought the world was infinite, that we could have more development and more “progress” forever. Therefore, underlying our current global economic order is a gigantic debt pyramid. Our money is created by a consortium of private bankers, who maintain monopoly of control on how our society exchanges value. This money is issued into existence as debt, which creates artificial scarcity, and forces competitive instead of cooperative behaviour. For hundreds of years the underlying instability of this system compelled tremendous innovation and dynamism, as well as periodic crises such as wars and depressions, while maintaining tremendous human misery through inequitable distribution of resources and the need for unemployed masses of “surplus labour”.
Such a system can only function as long as there is the opportunity for rapid growth, which means that lenders can issue credit with a good likelihood of return. Now that we have reached the end of growth, the system is undergoing spasms, and will soon self-destruct. The fact is that the vast amount of debts on the books of our governments and financial institutions will never be repaid. Complex financial instruments can be used for a time to hide and obscure this fact, but, eventually, it will no longer be possible to do so, and our current form of money will be brutally devalued. We will see increasing global turmoil, insurrections and revolutions in many countries around the world.
Our new situation requires a different kind of economic infrastructure, one that supports sustainable and cooperative behaviour over cutthroat, competitive and ecologically ruinous activity. There is no reason that central banks should maintain a monopoly control over money creation. Local communities, cooperatives and business associations could issue different types of currencies that would be used for many purposes. The economist Bernard Lietaer proposes creating a “negative interest” trading currency that is linked to a basket of real-world goods. Things in the real world degrade in value, naturally, over time, so it makes sense that money would share that property.
If we used a currency that quickly loses its value, we would prefer to share it with others rather than hoard it, as the longer we hold on to it, the less it would be worth.
There are many other proposals – and some prototypes up and running – for how money can be transformed so that it serves human communities and safeguards the resources we all hold in common. The essential point that we must realise, first, is that our current form of money is not inevitable or eternal. We constructed money as an instrument to serve a particular set of social functions, and now we must use our creativity to innovate new instruments for exchanging value. Biologists have discovered that immature ecosystems are marked by competition, while mature ecosystems develop through cooperation and symbiosis. Although it may seem unbelievable when we look around us, humanity, as a species, is reaching maturity. We are on the verge of a quantum leap in understanding ourselves. As we make the jump, we will employ our technical skills and our intelligence to reshape our social and economic systems, establishing an equitable and regenerative planetary culture, one that works for all.
DANIEL PINCHBECK is the author of BREAKING OPEN THE HEAD, 2012: THE RETURN OF QUETZALCOATL, and the just-published NOTES FROM THE EDGE TIMES. He edits realitysandwich.com and is featured in the new documentary 2012: Time for Change.