This is the 3rd in a 7-part essay on the type of policy innovations that would respond to the truth of the environmental predicament and, also, why most environmental professionals ignore such ideas to promote limited and limiting ideas instead. These ideas on a #RealGreenRevolution provide a contrast to current agendas, with the aim of encouraging a global environmental movement as a rights-based political force. Having looked at taxation and market reform in the last part, here I turn to that even sexier topic of monetary reform and currency innovation, and how to transform the operating codes of our economy that to alter behaviours in fair ways.
To receive each part of the essay, subscribe to my blog, using the box on the right. To engage with other people who are responding to these ideas, either engage on the Deep Adaptation Leadership group on LinkedIn (where I will check in) or the Deep Adaptation group on Facebook, or by following the hashtag #RealGreenRevolution on twitter. The introductory Part 1 provides context.
Most people, including politicians, still do not understand that in advanced economies well over 90 percent of all our monetary transactions are not in government issued currency. Our electronic payments and the bank transfers use the private ledgers of private banks and the systems that they have established to transact between themselves. What we are paying and receiving are units of the bank’s commitment to us. The “money” that sits in our private bank accounts was not created by government but by the banks themselves when they issued loans, or (much less by comparison) took in physical cash deposits. The problem with our money supply being created by private banks is that they decide how much new credit money is created and what for. Therefore, in most countries they lend most of it for property, which warps the price of property and therefore creates a debt-enslaved ‘house owning’ group and others renting precariously month by month. In addition, because they charge interest, there is more debt in the world than money to pay it off, which means that the money must be earned, paid to service debts, then spent by the bank or its shareholders so to be earned again, in a cycle which is never perfect, especially when high levels of inequality mean that some people remove the money from circulation (by neither lending or spending it into the real economy). That means an expanding amount of loans are needed to keep the system running smoothly and avoid a scarcity of money leading to job losses, bankruptcies, loan foreclosures and house repossessions. Banks will only issue more loans for activities that they assess will generate the necessary profits to pay interest. Therefore, the economy must expand whether a government or population wishes it to, or chooses to focus on measures other than increasing GDP (gross domestic product). This compulsion to growth the money supply or risk economic instability is called a Monetary Growth Imperative.
That imperative to grow is especially problematic because a decoupling of natural resource consumption and carbon emissions on the one hand, and GDP on the other, has not occurred significantly at an international level, with some countries decoupling only by importing products from abroad. Overall efficiencies that lead to reduction of resources or pollution per item produced has not reduced overall consumption of natural resources and pollution. Therefore, the Monetary Growth Imperative that arises from the nature of our banking and monetary systems means that a society will be prevented from effective climate change mitigation and regeneration without monetary reform. The current monetary system does not allow a steady-state economy that stays the same size with the same level of transactions. That compulsion to grow the economy also compromises the ability for us to adapt to disruptions, as there is a requirement for GDP to keep increasing to avoid the negative effects of the money becoming scarce. Unfortunately, the ‘degrowth movement’ has largely ignored or downplayed this aspect of the monetary system, and instead preferred to argue that all societies need is for our leaders to deprioritise their attention to GDP and the problem will go away. That could be an easier position to take for scholars and activists who imagine themselves as the educators of people, rather than recognise how we are engaged in a struggle against anti-democratic forces. A realisation of the latter, implies very different tactics than more nice conferences and books – tactics more in the realm of organising counter-veiling power to the banks, and preparing for the backlash.
Another problem from the current monetary system is the anti-democratic power of the bond markets. Currently the way governments create the money that they need additional to taxes is by selling bonds, which are bought by banks that actually create the money in the process. That provides a ridiculously powerful position to those banks, as their views on government policies affect whether the government can access the money. That creates a situation where a government is always concerned about a crisis in confidence in the bond markets. That is not democratic and restricts the degrees of freedom for a government to pursue a bold #ClimatePlus agenda (described in my first part of this essay). One answer to the two problems I have described is a dual approach of scaling back the amount of money being created by private banks, and increasing the amount of money being created by central banks and governments. Therefore, governments would no longer sell bonds, but create digital cash and sell or lend this to banks and other financial intermediaries, and businesses, that would in turn then lend it out further or spend it. Some of the money would be spent into circulation directly by the government. An independent group would oversee the amount of money created by the government to avoid election cycle manipulation. This approach has been dubbed “sovereign money”. Not liking the potential to reduce their power and profits, the public relations firms working for private banks have set out to demonise central bank digital currencies (CBDC) through conspiracy theories that it would curtail freedom. That is despite how CBDCs could be designed to provide complete privacy for daily transaction amounts within national borders, and at least more than the current systems of electronic payments that are monitored by multiple companies (a subject I return to below, when discussing Basic Services Vouchers). Without these monetary reforms, trying to mitigate, adapt, restore, regenerate and make reparations will be as impossible as swimming against a riptide. Therefore monetary reform has to be central to a #RealGreenRevolution.
