The Debt, Crisis or Opportunity?

By Carol Brouillet, 22 January 1995

The current monetary system is deeply flawed, in fact it is doomed, although it is difficult to say precisely when it will collapse. There are many historical precedents, since other civilizations had similar monetary systems based upon debt. When money is created and then lent to governments or people at any interest rate, it becomes impossible to pay back all loans with interest, quite simply because the interest was never created. So what happens is, the bank will foreclose on mortgages or acquire the hard assets of whoever has the misfortune to be unable to service his debt. It is the nature of the system itself to transfer wealth from the many to the few. When a mere 2% of the population control all the wealth, empires crumble and fall. We have almost reached that point on a global scale at this point in time. According to Margrit Kennedy:

We are living in World War III already, an economic war. It is a non-declared war: a war of usurious interest rates, ruinous prices, and distorted exchange conditions. Remote controlled interest rates and terms of trade have killed millions of people on a plundered planet. They are killed by hunger, sickness, unemployment and criminality. . . . Every day the Third World pays us 200 million dollars in interest.

The rich get richer and the poor get poorer. It isnt as obvious to some people as it is to others. While the Queen of England might notice the two million dollars a day that she receives in interest and the child who is sold into sexual slavery to pay off her parents debts, represent the extremes of the system, for the majority of families living in industrialized nations the cost of money is somewhat hidden, included in the price of goods and services. The exact amount varies according to the labor versus capital costs of the goods and services we buy. Perhaps it is only twelve percent of the garbage collection fee, and maybe it is seventy-seven percent of our housing costs. On the average it is about 50 percent of the cost of the necessities of life. If interest rates were abolished with a more equitable monetary system, most people would be twice as rich or be able to work half as much as they currently do, to maintain the same standard of living.

Under the current system, the world has become divided into the haves and the have nots. While 80% must pay more than they receive in interest, 20% enjoy an unearned income from the wealth that they have inherited or acquired. The tendency of money and wealth to concentrate into the hands of fewer and fewer people is escalating. Oligarchies of a few extremely wealthy families exist in countries throughout the world. Enormous monopolies continue to consolidate in most industries. The creation of the World Trade Organization, a vehicle created by multinational corporations, which can override the sovereignty of nations is another testimony to the power of money and wealth and their ability to determine national and international policy. The World Bank imposes horrendous Structural Adjustment Programs upon the Third World, forcing them to cut services to their own people, sell off their natural resources, produce food for export even while their own people starve or go hungry.

For fifty years inflation has become institutionalized; it has become an insidious form of taxation. Government debts will soon outgrow government income. Already social programs are being slashed. The poor, who have the least voice in our society, will be hurt the most, while the wealthy will receive tax breaks and lucrative contracts and subsidies.

In 1890, Silvio Gesell formulated a theory of money and a natural economic order which turns our current economic notions on their heads not unlike the revolutionary notion that it was the Earth that circled the sun rather than the other way around- despite appearances. Gesell suggested securing the money flow by making money a governmental service subject to a use fee. Instead of paying interest to those who have more money than they need, in order to bring money back into circulation, people would pay a small fee if they kept the money out of circulation. The fee would have to return into circulation in order to maintain the balance between the volume of money and the volume of economic activity. The fee would serve as an income to the government and reduce the amount of taxes needed to carry out public tasks.

If such a revolutionary reform could be achieved, land and tax reforms would follow. Money and land are two things that everybody needs in order to live. Land, like air and water, therefore, should belong to everybody. The notion of the sacredness of private property was imposed with the advent of military conquest, dividing the spoils of war amongst the conquerors. The world is currently split into two systems:

• private ownership and private use of land in capitalist countries
• communal ownership and communal use of land in the communist countries (Although there is increasingly more and more privatization of public assets by corporations and individuals, especially since the collapse of the Soviet Union.)

While the vast majority of the people in capitalist countries pay for the huge profits from speculation in private land, more land concentrates in the hands of fewer people. Where I live, in California, 1% of the population owns over 2/3 of the land. A United Nations Study of 83 countries showed that less than 5% of rural landholders control 3/4 of the land. According to Susan George in her book How the Other Half Dies The most pressing cause of abject poverty ...is that a mere 2.5% of landowners with more than 100 hectares control nearly three- quarters of all land in the world—with the top .23% controlling over half. In the U.S., back in 1979, 3% of the population owned 95% of the privately held land. Despite the myths perpetuated about the American Dream, the real problem in capitalist countries is private ownership of land (not to mention the monopolization of the public airwaves and the communication industry). On the other hand, in a communist country, where land is communally owned and used, about 60% of the food is being produced on that 4% of the land which is farmed privately. That means, the problem there is communal use.

The solution to the problem requires a combination of private use and communal ownership to achieve social justice and allow individual growth. This was suggested by Henry George in 1879, Silvio Gesell in 1904, and Yoshito Otani in 1981.

