Tag: economy

Financial Stability Hypothesis

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The 2008 financial crisis rekindled interest in Minsky’s Financial Instability Hypothesis. This hypothesis states that capitalist economies are inherently unstable due to the inner workings of the financial system. Minsky ignored interest as the underlying cause of instability and proposed that the government should manage the problem.

It is a critical public interest that the economy doesn’t suffer from financial instability in the private sector. That requires governments and central banks to manage and back the banking system, which can cause moral hazards and lead to private gains backed by public losses.

Financial instability is primarily caused by leverage and interest on debts. Incomes vary, while interest payments are fixed. Financial institutions are even more leveraged than other corporations, which can escalate into a financial crisis or economic downturn. Negative interest rates can, therefore, potentially benefit financial stability.

It may be time to introduce the Financial Stability Hypothesis. It states that once interest rates are below zero and rates above zero are not allowed, stabilising mechanisms make the economy inherently stable. As a result, governments and central banks may have fewer reasons to interfere, and fiscal and monetary policies may become obsolete.

Minsky argued that market participants become optimistic and complacent when the economy does well, increasing leverage and risk in the financial system. Debt defaults and interest payments can escalate into an economic crisis when the economy slows.

But what would happen when interest rates are always negative and positive interest rates on money and debt are not allowed? If there is a holding fee on currency, then lending at negative interest rates can be attractive. In that case, the economy could become inherently stable because of the following stabilising mechanisms:

  • Lenders require interest to compensate for risks. When interest rates are capped at zero, equity investments become more attractive than debt, which can reduce financial leverage.
  • Capping interest rates to zero eliminates high-risk debt from the financial system, as the funding of risky ventures will come from equity rather than debt.
  • Usurious lending practices like credit card debt will end. This can stabilise the financial system and increase disposable income, as consumers will no longer pay interest.
  • Negative interest rates require trust in the currency and debtors. That provides an incentive for governments to fix their finances. It isn’t austerity, as governments receive interest on their debts.
  • When inflation rises, interest rates go up, and there would be less credit at a maximum interest rate of zero. That constrains the amount of money in circulation, capping inflation.
  • When there is excess deflation, interest rates go deeper into negative territory. That causes a stimulus, so the economy improves, and deflation mitigates.

Negative interest rates and a ban on interest rates above zero on money and debts might stabilise and improve a debt-burdened economy. Inflation would be low, and there could be deflation. Governments and central banks don’t have to manage the economy actively using fiscal and monetary policies.

Some historical evidence suggests that negative interest rate currencies can be stable. Ancient Egypt had money backed by grain storage. Because of the storage cost, the money had a holding fee that worked like a negative interest rate. This money circulated for more than 1,500 years.

The key to making a usury-free financial system feasible is accepting that not every demand for a loan must be satisfied, most notably demand for loans that harm people or can destabilise the financial system. Loan requests must be discarded rather than fulfilled at a higher interest rate. That will also rein in inflation.

Barataria: An Economic Fairy Tale

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Money makes the world go round

Money makes the world go round, they say. And that is correct. Money directs our actions. Those who have savings hope to make a return. The financial sector directs our savings to investments. If you have a savings account at a bank, the bank will invest that money in loans and give you interest. If you buy a mutual fund, you invest in corporations. Finance harbours an unprecedented power. We are its hostage, but finance is also our hostage. When we invest, we desire profits, and the financial sector must deliver them. Profits on capital, usually called interest, drive economic growth and wealth inequality.

Before the Industrial Revolution, nearly everyone was as miserable as the poorest people today. Since then, capitalism has lifted billions of people out of poverty. There are benefits to entrepreneurship and enterprise. But there is a dark side to capitalism. It is exploitation, pollution, and the squandering of scarce resources. Trade and finance, not our values and needs, determine what happens to us and the world. We must blame ourselves. As consumers we desire convenience and as investors we desire profits. And often we don’t think of the consequences of our actions for other people and the planet.

We suffer from money delusion. Our measure of success is GDP. And GDP does not equal well-being. If you buy a gun and go on a killing spree, the sale of the semi-automatic rifle, the costs of medics trying to save the victim, the salaries of the police going after you, and the price of your processing in the justice system all count as GDP. And so do the films from Hollywood glorifying violence and the merchandise that come with them. Cigarette sales and the subsequent cancer treatments all add to GDP. The advertisements, the consultancy fees and the litigation add to it, as does the building of lavish mansions for consultants and lawyers. Economists call it creating wealth. But it is not economical to store food, so there is only enough food in storage to feed humanity for a few months.

