The following is the eighteenth installment from Sacred Economics: Money, Gift, and Society in the Age of Transition, available from EVOLVER EDITIONS/North Atlantic Books. You can read the Introduction here, and visit the Sacred Economics homepage here.
First they ignore you, then they laugh at you, then they fight you, then you win. --Mohandas Gandhi
Before I explore more deeply the shift in personal economic thinking and practice that is part of sacred economy, I will summarize its key macroeconomic elements. Some are coming into place already; others are still outside the purview of acceptable political discourse and await a deepening of the crisis for the unthinkable to become common sense.
The transition I map out is evolutionary. It does not involve confiscation of property or the wholesale destruction of present institutions, but their transformation. As the following summaries describe, this transformation is under way already, or incipient in existing institutions.
The reader may notice that, except where they are off the map entirely, most of these developments fall on the left side of the political spectrum. That is because they gradually redistribute wealth from the rich to everybody else. Whereas the moneyed classes have always desired higher interest rates, and labor lower interest rates, this book foresees them going negative. Whereas liberals are fond of social welfare programs, this book foresees their universalization in a social dividend. Whereas corporate interests advocate the gutting of environmental and social protections, this book foresees the reclamation of the commons. The single major exception to the foregoing is the elimination of the income tax, which will actually benefit that small subset of the wealthy whose wealth comes from entrepreneurial productivity rather than control of money and property generating economic rents.
1. Negative-Interest Currency
Motivation: Negative interest on reserves, and a physical currency that loses value with time, reverses the effects of interest. It enables prosperity without growth, systemically encourages the equitable distribution of wealth, and ends the discounting of future cash flows so that we no longer are pressed to mortgage our future for short-term returns. Moreover, it embodies the truth about the world, in which all things decay and return to their source. No longer is money an illusory exception to nature's law. Finally, since money in some sense represents the accumulated power of millennia of technological development, which is the common inheritance of all human beings, it is unjust for someone to profit merely by owning it, as happens in the current system of risk-free positive interest.
Transition and policy: We were on the brink of a transition to decaying currency in 2009, as central banks pushed interbank interest rates to near zero and flirted with breaching the zero lower bound. Today the economy is in an anemic recovery, but the underlying problems of stagnation and debt still remain. Each new crisis, each new bailout, offers the opportunity to buy out unrepayable debts with decaying currency, thereby rescuing the financial infrastructure without further intensifying the concentration of wealth. Moreover, when traditional monetary stimulus and Keynesian fiscal stimulus fail beyond doubt, as has happened in Japan, then central banks can hardly ignore the obvious next step of pushing interest rates below zero. To prevent currency wars, this should happen as a coordinated policy of all sovereign powers, or it should be built into a global currency.
The Federal Reserve does not at present have the authority to levy negative interest on reserves or to issue depreciating bank notes. In any country such authority resides, as it should, in legislative bodies. The time is ripe for this idea to enter the economic and political discourse, as central bankers fret about the impotence of their monetary tools. The current stagnation of the velocity of money demonstrates that lowering interest rates to zero stimulates lending only if there is the prospect of significant economic growth. The new round of quantitative easing will only underscore this point as excess reserves increase. In the absence of growth, banks would rather hold money at zero interest than lend it into the economy. But would they be willing to hold it at -2 percent? Or -5 percent?
Effect on economic life: For everyone but the investing class, the everyday experience of using money will be the same. Hard as it may be for the wealthy to imagine, most people today live paycheck to paycheck and rarely accumulate more than a couple months' worth of savings. For the more affluent, savings would still be possible, but the value of savings would gradually decrease over time unless invested at risk. There will be no way to grow money risk-free, to make "money work for you." Even government bonds will pay zero interest or less. For large purchases, whether on the personal or corporate level, low-interest or zero-interest loans rather than savings will be the primary financing vehicle. (This is happening already anyway.) Businesses will have access to investment capital that does not require them to devote a high proportion of their future cash flow to servicing debt, removing the "grow or die" imperative that governs economic life today.