In addition to monetary reform, another type of banking reform is necessary to harness the massive power of banks to support a ClimatePlus agenda. This is the role of credit guidance. Banks would be required to curtail lending to carbon intensive projects unless securing a specific exemption, and also to maintain a significant percentage of their lending to enterprises that register with the government as working on mitigation, drawdown, adaptation or regeneration activities. The individual loan decisions would be made by the banks, as well as the terms and costs of the loans, but a certain percentage of all lending would have to go to such activities, and so if the bank wanted to expand its lending for other activities, it would have to expand its lending to ClimatePlus related business activities by the same proportion. The ideas for useful business activities that relate to the necessary transition of economies would come from local entrepreneurs, based on their local knowledge, but suddenly those people and projects that respond to the needs to our predicament would have better access to credit than ever before. The use of credit guidance in this way has been a tool used around the world by governments that have sought to shape the trajectory of their economic development.
In addition to reprogramming the money system to make it help – not hinder – the ClimatePlus agenda, it is also important to pluralise the means of exchange in ways that help people cooperate. The main way to do that is a massive investment in the establishing and growth of community-owned and not-for-profit ‘collaborative credit’ networks. These networks use their own currency, which is merely a unit that measures transactions between participants, and can only be used within the network. Such networks can enable local collaboration and trade, in ways that are not dependent on people earning money from the market economy, or on the ongoing stability of national or international monetary systems. That is important for adapting communities to increased risk of global financial volatility, as well as encouraging re-localisation of production and consumption. Local governments should become key organisers and/or participants in such collaborative credit systems. Some of the systems could focus on small business, while others can focus on individuals, or both. Technological dependence would need to be avoided through the use of open source software systems and physical means of transaction as well as digital.
To benefit from major government support, for-profit business barter networks (also known as trade exchanges) would need to sign up to various standards for their professional performance. Then regulations could be upgraded to make it easier for them to operate in all countries. Digital tokens which derive their value from speculation (e.g. crypto currencies) are entirely different from collaborative credit networks and business barter networks. Such currencies should not be outlawed but require targeted regulations to reduce their carbon footprint. A global carbon energy tax should be set at a level that would mean certain crypto currencies would be less favourable. However, as that will take time to implement, and there are unprecedented energy demands from ‘proof-of-work’ cryptocurrencies, they should all be given a deadline to move to far more energy-efficient code, or be banned from interaction with the financial system or mention in legal contracts. (NB: as a libertarian socialist I do not agree with the counter-factual argument that Bitcoin is not a problem due to its carbon footprint, and notice that – despite years of critique and huge financial capacity – the crypto industry has done nothing significant on this issue voluntarily, just some PR; so it is sensible to recommend regulation of speculation and greed when it is particularly counterproductive).
Very few of us live in ways where we produce the food, water, fuel and other items that we consume. Therefore, the current economic model requires all of us to either sell our time within the market or to a government agency for a wage, or if we have assets, lease access to them or successfully speculate with them, in order to generate an income to cover our costs of living. With the levels of automation displacing employment, the need for a full time job to cover costs of living has been recognised as problematic. A situation where countries consider creating more jobs of any kind to keep people earning to pay for their costs reflects both a peculiar approach to life and drives consumption. In response, some people have argued for a Universal Basic Income (UBI) to be paid to every person, whether they are employed or not, or need it or not. I am against this idea for a number of reasons. I do not believe in public money being given to people (or companies) that are already relatively well off in society. Neither do I believe that governments can afford it if using the current monetary system, and therefore a UBI would involve major cuts to welfare that targets the most in need. If UBI existed, governments would argue there is no need for free provision of basic services of health and education, as everything could occur through the market. Then if inflation rose, suddenly the income poor could be a lot worse off if they were not able to find work to supplement their UBI.