The problem is not a single trade or trader. Nor is it a single financial transaction or bank. Trade and finance are also useful. We can’t have an economy without them. But if making money becomes our core value, we end up morally depraved. Depending on your political views, whether progressive or conservative, you see examples of how this corruption destroys progressive or conservative values. This is not only corruption in the traditional sense of people taking bribes, but money preventing us from doing the right thing.

In a competitive, economising world, we lack livelihood security and are under pressure to compete. As consumers, we are lured by convenience and social pressure to conform. Despite the dramatic increases in GDP during the last fifty years in advanced Western economies, life has not improved for many people. While the rich become richer, more and more people live from paycheck to paycheck and can’t afford a home.

Trade and finance fuelled competition and thereby drove modernisation, colonisation, the slave trade, and the depopulation of the countryside. Several movements tried to confront the issue, like socialism, fascism, anti-globalism, small-is-beautiful, and environmentalism. So far, meaningful change remained elusive. Few people, such as the Amish, successfully established communities that largely remain outside the system. There are alternatives to the current system, but they also come at a price. That price might be worth paying.

The pillars under the current system are trade and finance. We must prevent money from driving our decisions so we can address our needs and choose our destiny. That will have repercussions for the returns on capital and interest rates. And so, the change probably requires an interest-free financial system with a holding fee on currency like in Wörgl and ancient Egypt. Natural Money is a research into the feasibility and consequences of such a financial system.

To explore the options, imagine a community that has tried other ideas. In the early 1990s, STRO published The Miracle Island Barataria, an economic parable by the Argentinian-German economist Silvio Gesell.1 I rewrote that story to make its message more clear. And I highlight the longer-term consequences we are about to face. And so the chronicle goes.

Long ago, on a faraway island

In 1612, a few hundred Spanish families landed on Barataria after their ships had sunk. The Spanish government believed they had drowned, so no one searched for them, and they became an isolated community. At first, they worked together to build houses, shared their harvests, and had meetings in which they decided about the affairs that concerned everyone. It was democracy and communism. After ten years, the teacher, Diego Martinez, called them together. He noted that working together and sharing had helped them build their community, but the islanders were lazy. They spent their time at meetings discussing what to do, but many jobs remained undone.

‘If someone has a good idea, he must propose it in a meeting to people who don’t understand it. We will discuss it but usually we don’t agree or we don’t do what we agree upon. And so, nothing gets done and we remain poor. We could do better if we have the right to the fruits of our labour and take responsibility for our actions,’ Martinez said, ‘The strawberry beds had suffered damage because no one had covered them against night frost.’ He mentioned several other examples. Martinez said, ‘If the strawberries are yours, you will protect them. And if you have a good idea, you will do it yourself and hire people to help you.’

Potatoes are bulky, thus difficult to carry, and they rot. At the next meeting, Santiago Barabino argued that they could set up a storehouse for the potatoes and issue paper money, notes you could exchange for potatoes if you needed them. So, you had banknotes of 1, 2, 5 and 10 kilogrammes of potatoes. The Baratarians agreed to the proposal. To cover the storage cost and because potatoes rot, banknotes had a date of issue and gradually lost their value. If you returned the banknote to the potato storage after a year, you received 10% less. And because the issue date was on the banknote, buyers and sellers knew the actual value.

For a while, Barataria had banknotes covered by potatoes. Their value declined over time to pay for the storage and the rot. Borrowers didn’t pay interest. People lent the money if the borrower agreed to return notes representing the same weight. That would not have happened if the notes had a constant value. The notes lost value, so everyone spent their money quickly and kept items and food in their storehouses. The general level of opulence rose, but there were no poor or rich people. There were no merchants buying things at a low price to sell them at a high price. Because businesses didn’t pay interest and there were no merchants, things were cheap in Barataria. The chronicle notes that the islanders acted as good Christians and helped each other.

Then Carlos Marquez came up with a new idea. He addressed Baratarians, ‘How many losses do housewives suffer from keeping food in their storehouses? We shouldn’t put our savings in products, but money. We can back our money with something we don’t need and doesn’t deteriorate. The Pinus Moneta is a nut we can’t eat, and doesn’t rot,’ he said, ‘We don’t have to back money with a commodity of value like potatoes. The things we buy and sell give the money its value. If we do that, we can buy things when we need them and don’t have to store them ourselves.’