2. Elimination of Economic Rents, and Compensation for Depletion of the Commons
Motivation: Polarization of wealth is inevitable when people are allowed to profit from merely owning a thing, without producing anything or contributing to society. These profits, known as economic rents, accrue to the holders of land, the electromagnetic spectrum, mineral rights, oil reserves, patents, and many other forms of property. Because these forms of property either were prior to any human being or are the collective product of human culture, they should not belong to any private individual who does not use them for the benefit of the public and the planet.
In addition, today it is possible to profit by depleting aspects of the commonwealth such as biodiversity, aquifers, soil, ocean fisheries, and so on. These properly belong to all of us, and their depletion should only happen by common agreement and for the common good.
Transition and policy: Some states and nations already levy land-value taxes, and others have nationalized oil and minerals. The country of Bolivia and the state of Alaska, for example, assert public ownership over oil rights, so that oil companies earn money only for their services in extracting the oil, and not from owning the oil. Shifting the tax burden away from labor and toward property will become more and more attractive as wage earners' situations become desperate. Finally, as intractable regulatory battles over water rights show, building resource conservation directly into the money system is an idea whose time is coming.
Measures such as Georgist land-value taxes, leasing of mineral rights, and the use of the subjects of economic rent as a currency backing as described in this book are ways to return economic rents to the people, so that private interests can only profit by using property well, not by merely owning it. Anything that comes from the commons should be subject to fees or taxes. Intellectual property can be returned to the commons by shortening the terms of copyrights and patents, thereby acknowledging the cultural matrix from which ideas arise. We must also keep new sources of wealth, such as the genome, the electromagnetic spectrum, and the new "commons" of the internet, in the public domain, allocating their use only to those who use it to benefit society and the planet.
Effect on economic life: With a shift of taxation onto property and resources, sales and income taxes will be reduced or eliminated, and a strong economic incentive for conservation created. Since economic rents enrich those who already own, eliminating them will foster a more equitable distribution of wealth. In the realm of intellectual property, the widening of the public domain will encourage cultural creations that are not geared toward profit, as the "raw materials" of artistic and intellectual creation will be less subject to royalties and the limitations of private property.
3. Internalization of Social and Environmental Costs
Motivation: Just as it is possible today to deplete aquifers without paying society for it, it is also possible to deplete the earth's capacity to absorb and process waste, the geosphere's capacity to recycle carbon, and the human body's capacity to deal with toxic pollutants. Today, pollution and other forms of environmental degradation generate costs that are usually borne by society and future generations, not the polluters. Not only is this patently unfair, but it also encourages continued pollution and environmental degradation.
Transition and policy: Regulation with financial penalties for infractions is at present the primary means to reverse the economic incentive to pollute, but it suffers many flaws, both in practice and in underlying theory. Primarily, it provides an incentive to meet standards but no incentive to exceed them. Nor does it allow us to implement an overall ceiling on total emissions of a given pollutant or total drawdown of a natural resource. Current proposals to remedy these shortcomings include cap-and-trade schemes and green taxes. Many such schemes have been proposed and, in some places, implemented. Cap-and-trade (for sulfur dioxide) has worked quite well in reducing acid rain but poorly for decreasing CO2 emissions. These are steps in the right direction, but ultimately every form of pollution and depletion should be subject to payment.
For each type of pollutant and each natural resource, we must determine how much emission or drawdown the planet and its bioregions can sustain. Rights to emit these pollutants or use these resources can then be allocated in various ways. In some cases we might want to specify through central planning who gets to do and use what: farmer A gets to draw 100,000 gallons from the aquifer; farmer B 120,000; factory C 200,000; and so on. But because this generates economic inefficiency, in most cases we will want to use taxes on pollution and resources, or cap-and-trade auction systems, to provide economic rewards for conservation and pollution reduction. Better yet would be to base the money system itself on the gifts of the earth by backing currency with Earth's resources and its capacity to absorb and transform waste.
