The following is the eighth 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.
We have bigger houses but smaller families;
more conveniences, but less time.
We have more degrees but less sense;
more knowledge but less judgment;
more experts, but more problems;
more medicines but less healthiness.
We've been all the way to the moon and back,
but have trouble in crossing the street to meet our new
neighbor.
We built more computers to hold more copies than ever,
But have less real communication;
We have become long on quantity,
but short on quality.
These are times of fast foods but slow digestion;
Tall men but short characters;
Steep profits but shallow relationships.
It's a time when there is much in the window
But nothing in the room. –Authorship unknown
The financial crisis we are facing today arises from the
fact that there is almost no more social, cultural, natural, and spiritual
capital left to convert into money. Centuries of near-continuous money creation
have left us so destitute that we have nothing left to sell. Our forests are
damaged beyond repair, our soil depleted and washed into the sea, our fisheries
fished out, and the rejuvenating capacity of the earth to recycle our waste
saturated. Our cultural treasury of songs and stories, of images and icons, has
been looted and copyrighted. Any clever phrase you can think of is already a
trademarked slogan. Our very human relationships and abilities have been taken
away from us and sold back, so that we are now dependent on strangers, and
therefore on money, for things few humans ever paid for until recently: food,
shelter, clothing, entertainment, child care, cooking. Life itself has become a
consumer item.
Today we sell away the
last vestiges of our divine endowment: our health, the biosphere and genome,
even our own minds. Pythagoras's dictum, "All things are number," has nearly
come true: the world has been converted into money. This is the process that is
culminating in our age. It is almost complete, especially in America and the
"developed" world. In the "developing" world (notice how these terms assume our
own economic system as the destination of other societies) there still remain
people who live substantially in gift cultures, where natural and social wealth
is not yet the subject of property. Globalization is the process of stripping
away these assets, to feed the money machine's insatiable, existential need to
grow. Yet this strip-mining of other lands is running up against its limits
too, both because there is almost nothing left to take and because of growing
pockets of effective resistance.
The result is that the
supply of money — and the corresponding volume of debt — has for several decades
outstripped the production of goods and services that it promises. It is deeply
related to the problem of overcapacity in classical economics. To defer the
Marxian crisis of capital — a vicious circle of falling profits, falling wages,
depressed consumption, and overproduction in mature industries — into the future,
we must constantly develop new, high-profit industries and markets. The
continuation of capitalism as we know it depends on an infinite supply of these
new industries, which essentially must convert infinite new realms of social,
natural, cultural, and spiritual capital into money. The problem is that these
resources are finite, and the closer they come to exhaustion, the more painful
their extraction becomes. Therefore, contemporaneous with the financial crisis
we have an ecological crisis and a health crisis. They are intimately
interlinked. We cannot convert much more of the earth into money, or much more
of our health into money, before the basis of life itself is threatened.
An ancient Chinese
myth helps illuminate what is happening. There was a monster, it is said,
called the tao tie, which was possessed of an insatiable appetite. It
consumed every creature around it, even the earth itself, yet it was still
hungry. So it turned finally to its own body, eating its arms, legs, and torso,
leaving nothing but the head.
A head cannot live
without its body. Faced with the exhaustion of the nonmonetized commonwealth
that it consumes, financial capital has turned to devour its own body: the
industrial economy that it was supposed to serve. If income from production of
goods and services is insufficient to service debt, then creditors seize assets
instead. This is what has happened both in the American economy and globally.
Mortgages, for example, were originally a path toward owning your own home free
and clear, starting with 20 percent equity. Today few ever dream of actually
one day repaying their mortgage, but only of endlessly refinancing it, in
effect renting the house from the bank. Globally, Third World countries find
themselves in a similar situation, as they are forced to sell off national
assets and gut social services under IMF austerity programs. Just as you might
feel your entire productive labor is in the service of debt repayment, so is
their entire economy directed toward producing commodity goods to repay foreign
debt.
IMF austerity measures
are exactly analogous to a court-imposed debt-payment plan. They say, "You are
going to have to make do with less, work harder, and devote a greater
proportion of your income to debt payments. You will give me everything you own
and turn over all your future earnings to me!" Worker pensions, teacher
salaries, minerals, oil-all are turned to debt service. The forms of slavery
have changed over the years, but not the essential directive. The irony is that
in the long term, austerity measures don't even benefit the creditors. They
choke off economic growth by reducing consumption, demand, and business
investment opportunities. Jobs evaporate, commodity prices fall, and the debtor
people and nations are less able than ever to make their payments.