That seemed too good to be true. And when something appears too good to be true, it usually isn’t. Diego Martinez argued against the proposal. He told his fellow islanders that a medium of exchange passes hands. It remains in circulation. But savings stay where they are unless those short of money borrow it and pay interest. You end up paying interest to use the currency you need to buy the things you need. His argument was to no avail. And that is the price of democracy. People often decide about questions they don’t understand. And if you are doing well, you can’t imagine that seemingly insignificant errors can ruin you.

Most islanders preferred to spend their time getting drunk in the pub instead of studying the issues of government. And Marquez spoke passionately, while Martinez warned cautiously, saying things were fine and he couldn’t foresee the consequences. That may have swayed opinions. The islanders switched to money backed by the Pinus Moneta. That money didn’t lose its value. That made it attractive to save.

Suddenly, everyone wanted to exchange their supplies for the Pinus Moneta, mayhem in the marketplace. Everyone brought in all their supplies, but no one could sell their goods because everyone wanted money. That was until the company Barabino & Co came up with a plan. Barabino & Co. set up a bank with accounts you could use to save and make payments. Everyone could bring their money to the bank and receive an extra 10% after a year. The naive Baratarians agreed. They could have known there weren’t enough nuts of the Pinus Moneta to pay the interest. And they didn’t ask themselves how Barabino & Co. would generate the profits to pay that interest. With this borrowed money, Barabino & Co. bought goods from the islanders and gave them money in their accounts, but Barabino & Co. mainly bought seeds.

The following spring, Barabino & Co. hiked seed prices. Most islanders paid more for the seeds than they received in interest. They went into debt with Barabino & Co. Then Barabino & Co. bought the harvest and cranked up food prices. Soon, Barabino & Co. owned everything. Most islanders were in debt and worked hard, but a few wealthy people lived off interest income. They didn’t work and lived a life of luxury of the interest in their accounts. The Baratarians needed money to pay for the items they bought from Barabino & Co. They paid interest to use that money.

There weren’t enough nuts to pay the interest from, so the islanders went further into debt. And this continued year after year. Consequently, the Baratarians worked harder and grew more creative in earning money. They invented, produced and sold more things, most notably, wooden items made from the trees on the island. Not everyone could keep up, so there were homeless people. But the economy grew, and the islanders grew accustomed to luxuries they hadn’t before.

The chronicle tells us that this change came with other unfavourable consequences. It had undermined society. The Baratarians had become agitated, deceitful, and immoral. Crime was on the rise. Of their Christian faith, nothing remained except an empty shell. They were only interested in making money. Then came the day the Baratarians had cut down all the trees on the island. The islanders suddenly didn’t have the wood to make the tools for harvesting their crops and starved. The Pinus Moneta was worth nothing. After all, you can’t eat money.

Adam Smith and the Wealth of Nations

The tale tells the unpretty side of capitalism or how devious and nefarious acts contributed to a result most of us now see as desirable. Most people have a better life than most people in the Middle Ages. But that wealth came with war, colonialism, the slave trade, pollution, and miserable working conditions. With the help of saving and investing, capitalists build their capital. And that is often beneficial. Capitalism is about making sacrifices in the present by saving to have a better future by investing. In practice, it can come down to generating as much profit as possible. Morally reprehensible acts can have favourable outcomes, but founding our society on evil ultimately makes us evil.

Competition leads to a process economists call creative destruction. Businesses that don’t produce something customers desire at a competitive price go bankrupt. As factories produced at lower cost, artisans lost their business, but fabrics became cheaper, and more people could afford them. And countless new products have come to the market that make our lives more agreeable. As production becomes mechanised, fewer people do the work we need, and more people waste energy and resources on jobs we don’t need. You may think you need an espresso machine and social media, but you can do without them. It is a tale with two sides, like the Agricultural Revolution. Now, our chickens are coming home to roost. Capitalism as it is will probably end civilisation as we know it. That is why we must build our economy on values rather than profits.

Adam Smith, the father of capitalist thought, argued that if everyone pursues their private interests, they can achieve the public good. A baker doesn’t bake bread to serve the community but to make a living. That is why we have something to eat. Smith believed it would work out well as we are moral creatures. Individuals would temper their behaviour by how they thought it would affect others. That is not how markets operate. Individuals may have moral values, but markets never have them.