Effect on economic life: These measures end the opposition between ecology and economy. They align the best business decision with the best environmental decision, turning the power of entrepreneurial innovation toward the service of the planet. Huge new industries will arise devoted to conservation, pollution control, and toxic waste remediation. Zero-waste manufacturing will become the norm. The high expense of raw materials will encourage continued progress toward miniaturization and efficiency.
With economic disincentives for cheap, throwaway goods, manufactured items will become more expensive, more durable, and more repairable. We will care about our things more, maintain them and keep them. Large, resource-intensive goods such as cars, machines, and certain tools and appliances will be shared within a neighborhood or other community. Residential areas will become more compact; houses will become smaller; and larger homes will house extended families and other structures beyond the nuclear family.
As with the elimination of economic rents, these measures shift taxes away from income and onto resources so that we are taxed not on what we contribute but on what we take. Ultimately, income will not be taxed at all, freeing us from onerous record-keeping responsibilities and intrusive government monitoring.
4. Economic and Monetary Localization
Motivation: As community has disintegrated around the world, people yearn for a return to local economies where we know personally the people we depend on. We want to be connected to people and places, not adrift in an anonymous global monoculture. Moreover, global commodity production puts localities into competition with each other, fomenting a "race to the bottom" in wages and environmental regulations. Moreover, when production and economic exchange are local, the social and environmental effects of our actions are much more obvious, reinforcing our innate compassion.
Transition and policy: The trend toward local economy has already started. Spiking energy costs and ecological awareness prompt businesses to source more supplies locally, and millions of consumers are awakening to the health benefits of locally grown, fresh food. People everywhere show a strong desire to reconnect with community, and some city and regional governments have initiated "buy local" campaigns. Thousands of communities around the globe have launched local currencies, and although these occupy a tiny niche today, they get people used to the idea and provide a template for future local currencies backed by local governments.
The other elements of sacred economics synergize with localization. Internalization of costs will remove many illusory economies of scale that favor long-distance transport, while the elimination of economic rents will ameliorate the obscene wage differentials that now exist between rich and poor countries.1 Both these factors will encourage a reversal of some of the economic globalization that has happened in the last two hundred years. Meanwhile, as much of the natural, social, and cultural commons is local or bioregional in character, a money system backed by the commons will naturally strengthen local political and economic sovereignty.
Recent financial crises have shown that as soon as national currency stops working, local governments are quick to step in by creating their own money. It happened in Argentina in 2002; it almost happened in California in 2009; and with the likely breakup of the Economic and Monetary Union (EMU), a significant devolution of monetary sovereignty back to smaller nations may be happening in Europe. As the present crisis deepens, regional governments and smaller nations will have a chance to reclaim economic sovereignty by issuing currency and protecting it from global financial markets through capital controls, foreign-exchange transaction taxes, and so forth. Governments can also give preferential treatment to local businesses in allocating contracts. Finally, local and regional governments can reclaim their credit sovereignty from international finance by establishing public banks and other credit-generating institutions.
Economic life: While many high-tech products and services are by their nature global, hidden subsidies and decades of policy have thrust many things that can and should be local into the global commodity economy. In the future these will revert to local production. Most of the food that we eat will be grown in the bioregions in which we live. Houses and many manufactured products will use local materials, often recycled, and be produced on a smaller scale. Small towns will experience an economic revival, and "Main Street" will be repopulated by authentic local businesses.
5. The Social Dividend
Motivation: Thousands of years of technological advances have made production of the quantifiable necessities of life extremely easy. These advances, the gift of our ancestors, should be the common property of all humanity. All deserve a share of the wealth they have made possible. The same is true of the natural wealth of the earth, which was made by no man. The current economic system essentially forces us to work for what is already ours. It is more just to pay out the proceeds of the economic rent compensation, pollution taxes, and so on (see 2 and 3 above) to all citizens as a social dividend. This also serves to mitigate concentration of wealth and prevent deflationary crises. The social dividend would ideally provide the bare amount to cover life's necessities; beyond that, people could still choose to earn their own money. It frees work from the pressure of necessity; people would work because they want to, not because they have to.