Incapable of thinking
beyond the short term, the money interests love austerity because the debtor is
essentially saying, "We will devote more of our labor and resources toward the
servicing of debt." It allows unserviceable debts to be serviced just a little
while longer. This is what is happening in Europe at the time of this writing
(2010), as governments slash pensions and agree to privatize social services so
that they can assure bondholders that they will be paid. The rumblings of
austerity are audible here in America too, in the form of alarums about the
federal deficit. From within the logic of bond markets and budget deficits, the
case for greater fiscal responsibility is unassailable. From outside that
logic, it is absurd: are we to be forced by mere numbers, mere interpretation
of bits, to erode the standard of living of the many for the sake of preserving
the wealth of the few?
Eventually, debtors
run out of disposable income and seizable assets. The crash underway today
should have actually happened many years ago, except that various phony and
inflated assets were created to keep it going a little longer as the financial tao
tie cannibalized itself, covering debt with more debt. The efforts to shore
up this edifice cannot work, because it must keep growing — all those debts bear
interest. Yet the authorities keep trying. When you hear the phrase "rescue the
financial system," translate it in your mind into "keep the debts on the
books." They are trying to find a way for you (and debtor nations too) to keep
paying and for the debt to keep growing. A debt pyramid cannot grow forever,
because eventually, after all the debtors' assets are gone, and all their
disposable income devoted to debt payments, creditors have no choice but to
lend debtors the money to make their payments. Soon the outstanding balance is
so high that they have to borrow money even to pay interest, which means that
money is no longer flowing, and can no longer flow, from debtor to creditor.
This is the final stage, usually short, though prolonged in our day by Wall
Street's financial "wizardry." The loans and any derivatives built on them
begin to lose their value, and debt deflation ensues.
Essentially, the
proximate financial crisis and the deeper growth crisis of civilization are
connected in two ways. Interest-based debt-money compels economic growth, and a
debt crisis is a symptom that shows up whenever growth slows.
The present crisis is
the final stage of what began in the 1930s. Successive solutions to the
fundamental problem of keeping pace with money that expands with the rate of
interest have been applied, and exhausted. The first effective solution was
war, a state that has been permanent since 1940. Unfortunately, or rather
fortunately, nuclear weapons and a shift in human consciousness have limited
the solution of endless military escalation. War between the great powers is no
longer possible. Other solutions — globalization, technology-enabled development
of new goods and services to replace human functions never before commoditized,
technology-enabled plunder of natural resources once off limits, and finally
financial autocannibalism — have similarly run their course. Unless there are
realms of wealth I have not considered, and new depths of poverty, misery, and
alienation to which we might plunge, the inevitable cannot be delayed much
longer.
The credit bubble that
is blamed as the source of our current economic woes was not a cause of them at
all, but only a symptom. When returns on capital investment began falling in
the early 1970s, capital began a desperate search for other ways to maintain
its expansion. When each bubble popped — commodities in the late 1970s, S&L
real estate investments in the 1980s, the dotcom stocks in the 1990s, and real
estate and financial derivatives in the 2000s — capital immediately moved on to the
next, maintaining an illusion of economic expansion. But the real economy was
stagnating. There were not enough needs to meet the overcapacity of production,
not enough social and natural capital left to convert into money.
To maintain the
exponential growth of money, either the volume of goods and services must be
able to keep pace with it, or imperialism and war must be able to escalate
indefinitely. All have reached their limit. There is nowhere to turn.
Today, the impasse in
our ability to convert nature into commodities and relationships into services
is not temporary. There is little more we can convert. Technological progress
and refinements to industrial methods will not help us take more fish from the
seas-the fish are mostly gone. It will not help us increase the timber
harvest — the forests are already stressed to capacity. It will not allow us to
pump more oil — the reserves are drying up. We cannot expand the service
sector — there are hardly any things we do for each other that we don't pay for already.