Instead of the UBI, I believe that Basic Services Vouchers (BSV) should be provided to anyone who self-declares their personal assets to be below a certain threshold (assets including all kinds of savings, investments and properties). These vouchers could be in physical or digital form, and accepted by any person or organisation. However, only registered cooperatives (of any size), small-to-medium sized companies (SMEs) and government-owned companies (local or national) could open accounts to receive the vouchers, and have the facility to exchange them for national currency through a clearing house (owned either by a central bank or the financial ministry of the government). Individual users could also exchange them with each other but not have the facility to cash out into national fiat currency. The vouchers would be issued by an agency working with a central bank, which would provide the backing for the vouchers in the form of a proportion of central bank fiat currency (not necessarily a full 1-2-1 backing, as the backing also comes in the form of the legal requirement for the government to accept the vouchers as payment). Any payment services provider could provide voucher accounts to the end users (i.e. not just banks). Loans of vouchers would not be allowed and neither could these payment providers enable transfers of vouchers into national currency, unless by the registered organisations mentioned above. The users could spend their BSVs on whatever they wanted that was offered by those registered organisations as available for BSVs. The payment service providers would be required to operate in ways where information of transactions under a certain size would be private, either in the instance of transaction or very soon after (i.e. to mimic the anonymity of cash transactions). There would be no requirements on the users of BSVs apart from to register their identity and self-declare their assets being under a certain level in order to receive the regular BSV stipend. All users of the BSVs could use them to pay government taxes and/or fees, both national and local. It would be illegal for any company to require staff to accept the BSVs for payment, although people could accept them if they chose. Creating the system this way would mean that the new money in the vouchers would not quickly leak out of the economically-deprived areas where the BSVs would be required the most, and instead help encourage local trade amongst smaller and more locally owned organisations, as well as remunerated forms of cooperation between local people. The restrictions on transactions into the national fiat currency system would moderate any potential effect on inflation. The BSVs would not be at risk from financial collapse within the global banking system, as they would be using a parallel payment infrastructure. Once the BSVs grew in usage, so the sovereign money policy I described above could be increased and the share of monetary transactions done through private banking systems would gradually diminish. In addition, the fact that BSVs would be a parallel system to national fiat also means that governments would not face the same concerns over budget deficits for funding them, as they would not be created through bond sales of their national currency, and 1-2-1 backing of the vouchers with the national currency would not be necessary.
This BSV system would help with climate mitigation, regeneration and adaptation, by supporting the relocalisation of economies and providing alternatives to a monetary system that requires growth and systematises the extraction and centralisation of wealth. If you understand how current banking works then you may have guessed already that the current banking system would initially organise aggressively and comprehensively against such proposals. That is because it would break the monopolistic position of banks in providing the means of daily transactions. One tactic would be to fund the promotion of conspiracy theories that such a voucher system would involve surveillance, social control and affect the ability to work. Unfortunately, most people fall for such conspiracy lies for two reasons. First, they don’t realise how they are currently surveilled by multiple companies and governments with their current monetary transactions, that their ability to transact can be curtailed by those companies already, and that the control of the money supply by those banks means that the availability of money for someone to pay their wages is already not in their, or their governments power. Second, they don’t realise that a BSV can be designed to provide privacy, prevent government interference, and could provide new forms of liquidity so the job market would not be affected by downturns in the supply of credit to an economy by banks. Unfortunately, because of almost a decade of lobbying against digital cash innovation by governments in the west, the country that has moved ahead with such a system is China, which is introducing it in ways that do not uphold the basic principles of privacy and freedoms as I’ve outlined above. That is then fodder for the conspiracy theorists who do the bidding of the bankers by demonising new forms of government-issued digital currency and the provision of free forms of money to people in need.
Unfortunately, this BSV system also has a new major opponent in the form of Big Tech. They regard themselves as the next providers or partners in the provision of the future currencies. The crypto currencies are not used for everyday transactions and most are unlikely to be because of their technical features. Large platforms that have billions of users are highly suited to becoming transaction systems that use their own units of account, or digital currency. With the BSV system I have outlined, they would only be able to make transaction fees, rather than the larger incomes that come from either interest on loans or the right of seigniorage i.e. creating the units for themselves. Because both Big Tech and the banking systems would likely be so against a country leading on this BSV system, they could attempt disciplining a country through the bond markets and other nefarious approaches. Therefore, a BSV system would need to be developed at an international level, and with some backing from organisations that represent the real economy, rather than Big Tech and banking. Unfortunately, I have not seen that kind of principled and systemic thought, let alone leadership, anywhere in any part of the intergovernmental system in my decades working with it since 1997. Which brings us onto governance reform, the subject of the next part of this essay on a #RealGreenRevolution.
To receive each part of this essay, subscribe to my blog, using the box on the right. To engage with other people who are responding to these ideas, either engage on the Deep Adaptation Leadership group on LinkedIn (where I will check in) or the Deep Adaptation group on Facebook, or by following the hashtag #RealGreenRevolution on twitter. The introductory Part 1 provides context.