Factory owners didn’t consider the plight of the artisans they put out of business or the miserable working conditions of their employees. And if they did, they would go out of business. Moral considerations do not drive business decisions. Most people may have a moral conscience, but some do not or have moral values that allow them to trade. They provide harmful products like cigarettes, semi-automatic rifles and cocaine and even try to expand their market by advertising their products. A gun salesperson might argue that he allows people to defend themselves. A merchant will say, ‘If I don’t supply the market, someone else will, so why not take in that profit myself?’ And, gang warfare is often just business and a fight about market share between entrepreneurs.

Poverty was Smith’s primary concern. Increasing production was the way out. Self-interest is an effective way to achieve that. Since then, production increases lifted billions of people out of poverty. Smith wrote:

  • The division of labour drives production increases. If you specialise in a trade, you can do a better job or produce more at a lower cost.
  • The size of the market limits the division of labour. High transport costs limit market sizes. Cheap energy drives long-distance trade.
  • People preferred precious metals as money as they could save them. It facilitated trade and finance as merchants could store their gains and make profits in finance.

Precious metals aren’t money anymore. The tale of Barataria highlights why. As a means of exchange, it needs to lose value. But as a means of savings, it should retain its value. Central banks try to generate some inflation but not too much, so money can be a means of exchange and a store of value. There is also another reason. In this way, governments finance deficits by borrowing and promising to pay interest. Producers produce things at different times, locations, and quantities than consumers need. Traders bridge those gaps by storing, transporting, and dividing goods. It promotes large-scale production and labour efficiency, so we need fewer people to provide for our necessities. And so, more people do things we don’t need.

In advanced economies, many people’s jobs are pointless, bullshit jobs that waste energy and resources, but do not produce something we need. Imagine these jobs replaced by meaningful work, like police officers solving crimes, social workers helping disadvantaged children, and family and care workers caring for the elderly. On the market, labour has a price driven by competition, but in communities, we are free to reward contributions as we please. Labour efficiency only appears rational when there are abundant energy and natural resources. But that changes once resources and energy are in short supply. As our material wealth declines, we can lead more meaningful lives and address our needs.

The ‘evil empire’ of trade and usury

Economic power and financial power translate into military power. The Europeans didn’t finance their colonial wars with taxes like previous empires but with the profits from their colonies. No one likes to pay taxes, but everyone wants a profit. The Europeans reinvested these profits, so their financial and military strength increased. After the bourgeoisie took control of the British government in the Glorious Revolution, the British state became a venture of the propertied class like the Netherlands and Venice. The bourgeoisie believed it could benefit from a functioning state and was willing to pay for it. Taxation thus became seen as legitimate as it came with the consent of the taxed. With its secured and enlarged tax base and a newly established central bank, Great Britain could borrow more in financial markets at lower interest rates.

The bourgeoisie didn’t like to pay for corruption or ineptitude, so the quality of the state improved. It allowed Great Britain to defeat France, a country with more wealth and a larger population. In France, wealthy people didn’t pay taxes, and the government lacked funds. France defaulted on its debts several times, and its government was inept and corrupt, so lenders were unwilling to lend to the French government. With its control over the seas, Great Britain controlled the largest market, which enabled the Industrial Revolution because large-scale mechanised production required sizeable markets.

Today, the United States is a venture of the propertied classes like Great Britain once was. Wealthy people pay little in taxes. The reserve status of the US dollar rather than an effective government is the primary asset of the empire of trade and usury. A corrupt and inept government is a boon to the elites. They bribe politicians to pass legislation they desire. They finance the think tanks that advise on policy matters. If things go wrong because the government is corrupt, they blame the government, saying there are too many regulations. The interests they represent might profit from fewer regulations. Or they blame the lack of government oversight and demand more rules. Their lobbyists may then make the regulations benefit the interest groups they represent.

Americans can have a higher-quality government, but it is not in the interest of the elites. They only need a top-quality military and secret services to prop up their world order. And they need it to be corrupt to make it do what they want. The US finances its wars not by taxes but by the global usury financial system, of which the US dollar is the central pillar. These expenses add to the debt pile. The US promises to pay interest on its debt with money that doesn’t exist to finance its military and the extravagant lifestyle of its elites. As a result, the US is the world’s greatest debtor, and its debt is the world’s savings. Soon, resources will be in short supply, like trees on Barataria, and the world’s savings will be worth nothing.