Transition and policy: A social dividend already exists in the state of Alaska, where each citizen shares in the state's oil revenues and receives an annual check for several thousand dollars. Recent stimulus checks are another harbinger of the social dividend that is to come. A further existing model is the welfare system, which is derided with the term "entitlements." But perhaps we should embrace that epithet and extend it to every citizen-after all, are we not all entitled to the vast abundant wealth that Earth and our ancestors have bequeathed us?
Entitlements already in place, such as food stamps, public health insurance, tax credits to low- and middle-income families with children, social welfare programs, unemployment compensation, and stimulus checks can be expanded and universalized. Such measures run counter to the current political trend of "austerity," but the rapidly intensifying misery those policies engender may lead to social unrest and political upheaval. At that time the political will shall emerge to redistribute wealth. When that happens, let us not think punitively, in terms of taxing the rich; let us rather take the attitude of giving all citizens their due. A social dividend is a covert redistribution of wealth because while all receive equally, the wealthy pay proportionally more taxes to fund it.2 In the vision of this book, it will be funded by demurrage charges, pollution fees, and payments for the use of the commons (see 1, 2, and 3 above).
Economic life: While there will still be poor people and wealthy people, poverty will no longer entail extreme anxiety. Those who are oriented toward creating things that other people want and need will earn more money; those who are focused on simplicity, living in nature, or artistic self-expression may have to get by on the bare necessities. The point of economic life, however, will no longer be to "make a living." Freed of that pressure, we will turn our gifts toward that which inspires us-for more and more of us, that is the healing of society and the planet from the ravages of Separation. (If you still think that freedom from survival pressure will lead to dissipation and indolence, please go back and reread "The Will to Work" in Chapter 14.)
6. Economic Degrowth
Motivation: Over hundreds of years of inventing labor-saving devices, from the spinning jenny to the digital computer, we have at every turn chosen to consume more rather than to work less. This choice, driven by the money system, accompanied an accelerating drawdown of social and natural capital. Today, the option of accelerating consumption is no longer available to us. Absent the driving force of positive risk-free interest, economic growth will no longer be necessary to promote the flow of capital, and a degrowth economy will become feasible. Technology will continue to advance, and we will be left with the second option: to work less or, more accurately, to work less for money.
Transition and policy: This is already happening. Persistently high unemployment rates (near 20 percent, counting discouraged workers) in industrialized countries, together with overcapacity of production, imply that there is simply not enough paid work to employ everyone to produce all we need. To be sure, there is much necessary and beautiful work to be done-but much of it fundamentally does not generate an economic return. Unemployment is considered an evil today, but it would not be if it were supported by a social dividend and spread out over the economy. What if everyone worked 20 percent less, instead of 20 percent of the people working not at all? This economic circumstance coincides with a shift in consciousness as more and more of us reject the conventional notion of work-the division of life into two exclusive zones, work and leisure.
Decaying currency, resource-based economics (2 and 3 above), and the social dividend all support a degrowth economy. We must also deprogram ourselves from the growth-is-good mantra that guides public policy today. In the 2009 stimulus program, the rationale for the roads, bridges, and other projects was to stimulate growth-it was not a conscious decision that we actually need more roads and bridges. Similarly, housing starts are welcome as a sign of growth, and not as an expression of a belief that we need more subdivisions and sprawl. Policies such as monetary and Keynesian fiscal stimulus, which in their new incarnation will be negative-interest money and the social dividend, must be reframed: they are not to get the economy growing again; they are to circulate money to those who need to spend it. Generally speaking, this will not trigger growth if the commons is protected from monetization; instead it will shift the allocation of resources and the focus of economic activity.