There is no more room for economic growth as we have known it; that is, no more
room for the conversion of life and the world into money. Therefore, even if we
follow the more radical policy prescriptions from the left, hoping by an
annulment of debts and a redistribution of income to ignite renewed economic
growth, we can only succeed in depleting what remains of our divine bequest of
nature, culture, and community. At best, economic stimulus will allow a modest,
short-lived expansion as the functions that were demonetized during the
recession are remonetized. For example, because of the economic situation, some
friends and I cover for each other's child care needs, whereas in prosperous
times we might have sent our kids to preschool. Our reciprocity represents an
opportunity for economic growth: what we do for each other freely can be
converted into monetized services. Generalized to the whole society, this is
only an opportunity to grow back to where we were before, at which point the
same crisis will emerge again. "Shrink in order to grow," the essence of war
and deflation, is only effective, and decreasingly so, as a holding action
while new realms of unmonetized social and natural capital are accessed.
The current problem is
therefore much deeper than today's conventional wisdom holds. Consider this
typical example from a financial journal:
"[Paul] Volcker is right. The collateralized debt
obligations, collateralized mortgage-backed securities, and other
computer-spawned complexities and playthings were not the solutions to basic
needs in the economy, but to unslaked greed on Wall Street. Without them, banks
would have had no choice but to continue to devote their capital and talents to
meeting real needs from businesses and consumers, and there would have been no
crisis, no crash, and no recession."1
This describes only the most superficial level of a deeper
problem of which the collateralized debt obligations (CDOs) and so forth are
mere symptoms. The deeper problem was that there were insufficient "real needs"
to which banks could devote their capital, because only those needs that will
generate profits beyond the interest rate constitute valid lending
opportunities. In an economy plagued by overproduction, such opportunities are
rare. So, the financial industry played numbers games instead. The CDOs and so
on were a symptom, not a cause, of the financial crisis that originated in the
impossibility of economic growth keeping pace with interest.
Various pundits have
observed that Bernard Madoff's Ponzi scheme was not so different from the
financial industry's pyramid of mortgaged-based derivatives and other
instruments, which themselves formed a bubble that, like Madoff's, could only
sustain itself through an unceasing, indeed exponentially growing, influx of
new money. As such, it is a symbol of our times — and even more than people
suppose. It is not only the Wall Street casino economy that is an unsustainable
pyramid scheme. The larger economic system, based as it is on the eternal
conversion of a finite commonwealth into money, is unsustainable as well. It is
like a bonfire that must burn higher and higher, to the exhaustion of all
available fuel. Only a fool would think that a fire can burn ever-higher when
the supply of fuel is finite. To extend the metaphor, the recent
deindustrialization and financialization of the economy amount to using the
heat to create more fuel. According to the second law of thermodynamics, the
amount created is always less than the amount expended to create it. Obviously,
the practice of borrowing new money to pay the principal and interest of old
debts cannot last very long, but that is what the economy as a whole has done
for ten years now.
Yet even abandoning
this folly, we still must face the depletion of fuel (remember, I mean not
literal energy sources, but any bond of nature or culture that can be turned
into a commodity). Most of the proposals for addressing the present economic
crisis amount to finding more fuel. Whether it is drilling more oil wells,
paving over more green space, or spurring consumer spending, the goal is to
reignite economic growth — that is, to expand the realm of goods and services. It
means finding new things for which we can pay. Today, unimaginably to our
forebears, we pay even for our water and our songs. What else is left to
convert into money?
As far as I know, the
first economist to recognize the fundamental problem and its relation to the
money system was Frederick Soddy, a Nobel laureate and pioneer of nuclear
chemistry who turned his attention to economics in the 1920s. Soddy was among
the first to debunk the ideology of infinite exponential economic growth,
extending the reasoning of Thomas Malthus beyond population to economics.
Herman Daly describes Soddy's view succinctly:
"The idea that people can live off the interest of their
mutual indebtedness … is just another perpetual motion scheme — a vulgar delusion
on a grand scale. Soddy seems to be saying that what is obviously impossible
for the community — for everyone to live on interest-should also be forbidden to
individuals, as a principle of fairness. If it is not forbidden, or at least
limited in some way, then at some point the growing liens of debt holders on
the limited revenue will become greater than the future producers of that revenue
will be willing or able to support, and conflict will result. The conflict
takes the form of debt repudiation. Debt grows at compound interest and as a
purely mathematical quantity encounters no limits to slow it down. Wealth grows
for a while at compound interest, but, having a physical dimension, its growth
sooner or later encounters limits."2
This association of
economic growth with resource consumption is especially common today among Peak
Oil theorists, who forecast economic collapse as oil production begins its
"long descent." Their critics contend that economic growth can and does happen
independent of energy use, thanks to technology, miniaturization, efficiency
improvements, and so on. Since 1960, U.S. economic growth has outstripped energy
use, a trend that accelerated in the 1980s. (See Figure 1.) Germany has done
even better, having essentially flat energy use since 1991 despite considerable
economic growth. However, this objection only illustrates a larger point. Yes,
it is possible to maintain economic growth by displacing it from the
consumption of one part of the commons to another-by burning gas instead of oil
or by commoditizing human services or intellectual property instead of the cod
fishery-but aggregated over the totality of the social, natural, cultural, and
spiritual commons, the basic argument of Peak Oil remains valid. Instead of
Peak Oil, we are facing Peak Everything.
