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In plain language and convincing detail, this book explains how our money system is propelling us toward the self-destruction of our species—and what we should do about it. Our present money system frustrates the well-meaning efforts of active citizens, NGOs, and governments to deal with our present ills and problems, including worldwide poverty, environmental destruction, social injustice, economic inefficiency, and political unrest and violence within and between nations. Failure to reform the world's money system urgently and radically from its roots up could bring disaster for human civilization before the end of this century. Future Money shows clearly how our money system operates and how it could be reformed so that it acts for the benefit of people and society rather than the opposite, and describes the obstacles that currently prevent that reform. The world's financial experts and leaders in politics, government and business, and most mainstream academic and media commentators, have demonstrated that they are not yet able or willing to diagnose and treat the profound and pervasive problems that are directly caused by the money system. This book speaks explicitly to active, independent-minded citizens with the hope that it will help them understand why people committed to careers in almost every important walk of life today find it difficult to recognize the problem. It shows why we have to take the initiative now, and urgently, to get the issue on to mainstream agendas worldwide.
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About the Author
James Robertson set up and directed the Inter-Bank Research Organisation (IBRO) for the big banks, and set up the Other Economic Summit (TOES), later the New Economics Foundation. He has worked and lectured in many countries for many organizations and people, including the World Health Organization, the European Commission and the Organisation for Economic Co-operation and Development (OECD). He is the author of Reform of British Central Government, The Sane Alternative, and Transforming Economic Life.
Read an Excerpt
Breakdown or Breakthrough
By James Robertson
Green Books LtdCopyright © 2012 James Robertson
All rights reserved.
Some lessons from the history of money
This chapter summarises in broad chronological order the evolving historical background to the proposals in Chapters 3-6 for changing how the money system now works.
It shows that, from the origin of the money system until now, two of its main purposes have been: to transfer wealth and well-being to powerful and rich people and countries, from weaker and poorer ones; and to veil – in mystery, deceit and cheating – how that is done.
In recent centuries in Europe and subsequently worldwide, those two purposes of the money system have combined to develop new capabilities for a third and fourth: to exploit the resources of the planet; and to develop the technical, economic and military power of competing nations.
We have now reached a tipping point. We can see that by our exploitation of the planet's resources, by our unjust competition between people and between nations, and by our relentless development of ever more lethal technologies, we are likely to destroy our civilisation in the foreseeable future. At the same time, we are beginning to see that the way the money system now works drives us to continue on that course.
The origins of money
Archaeologists may have found older traces of coins in China and elsewhere, but the lessons we can draw from the history of money start with the early 'bank accounts' for grain and other commodities given as tribute to ancient temples and palaces in Babylon and Egypt, followed by the gold and silver coins minted by rulers in Ionian Greece in the 8th to 6th centuries BC.
The myth of the god Bacchus giving King Midas the gift of turning everything he touched into gold; the Delphic oracle's equally disastrous advice that misled King Croesus, the richest man in the world, into losing his empire and fortune; and the priestly warning 'Outsiders, keep out' – all these have helped to set the pattern that we have today for how the money system works. Unless we urgently change how it works as Euro-American world supremacy continues to decline, our legacy to humanity will include an unsustainable money system veiled in modern mystery and myth that leads us all towards the decline of our civilisation.
In the 18th century, as the industrial revolution took off, the Scottish Enlightenment philosopher Adam Smith suggested that money owed its origins to merchants and bankers, rather than to rulers and priests. He noted that human nature has "a propensity to truck, barter and exchange" which is "to be found in no other race of animals". The growth of trade and the 'division of labour' between specialists in different skills, jobs and careers, gave profitable opportunities to merchants and bankers to develop money as a means of exchange more efficient and convenient than barter.
Today the money system works as a collaboration between rulers and commercial profit-making businesses. In our supposedly democratic societies, big governments and powerful financial and business corporations collaborate to shield money's workings from the understanding of citizens. With modern myths and magic about the need for never-ending money-measured 'economic growth', the way they manage the world's money makes us all increasingly dependent on the money they create and control.
The legacy of ancient Greece and Rome
As gold and silver coins spread through the city states of Greece, stamped with the emblems of their cities, Athens grew in power and wealth. Its famous 'owl of Minerva' coins were minted of silver, dug by thousands of short-lived slaves in the mines of Laurion. As Xenophon said, "The Divine Bounty has bestowed upon us inexhaustible mines of silver, and advantages which we enjoy above all our neighbouring cities." Precious metals (gold and silver) were already playing their central part in the history of money, based on the assumption that 'real money' consisted of them or of the ability to exchange it for them. Since then, human lives have been sacrificed to gold and silver mining in almost every part of the world.
At the height of her empire in the 5th century BC, Athens compelled her allies to use her 'owl of Minerva' coins, and Athenian citizens had to hand over foreign coins to be recycled as 'owls'. This was profitable for Athens, and the money system continues to operate that way today. Unless they give it away, anyone who creates new money will profit from the difference between its value and the cost of producing it. Other people can only get it in exchange for providing goods and services such as work or by paying interest for borrowing it. Those who mainly profit are the rulers and commercial bankers who create the money in general use. Those from a country whose money is used in international as well as domestic exchanges of goods and services profit additionally from its use by people from other countries. Britain and then the US have occupied that dominating position in the past two centuries, as the pound and then the dollar have been used as the main international currency.