Economic life: The poor and middle classes will experience greater affluence, as if the economy were growing, because the benefits of higher wages and easier employment that ordinarily only happen in a context of growth-driven business investment will be able to happen in a steady-state or degrowth economy. People will spend more and more of their time in noneconomic activities as the money realm shrinks and the realm of gifts, voluntarism, leisure, and the unquantifiable grows. Digital content-images, music, video, news, books, etc.-will continue its trend toward zero-cost availability. While resource-based production will be far more expensive, human input will continue to benefit from the ongoing accumulation of technology so that in many high-tech realms, we will do more with less. People will also share more and consume less, borrow more and rent less, give more and sell less-all reflecting and engendering economic degrowth.
7. Gift Culture and P2P economics
Motivation: The expansion of the money realm has come at the expense of other forms of economic circulation, in particular gifts. When every economic relationship becomes a paid service, we are left independent of everyone we know and dependent, via money, on anonymous, distant service providers. That is a primary reason for the decline of community in modern societies, with its attendant alienation, loneliness, and psychological misery. Moreover, money is unsuited to facilitate the circulation and development of the unquantifiable things that truly make life rich.
Transition and policy: Thankfully, the money realm is already beginning to shrink, and that degrowth allows new space for gift economics. The internet is in important respects a gift network, and it has made it easy to give away information that was once very costly to produce. In various ways, this has pushed services like advertising (think Craigslist), travel agency, journalism, publishing, music, and many more toward the gift realm. It has also facilitated gift-based modes of open-source production. What once required paid intermediaries and centralized administrative structures now happens directly. People and businesses are even creating credit, via mutual-credit systems, without the intermediation of banks. Meanwhile, on the local level the ideals of the connected self, the yearning for community, and sheer economic exigency are leading people to restore gift-based community structures.
Governments can liberalize tax and banking regulations to give free rein to the new systems of economic circulation emerging today. The commons in which these systems reside, in particular the internet, must be kept public. Governments can also establish and promote mutual-credit systems for business and industry, shielding the domestic or local economy from predation by international capital.
Economic life: People will meet their needs, whether for goods, services, or money itself, in a great variety of ways. Face-to-face gift circles and online coordination of gifts and needs will allow many needs to be met without money. People will have much more of a sense of being a part of a community they rely on. Complementary, user-created credit systems, along with internet-based P2P lending, will obviate some of the traditional need for banks. On a local level as well as mediated through global networks, new nonquantified "currencies" of recognition and gratitude will emerge that connect and reward qualitative contributions to society and the planet.
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As you can see, all of the seven elements I have described are tightly synergistic. Indeed, none can stand on its own. Negative-interest currency, for instance, won't work if other sources of economic rent are still available to invest in. Localization depends in large part on the removal of hidden subsidies that make global trade economic. Gift economies allow the quality of life to improve even as the economy shrinks.
Together, the various strands of sacred economy I have described in Part II of this book weave a tapestry, an organic matrix that we can see emerging today. The new economy will not come from a new beginning, a sweeping away of the old and a starting afresh; it is rather a phase transition, a metamorphosis.
Just as no piece of sacred economy can stand alone, so also does each piece naturally induce the others. But if there is a linchpin, it is the end of growth, the transition of the human species to a new relationship with Earth, a new Story of the People. Ultimately, it is our emerging desire to be Earth's partner, and our newfound spiritual realization of the uniqueness and connectedness of all beings, that underlies what I have called sacred economics.
1. That is because low wages are in effect subsidized by the nonmonetized commons. When much is still available for free from the land and the community, the cost of living and therefore wages can be very low.
2. Another way to fund it is with fiat money created by the government and paid to all citizens. This also is a covert form of wealth redistribution, since unless an equivalent amount of money is removed from the economy through taxation, inflation will result, diminishing the relative wealth of the creditor class.
Image by Patrick Hoesly, courtesy of Creative Commons license.