When the financial crisis hit in 2008, the first government
response, the bailout and monetary stimulus, was an attempt to uphold a tower
of debt upon debt that far exceeded its real economic foundation. As such, its
apparent success was temporary, a postponement of the inevitable: "pretend and
extend," as some on Wall Street call it. The alternative, economic stimulus, is
doomed for a deeper reason. It will fail because we are "maxed out": maxed out
on nature's capacity to receive our wastes without destroying the ecological
basis of civilization; maxed out on society's ability to withstand any more
loss of community and connection; maxed out on our forests' ability to
withstand more clear-cuts; maxed out on the human body's capacity to stay
viable in a depleted, toxic world. That we are also maxed out on our credit
only reflects that we have nothing left to convert into money. Do we really
need more roads and bridges?3 Can we sustain more of them, and more
of the industrial economy that goes along? Government stimulus programs will at
best prolong the current economic system for two or three years, with perhaps a
brief period of growth as we complete the pillage of nature, spirit, body, and
culture. When these vestiges of the commonwealth are gone, then nothing will be
able to stop the Great Unraveling of the money system.
Although the details
and timeline of this unraveling are impossible to predict, I think we will
first experience persistent deflation, stagnation, and wealth polarization,
followed by social unrest, hyperinflation, or currency collapse. At that
moment, the alternatives we are exploring today will come into their own,
offering an opportunity to build a new and sacred economy. The farther the
collapse proceeds, the more attractive the proposals of this book will become.
In the face of the impending crisis, people often ask what
they can do to protect themselves. "Buy gold? Stockpile canned goods? Build a
fortified compound in a remote area? What should I do?" I would like to suggest
a different kind of question: "What is the most beautiful thing I can do?" You
see, the gathering crisis presents a tremendous opportunity. Deflation, the
destruction of money, is only a categorical evil if the creation of money is a
categorical good. However, you can see from the examples I have given that the
creation of money has in many ways impoverished us all. Conversely, the
destruction of money has the potential to enrich us. It offers the opportunity
to reclaim parts of the lost commonwealth from the realm of money and property.
We see this happening
every time there is an economic recession. People can no longer pay for various
goods and services, and so have to rely on friends and neighbors instead. Where
there is no money to facilitate transactions, gift economies reemerge and new
kinds of money are created. Ordinarily, though, people and institutions try to
hang on to the old ways as long as possible. The habitual first response to
economic crisis is to make and keep more money — to accelerate the conversion of
anything you can into money. On a systemic level, the debt surge is generating
enormous pressure to extend the commodification of the commonwealth. We can see
this happening with the calls to drill for oil in Alaska, commence deep-sea
drilling, and so on. The time is here, though, for the reverse process to begin
in earnest-to remove things from the realm of goods and services and return
them to the realm of gifts, reciprocity, self-sufficiency, and community
sharing. Note well: this is going to happen anyway in the wake of a currency
collapse, as people lose their jobs or become too poor to buy things. People
will help each other, and real communities will reemerge.
Even if you care
mostly about the security of your own future, community is probably the best
investment you can make. When the financial system unravels, most investments
become mere pieces of paper or electronic data files. They derive value only
from the web of social agreements that contains and interprets them. Even
physical gold doesn't provide much security when things get really bad. In
times of extreme crisis, governments typically confiscate private gold
holdings — Hitler, Lenin, and Roosevelt all did so. If even the government falls
apart, then people with guns will come and take your gold or any other store of
wealth.