In practical terms, it would mean that a community buy up all its land (over a period of time) and lease it out to its inhabitants. Or more simply, the imposition of a land tax and the elimination of all taxes on labor. Under a land tax, more land would become available and the price of land would fall. In developing countries, this would enable more small scale farms to flourish and supply local produce for local needs. In the United States, it would also encourage small scale, organic, sustainable agriculture, as opposed to the enormous agribusiness style farms which destroy the soil, are overly reliant upon pesticides and threaten biodiversity. The change would take an enormous load off the shoulders of the working population.

Taxes need to be shifted from encouraging the exploitation and destruction of the worlds natural resources, including its people, to encouraging a healthy stewardship and ecologically sustainable existence. There is much good work to be done, and there is a global unemployment crisis. The existing system is corrupt, rotting and an abysmal failure. A new system is needed- one which shifts taxes from income to products. An assessment of the costs to the environment should be included in the product tax. This change would change the consumption patterns and encourage the development of Earth friendly products which are more likely to be more labor intensive and less mechanical.

Obviously a more equitable distribution of the worlds wealth would eliminate much of the worlds tensions and reasons for conflict. The U.S. is the worlds largest consumer, as well as the greatest exporter of arms. The disparity between the rich and the poor in the U.S. is the root cause of the flourishing prison and private security business in an increasingly overt police state. There are many disturbing parallels between Germany under Hitler and the United States today.

Individual and social change seem to occur because a breakdown has occurred, because a breakdown may occur, or because another pattern of behavior seems preferable to achieve the desired result. A change in the monetary system, as prelude to other changes, could happen for any or all of those reasons. In the past, the cancerous accumulation of wealth and power has been dissolved by social revolutions, wars, and economic collapse. The shakiness of the worlds financial institutions is apparent to all, with the debt crisis hurting the vast majority of nations and people. The advantages of a more equitable monetary system are evident in terms of social and environmental impact.

The Chinese pictograph for crisis: wei-ji consists of the two signs representing danger and opportunity. Increasingly the ideological conflicts between the left and right are obscured by the realization that the real problem is one of the top and the bottom. Whether people are motivated by fear and ignorance or by truth and justice, our hope lies in embracing a non-violent solution which offers the realization of the deepest aspirations of all people.

Monetary reform would offer:

• the elimination of inflation
• the increase of social equity
• decreasing unemployment
• the lowering of prices for goods and services
• an initial economic boom
• a stable and increasingly sustainable economy, when additional land and tax reforms are implemented

One beauty of a new monetary system would be its democratic nature—it could start anywhere and grow. There are already over 130 electronic alternative currency systems in operation in England. Paul Glover has started Ithaca Money in New York and sells a hometown money making kit. As the economic crisis worsens, more and more places are likely to develop their own systems. The idea needs to be seeded; historical examples and successful regional debt-free alternative currencies need to be heralded as the wave of the future. The money creation monopoly must be broken.

How might the 10% of the population who benefit from the hidden redistribution mechanism in the current system allow any change to occur which might eliminate their chance to extract a work-free income from the large majority of people?

First they have to realize that the branch on which they are sitting grows on a very sick tree and that there is a healthy alternative tree which is not going to collapse sooner or later. Social evolution or social revolution, the wise path would be the soft path. Many wealthy people simply do not understand how the system works and invest in a wide range of stocks, bonds, real estate, things because they are afraid of inflation and are insecure. Given the option of being rich in a very dangerous insecure world or being secure financially in a more just, equitable world, the choice is quite clear. Wealthy liberals and conservatives should be able to clearly see that it would be in their interests to support monetary reform rather than support the growing instability and risking the inevitable crash.

A book by Marilyn Waring entitled If Women Counted (A film is being made by the Canadian Film Board about her, with the same title) looks at economics from a feminist perspective and notes that all economic statistics gathered since the 1940s on a nations GNP were devised from methods whose intention was to calculate a countrys ability to pay for war. Economists and public policy makers give little or no weight to the life-giving, sustaining contribution of the Earth and the un-paid labor of women. Economic data does not indicate how healthy the environment is, nor the strength of a community that exists in a gift economy where the sharing of labor, ideas, resources are pooled and people help one another with no money changing hands. Money has little or no value in societies which are self-sufficient, closely attuned to the natural world and are far more spiritual than contemporary Western societies. In My Name is Chellis and Im in Recovery From Western Civilization, Chellis Glendinning looks at how humanity has separated itself from nature and wounded itself simultaneously in the process. She points out a path towards recovery and healing.

All is connected, each individual is a microcosmic reflection of their society and world, capable of change and being a catalyst for change. Despite the magnitude of the Earths problems, I am full of hope as I realize that there are solutions out there and that they are accessible and implementable to anyone and everyone with a heart, a brain, two hands or a spirit.