Losing our human values

In the past, people regarded trade and finance with suspicion. In popular culture, these were domains where people with questionable ethics thrived. Hermes, the Greek god for the traders, was the god of the thieves. And bankers are the worst. Did Jesus not chase the money changers from the temple? They turned the sacred temple into a den of thieves. And the Bible says, ‘For the love of money is a root of all kinds of evil.’ The Jewish sage Jesus Sirach noted, ‘A merchant can hardly avoid doing wrong; every salesman is guilty of sin.’ It is in the Catholic Bible. Jews and the Protestants didn’t include it in their scriptures. That might be why the Catholic view on trade and finance differs from the Jewish and Protestant stances.

Capitalism has been a wonderful fairy tale as long as it lasted. One day, we will all be rich. And indeed, even the poorest are mostly better off. The life expectancy in the poorest countries today exceeds that of the Netherlands in 1750, the wealthiest nation on the eve of the Industrial Revolution. But today, we take more than Earth can give us. We can’t ignore that for much longer. And if we let the ethics of trade and usury guide us, we lose our values, whether they are Christian, Buddhist, Confucianist, Islamic, Hindu or traditionalist. We will value money more than people or the planet. We will not care enough to do what we need to do to prevent a disaster we can prevent without too much pain. In doing so, we lose our humanity, as behind those traditions are human values.

Modernisation is about the rise of markets and governments at the expense of communities. Capitalism requires enlarged markets to enjoy the benefits of scale. Via capital income and usury, capital builds and concentrates in the hands of a few. Abundant natural resources and energy from fossil fuels made it possible. And the capitalists need the state to protect their interests or to appease people with handouts. The concentration of economic activities and opportunities promotes the depopulation of the countryside and mass migration from poorer to wealthier areas.

We likely have less energy and fewer resources at our disposal in the future, so we must live simpler lives and depend more on families, communities and nature and less on markets, governments and technology. Many of us think life must be perfect, but it never is. New technologies and products will not change that. Depending more on family and communities may not make us happier, but it could bring us closer to our human nature. The foundations of a future civilisation must both be sustainable and humane. We could build our future society on values rather than money. But that is easier said than done.

Latest revision: 16 March 2024

Featured image: cover of The Miracle Island Barataria

1. Het wondereiland Barataria. Silvio Gesell (1922).

The Great Reset

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During the coronavirus pandemic, the World Economic Forum (WEF) launched a plan, The Great Reset. It aims to rebuild the world economy more intelligently, fairer and sustainably while adhering to the United Nations Sustainable Development Goals (SDG). These SDGs include ending poverty, improving health and well-being, better education, equality, clean water and sanitation, affordable and clean energy, jobs and economic growth. That sounds great, but is it a reset? It would be up to so-called responsible corporations and international non-governmental organisations (NGOs) to implement the agenda before 2030. Not everyone thinks that is a great idea.

The change is supposed to be powered by the Fourth Industrial Revolution, a fusion of technologies in fields such as artificial intelligence, robotics, the Internet of Things, autonomous vehicles, 3-D printing, nanotechnology, biotechnology, materials science, energy storage and quantum computing. I get an uneasy feeling when I read that. It looks like an excuse for technology addicts to play with our future. Is it because I am against progress, or is it because of a rational fear that something is about to go seriously wrong even though I don’t know exactly what?

Under the umbrella of the Great Reset, so-called young global leaders of the WEF came up with new ideas. For instance, new technologies can make products like cars and houses cheaply available as a service, ending the need to own these items. A young global leader wrote an article titled, ‘Welcome to 2030. I own nothing, have no privacy, and life has never been better.’1 She hoped to start a discussion, and the article produced a slogan that also became an Internet meme, ‘You’ll own nothing, and you’ll be happy.’ There certainly is an economic rationale for sharing items like cars, most notably if they become more expensive to keep because of technological innovation.

Property, for instance, a home, can give you economic freedom. If you own a home, you don’t have to pay rent. And you own some capital when you retire. Some people think the WEF is a sinister elite club scheming to achieve a secret agenda where the elites own everything, and the rest of us ends up with nothing. And that might happen anyway if current trends continue because that is how capitalism works. Capital accumulates and ends up in the hands of a few because of interest. It is not a secret since Karl Marx figured that out. And it leads to a crisis when the impoverished masses can’t buy the things that capital produces. With negative interest rates, there is no need for that.