I sometimes read the
financial website Zero Hedge for its remarkable insight into the pretenses and
machinations of the financial power elite. In that website's dim view, no asset
class except physical gold and other physical commodities is safe today. I agree
with its logic as far as it goes, but it does not go far enough. If the system
breaks down to the point of hyperinflation, then the institution of property — as
much a social convention as money is — will break down too. In times of social
turmoil, I can't imagine anything more dangerous than possessing a few hundred
ounces of gold. Really the only security is to be found in community: the
gratitude, connections, and support of the people around you. If you have
wealth now, I recommend, as your investment advisor, that you use it to enrich
the people around you in lasting ways.
In the meantime,
before the collapse of the current system, anything we do to protect some
natural or social resource from conversion into money will both hasten the
collapse and mitigate its severity. Any forest you save from
development, any road you stop, any cooperative playgroup you establish; anyone
you teach to heal themselves, or to build their own house, cook their own food,
or make their own clothes; any wealth you create or add to the public domain;
anything you render off-limits to the world-devouring Machine will help shorten
the Machine's life span. And when the money system collapses, if you already do
not depend on money for some portion of life's necessities and pleasures, then
the collapse of money will pose much less of a harsh transition for you. The
same applies on the social level. Any form of natural wealth, whether
biodiversity, fertile soil, or clean water, and any community or social
institution that is not a vehicle for the conversion of life into money, will
sustain and enrich life after money.
I am referring to
money as we know it. I will soon describe a money system that does not drive
the conversion of all that is good, true, and beautiful into money. It enacts a
fundamentally different human identity, a fundamentally different sense of
self, from what dominates today. No more will it be true that more for me is
less for you. On a personal level, the deepest possible revolution we can enact
is a revolution in our sense of self, in our identity. The discrete and
separate self of Descartes and Adam Smith has run its course and is becoming
obsolete. We are realizing our own inseparability, from each other and from the
totality of all life. Usury belies this union, for it seeks growth of the
separate self at the expense of something external, something other. Probably
everyone reading this book agrees with the principles of interconnectedness,
whether from a spiritual or an ecological perspective. The time has come to
live it. It is time to enter the spirit of the gift, which embodies the felt
understanding of nonseparation. It is becoming abundantly obvious that less for
you (in all its dimensions) is also less for me. The ideology of perpetual gain
has brought us to a state of poverty so destitute that we are gasping for air.
That ideology, and the civilization built upon it, is what is collapsing today.
Resisting or
postponing the collapse will only make it worse. Finding new ways to grow the
economy will only consume what is left of our wealth. Let us stop resisting the
revolution in human beingness. If we want to outlast the multiple crises
unfolding today, let us not seek to survive them. That is the mind-set
of separation; that is resistance, a clinging to a dying past. Instead, let us
shift our perspective toward reunion and think in terms of what we can give.
What can we each contribute to a more beautiful world? That is our only
responsibility and our only security.
I will develop this theme — right livelihood and
right investing — later in this book. We can engage in conscious, purposeful
money destruction in place of the unconscious destruction of money that happens
in a collapsing economy. If you still have money to invest, invest it in
enterprises that explicitly seek to build community, protect nature, and
preserve the cultural commonwealth. Expect a zero or negative financial return
on your investment-that is a good sign that you are not unintentionally
converting even more of the world to money. Whether or not you have money to
invest, you can also reclaim what was sold away by taking steps out the money
economy. Anything you learn to do for yourself or for other people, without
paying for it; any utilization of recycled or discarded materials; anything you
make instead of buy, give instead of sell; any new skill or new song or new art
you teach yourself or another will reduce the dominion of money and grow a gift
economy to sustain us through the coming transition. The world of the Gift,
echoing primitive gift societies, the web of ecology, and the spiritual
teachings of the ages, is nigh upon us. It tugs on our heartstrings and awakens
our generosity. Shall we heed its call, before the remainder of earth's beauty
is consumed?
1. Coxe, 13.
2. Daly,
"The Economic Thought of Frederick Soddy," 475.
3. Some
might say that Third World countries do need more roads and bridges to raise
their standard of living. Consider, however, that big infrastructure projects,
exemplary of World Bank investment, are key to the integration of formerly
autonomous economies into the global commodity economy. Perhaps what they need
is not more roads and bridges. Perhaps what they need is protection from the
depredations of the global commodity economy, of which roads and bridges are an
agent.
Image by Brooks Elliot, courtesy of Creative Commons license.