Throughout money's history the links between money and land and debt have been centrally important. More and more peasant farmers in Athens around 600 BC went more and more deeply into debt. Unable to meet their debts after bad harvests, they had to hand over their land to rich landowners and sometimes even to hand themselves over as slaves. The wise lawgiver, Solon, who had advised Croesus to call no man happy until he is dead, introduced reforms known as Seisactheia, the Greek word for 'shaking off the burdens'. This was an example of 'jubilee', reflecting the instruction said to have been given to Moses by God that, when the people of Israel had settled in their promised land, they should proclaim a jubilee every fifty years – a year to be joyful. Debts should be forgiven, every family who had lost their land should have it back, and every citizen who had become a slave should be freed. Similar 'Clean Slate' proclamations are said to have been made from time to time in Babylon and other ancient societies too.
The Jubilee idea became alive again much more recently. Jubilee 2000 was a worldwide campaign of over 20 million people that urged world leaders to celebrate the year 2000 by cancelling $100 billion of debts owed by poor countries to rich ones. The campaign received wide publicity and support, and as a result some debts of the poorest countries were cancelled.
But cancelling some existing debts, whether those of poor people or poor countries, can only be a palliative of temporary value if the money system continues to operate in ways that automatically transfer money from poor to rich; and so it has proved. Looking forward now from 2012, a comprehensive worldwide shaking-off of the existing worldwide burden of debt appears to be growing more necessary and possible. It is an open question whether a total collapse in the world's present money system – dwarfing the great crash of 1929 and the Great Depression of the 1930s – will be an eventual consequence of the continuing financial crisis triggered by irresponsible banking in 2007-8, or whether a planned 'decolonisation' of debt can be achieved.
As Rome expanded its rule over the whole of Italy and Greece and most of the then known world, it became much richer than Greece had been. The Roman Empire developed a sophisticated money-changing and banking system, linked to a network of tax collectors like St Matthew. The gap between rich and poor grew wider. Some Romans like Crassus, an older contemporary of Julius Caesar and Pompey, became as rich as today's multi-billionaires.
Ancient Greece and ancient Rome both showed a tendency over the years for a powerful minority to own most of the money and land. The Roman Empire in particular showed that a growing gap between a rich land-owning minority and a poor landless urban majority may ultimately help to bring about a society's collapse. As the city of Rome became crowded with thousands of landless people who could not earn their livelihoods, writers of the time – like Pliny (23-79 AD) and Juvenal (60-130 AD) – observed that the great landed estates were destroying the country. All that many Roman citizens spent their time on was free 'bread and circuses'. At the same time, the complexities of bureaucratic administration, tax gathering, debt and moneylending imposed increasingly heavy burdens on productive enterprise. Today, researchers into the collapse of past civilisations include those complexities as part of the cause of the late Roman Empire's failure to resist the waves of Franks, Vandals, Huns, Goths and other tribes from Northern Europe and Asia that overran its boundaries, leading to its break-up and the Dark Ages that followed. Could world society today be on a similar path to an even more final disaster?
From feudalism to the revival of money
The Emperor Charlemagne (742-814) minted coins of silver dug from mines in Germany by slaves. These coins were modelled on the old Roman denarius. In France, 'denier' coins were used until the French Revolution. Pounds, shillings and pence were used in Britain until the 1970s; the shorthand for them was £sd; and the 'd' still stood for denarius.
In spite of this link with the Roman past, the feudal societies that emerged from the Dark Ages were organised around land in a network of reciprocal responsibilities, rather than around money. Dukes, barons and other nobles owed services to their king in exchange for their lands. Lower landowners owed services to those above them. At the bottom of the ladder, farmers and villagers and serfs owed services to their local landlords. An important service to the king was to provide men for his armies. Other farmers, villagers and serfs had to give their landlords a share of the produce from their land – meat, cloth, wheat, fruit, and so on – and work on their estates, building roads, cutting trees and harvesting and transporting crops.
Over the following centuries, payment of money steadily replaced the obligation to provide goods and services. It became the common understanding that subjects should pay taxes to kings and rulers, and people should pay rents to their landlords and earn wages for working. In general, the importance of money in almost all aspects of life has continued to grow right up to the present time. It has brought freedom and well-being for many people but has damaged and destroyed the lives of many others. More and more of us in more and more countries have become dependent on big employers to organise our work and provide our incomes, on big corporations to provide us with the necessities of life in exchange for our money, on big government to provide us with more and more services in exchange for more and more taxes, and on big banks to provide us with our societies' money supplies.
From about 1000 AD, countries like England, France and Spain began to be consolidated into nations, under rulers who strengthened their rule through their control of money. Important money functions for governments today have grown out of that, including: the creation and issue of money; the collection of tax money by rulers to spend on their needs and activities, especially wars; and, in the past few centuries, government spending on public needs. In the past thousand years those functions have developed piecemeal over time, in response to changing pressures on rulers and new opportunities for financial business.
