I highly recommend Mellor’s essay because it deconstructs some of the basic, unquestioned premises of modern banking and money-creation while opening up new vistas for progressive action. Even Bernie Sanders, Elizabeth Warren and their followers have not gotten their heads around the idea that the public could credibly reclaim its power to create debt-free, socially useful money. But this would require the creation of new types of public institutions and processes for creating money for public purposes, and avoiding the pitfalls of political capture and inflation.
“Neoliberalism, which has influenced so much of the conventional thinking about money, is adamant that the public sector must not create (‘print’) money, and so public expenditure must be limited to what the market can ‘afford.’ Money, in this view, is a limited resource that the market ensures will be used efficiently. Is public money, then, a pipe dream? No, for the financial crisis and the response to it undermined this neoliberal dogma. The financial sector mismanaged its role as a source of money so badly that the state had to step in and provide unlimited monetary backing to rescue it. The creation of money out of thin air by public authorities revealed the inherently political nature of money. But why, then, was the power to create money ceded to the private sector in the first place—and with so little public accountability? And if money can be created to serve the banks, why not to benefit people and the environment?”
In other writings, Mellor has pointed out the remarkable fact that “quantitative easing” carried out by the US Government to bail out banks is not regarded as public debt. QE gave away the game. It conspicuously demonstrated that the government itself (and not just banks) could create money out of thin air, and do so without it being considered public debt. The trillions of dollars created to prop up banks following the 2008 financial crisis, after all, was a case of the sovereign state creating debt-free money. (The banks are not going to repay those trillions.)
Mellor insists that “states can and do ‘print money.’ First, it is produced ex nihilo by central banks to provide cash and support for the money-creating activities of the banking sector. Second, money is created and circulated as the government spends, in the same way that banks create money as they lend. States spend money and then offset their expenditures against tax revenue and other income received.”
“All modern currencies are “fiat money,” created out of nothing, their value sustained by public trust and state authority," write Mellor. "So why are states and their citizens shackled in debt? Why can’t the people simply create the money they need free of debt? Why can’t that money be circulated in a not-for-profit social or public sector?"
She answer: “….if money is created and circulated initially by the public sector, then there is no need to ‘raise’ money through taxation. Rather than preceding public expenditure, taxation would follow it, retrieving publicly created money from circulation in amounts sufficient to keep inflation in check. If the public sector is much larger than the private sector, taxes might have to be quite high.” But these "expenditures" of new money would serve social and environmental needs without having to meet the profit-making criteria of banks.
In the rest of her essay, Mellor outlines how a new public circuit of money could be responsibly administered by new public institutions without creating inflation or resulting in special-interest abuses of the money-creation power (as if that does not already occur right now, via banks!). She envisions “a shift from profits to provisioning would put the main focus of the economy where it belongs: on the sustainable meeting of needs. That goal would be met through a combination of a basic income (that is, a monetary allocation to each individual as matter of right) and a budget for collective expenditures on public services and infrastructure.”
To work well, a robust democratic process would be needed to ensure an effective form of participatory budgeting and strong oversight of monetary decisionmaking and implementation. But with such a system, money-creation would not just finance “development” that can no longer be sustained by the planet’s finite resources, it could facilitate the provision of economic security and sustainable livelihoods for all.
It’s time for commoners to open up a new debate about the politics of money-creation. The rise of blockchain-ledger software (the engine behind Bitcoin) is already doing this. Digital currencies are showing how voluntary collectives can create their own functional currencies that let communities (and not banks) capture the value that communities create. That represents a potentially huge shift of political power. It’s also time to bring the politics of fiat currency (conventional money) into this discussion, as Mary Mellor's fascinating essay does.
ABOUT THE AUTHOR
David Bollier is an author, activist, blogger and consultant who spends a lot of time exploring the commons as a new paradigm of economics, politics, and culture. He has been on this trail for about twenty years, working with a variety of international and domestic partners. In 2010, he co-founded the Commons Strategies Group, a consulting project that works to promote the commons internationally. More recently, he has become Director of the Reinventing the Commons Program at the Schumacher Center for a New Economics, based in Great Barrington, Massachusetts.
Do We Need a New "Axial Age" to Find Our Place in Nature?
Originally published by
Cassandra's Legacy, 19 September 2017
under a Creative Commons License
Cassandra by Evelyn De Morgan, 1898
We might summarize our present human situation by the simple statement: In the 20th century, the glory of the human has become the desolation of the Earth. And now, the desolation of the Earth is becoming the destiny of the human. From here on, the primary judgment of all human institutions, professions, programs and activities will be determined by the extent to which they inhibit, ignore or foster a mutually enhancing human-Earth relationship. —Thomas Berry (Cited by Peter Brown in "Ethics for Economics in the Anthropocene")
We are deeply stuck in a wrong paradigm. Nature - or the ecosystem, if you prefer - is not, and never was, a "resource" for humankind to grab for free. We are part of Nature and if we don't respect Nature, then everything we do will be wrong and will damage ourselves as well as all living beings.
This was the basic point of Peter Brown's talk at the Summer School of the Club of Rome in Florence. I don't know if I can call it the best talk of the whole school, although I am tempted to do so. Surely, in any case, it was the one that went more in-depth into the core of the challenges we are facing. Eventually, it is all a question of ethics. And ethics means first of all respect. If we don't respect the Earth, we are not worthy of respect ourselves.
This is a fundamental point that underlies most of the current struggle. And to overcome the present impasse what we need, I think, can be summarized in the goals of the American Teilhard Association:
- A future worthy of the planet Earth in the full splendor of its evolutionary emergence.
- A future worthy of the human community as a high expression and a mode of fulfillment of the earth’s evolutionary process.
- A future worthy of the generations that will succeed us.
Clearly, these goals cannot come out of the postulates of current economics, nor from the optimization of an agent's utility function. It is something that goes beyond mere mechanical considerations. It is a new vision of the universe, something that I could call "A New Axial Age", a term that Peter Brown didn't use in his talk but that came to my mind while I was listening.
As you know, the term "axial age" encompasses the great changes that took place during the 1st millennium BC. Maybe the term has been overused with time, but it true that those centuries were a time of spiritual awakening, of a new vision of humanity that took place simultaneously and independently all over Eurasia, from China to Greece. And many of our current religious beliefs were laid down during that age.
It may be time for a new leap in human consciousness. A step to a higher level of understanding that would take us to include in our religious view not just our fellow human beings but all the fellow creatures inhabiting this planet. It might be a new religion if we were to follow a path similar to the ancient axial age. Or it might be a revisitation of our existing religions. After all, it is what Pope Francis is doing with Christianity, emphasizing the brotherhood (or, better, sisterhood) of all beings in an intuition that Francis of Assisi had already seen several centuries ago.
At this point, I am sure that I have overinterpreted Peter Brown's talk, but I think this is the gist of the line of reasoning he was following. In any case, to make sure you understand Brown's ideas, here is a video of him that seems to me to be very similar to his presentation in Florence
Peter Brown: Why We are Lost (ASI 2016) from McGill Transcultural Psychiatry on Vimeo.
ABOUT THE AUTHOR
Ugo Bardi teaches physical chemistry at the University of Florence, in Italy. He is interested in resource depletion, system dynamics modeling, climate science and renewable energy.