Providing society with money
Money has been created in various ways. Rulers have minted it as coins which they have spent into circulation. Bankers have created it to lend to their customers, either as banknotes or simply by writing it into their customers' accounts as 'credit'; and members of local groups have themselves created money in 'complementary currencies' in exchange for goods and services provided by other members of the group. In every case, whoever creates new money gets a profit or a benefit from it. In today's democracies, the questions include: who profits, and who should profit, from creating official-currency money like the dollar, the euro and the pound?
In medieval times, providing the money supply meant minting coins and putting them into circulation by spending them. The power and wealth of rulers depended partly on whether their money was widely used by people in their own and other countries. For example, in the 13th century, King Louis IX of France (St Louis) ordered his subjects to use his coins for making payments throughout his kingdom – as the 5th-century-BC Athenian government had done.
Rulers profited from producing coins of greater value than the cost of minting them. Such profit is called seignorage, and it still applies today to the small part of the money supply that consists of coins and banknotes. In Britain that is now only about 3%, because our government allows the commercial banks to create the other 97% out of thin air in the form of profit-making loans which they write into their customers' bank accounts as 'credit'.
History is full of ways by which rich and powerful people have tricked money out of people. In the past, rulers could increase their seignorage profits by surreptitiously reducing the value of the gold or silver contained in the coins they minted. This was known as debasing the coinage. Henry VIII of England (15091547) is one of many rulers who did it. He is best remembered for having had six wives, having replaced the Pope as head of the Church of England, and having 'dissolved' the monasteries. But he also made everyone give him back their silver coins for new copper coins, covered with a thin surface of silver to make them look genuine. Unfortunately, when the silver coating wore off the King's nose on the coins, people could see that he was cheating them, and they nicknamed him 'Old Copper Nose'.
In those distant days when coins of gold and silver were the main vehicles for money, debasing them and clipping bits off them were among the main ways of deceiving and cheating people over money. Later, as paper money became more important than coins, and then electronic money became more important than banknotes, other tricks became more important.
Trade, paper money, banknotes and 'bankers' tricks'
In the 12th and 13th centuries AD, armies from all over Christian Europe had joined one another in Crusades to capture Jerusalem from the Muslims. One result was increasing trade between those European countries themselves and between Europe and the East.
The growth of trade brought wealth to Italian cities like Venice, Genoa and Florence, situated between the spices and silks of Asia and the markets for them in northern Europe. More trade meant more borrowing by merchants, like Antonio in Shakespeare's The Merchant of Venice, to pay the costs of trading until the profits came in. Exchange of currencies also grew – for example by merchants from Italy needing to change profits from sales of Italian wool in France into ducats to spend at home on preparations for future trading expeditions.
As the need for banking and money-changing grew, it became more profitable. The most successful bankers were from Florence. By the 15th century Cosimo de Medici had built up a multinational bank with branches in Avignon, Bruges, London and various Italian cities. He became the ruler of Florence. He and his grandson, Lorenzo the Magnificent, commissioned numerous buildings and works of art by Renaissance masters like Brunelleschi, Botticelli and Michelangelo, and turned Florence into the city we still know today.
Paper money had been used in China for many years. When Marco Polo returned to Venice from China in 1295, he described in The Travels of Marco Polo how Kublai Khan's government issued paper money notes authenticated by his officials. Everyone throughout China was compelled to accept them as money, and anyone who counterfeited them was sentenced to death. Being able to create unlimited amounts of paper money gave the Great Khan more scope to encourage economic activity in his country than rulers in Europe who depended on having enough gold and silver to mint coins.
Marco Polo's book encouraged the use of paper in Europe for money dealings. Paper 'bills of exchange' helped merchants and bankers to do business in different places. Instead of carrying heavy loads of coins with him, a merchant could buy a paper bill of exchange from his banker before he set out from home. It would instruct the banker's agent in a foreign city to pay the merchant a certain sum of money in that city's currency at a certain time in the future, so that he could get the money to spend there when he arrived.
Bankers and goldsmiths also gave paper notes as receipts and 'promises to pay' to customers who had deposited coins and gold and silver with them for safekeeping. As time passed, people found it convenient to pay one another by exchanging those bankers' notes. Over the following centuries the notes became a widely accepted substitute for money.
Excerpted from Future Money by James Robertson. Copyright © 2012 James Robertson. Excerpted by permission of Green Books Ltd.
All rights reserved. No part of this excerpt may be reproduced or reprinted without permission in writing from the publisher.
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Table of Contents
A summary of key points,
PART ONE: Understanding the money system,
Introduction: the evolving money system,
Chapter 1: Some lessons from the history of money,
Chapter 2: Money and ethics,
PART TWO: Proposed reforms,
Chapter 3: Managing the national money supply,
Chapter 4: Collecting and spending public revenue,
Chapter 5: The international money system: what can we do about it?,
Chapter 6: Money for localities, households and people,
Chapter 7: Some abstractions and distractions,
Conclusion: So what's to be done? And how?,
Appendix 1: The Georgist and Social Credit movements,
Appendix 2: Contacts for further study and research, selected references and,