Property rights have become a semi-religious value in Western culture. That prevents us from taking the property of the elites and ending their stranglehold on our political economy. Marx advised that workers or the state would take over corporations. That might not be a good idea because workers and governments often do poorly at running corporations. Markets and private enterprises can efficiently provide goods and services, but it comes with wealth inequality and happens at the expense of future generations. Our societies must find the right balance. At some point, the disadvantages of the current political economy start to outweigh the advantages.

We use far more resources than the planet can provide, and wealth inequality is now so extreme that we might need a genuine Great Reset. Taking the wealth from the elites and discontinuing enterprises that don’t provide for our essentials is not communism, as long as there are markets and private property. People should prosper if their work benefits society and enterprises often do better at providing for our needs. But we don’t benefit from the corrupting influence of oligarchs. Their wealth comes from inheritance, criminal and shady activities, and, most notably, accumulated interest on their capital. That arrangement may have suited us in the past, but not now.

Economists believe property rights are essential for economic growth, and that business owners should be able to do as they please. For instance, Elon Musk has the right to ruin Twitter because he owns the company. Should employees and others suffer from the irrational behaviour of their owners? In the Netherlands, a series of interesting trials took place, where corporations tried to escape the influence of their majority shareholder Gerard Sanderink, who allegedly didn’t act rationally in the interest of these companies.2 Limited property rights and a collectivist attitude have not prevented China from becoming a large and advanced economy surpassing the United States and may have contributed to China’s success.

The degree of individualism currently existing in the West may do more harm than good. They promote political fights and litigation and prevent us from doing what we should do. And perhaps, less privacy can go a long way in reducing crime. Property rights and individualism were crucial to start capitalism and made the West dominate the world for centuries. And so, we have learned to see them as necessary, inevitable or even desirable. But once the European imperialist capitalist engine ran, these features became less important than economic stability. If you start a business, you must be able to estimate your returns, but you can lease everything and own nothing.

Individualism and property rights also play a positive role in society. The cultural heritage of the West is extensive compared to other cultures, for instance, if you express it in the number of books written or discoveries made. Self-interest and personal responsibility can inspire us to work harder and do a better job. The Soviet Union failed to produce enough food for its citizens while there was enough arable land. In the Soviet Union, farmers had to work on collective enterprises where they could not do as they saw fit and didn’t share in the profits. The tragedy of the commons is that we don’t care for public spaces as much as our possessions. Homeowners usually take better care of their houses than tenants. The same is true for car owners.

As they are now, property rights protect the elites. And the WEF plan is just a fart in the wind, not a Great Reset. We face unprecedented worldwide challenges while wealth inequality is at extreme levels, so individualism and property rights need limits. And we need a proper Great Reset, or a switch from economic to political control of the world’s resources if we intend to live in a humane world society that respects our planet. It is what a corporation named Patagonia did in 2022.3 We can do that on a global scale.

It begins with seizing the wealth of oligarchs and criminals and all hidden wealth in offshore tax havens, including their so-called charities, placing them in sovereign wealth funds, and setting a limit on what individuals can own or earn. And perhaps, we need to build our future on values rather than balance sheets. And everyone should contribute. Capital accumulates by interest, and people who live off interest don’t work for a living. That might be as bad as being on the dole while you can work. And peddling unnecessary products that harm life on Earth could be as bad as being a criminal.

Laws should prevent people and corporations from doing wrong, but they often fail to do that. Corporations pollute the environment or exploit employees to make a profit. But consumers desire excellence for rock-bottom prices. It is profitable to break the law if you can get away with it or when the gain is higher than the fine. And if there are loopholes, they become exploited. The anonymity provided by money, large corporations and markets turn us into uncaring calculating creatures. That is why big pharma, the military-industrial complex, the financial industry, and the Internet giants threaten us. If corporations do right out of their own, many laws and regulations become redundant. If moral values can replace the law, it could be better.

Less efficiency, poorer service and a smaller choice of products can be preferable if that doesn’t lead to deprivation and starvation. For instance, why must you get your meal from a takeaway restaurant instead of preparing it yourself? Or why do you need to dress up in the latest fashion if you have ample wearable clothing? And you must work to pay for these things, so if you don’t buy them, you have time to prepare your meal or mend your clothes. We don’t want to give up these things, so in a democracy, we can’t fix this problem. Perhaps we might accept the change if God sends a Messiah who tells us this is for the best.

That might be wishful thinking, but what else can make it happen if it is not religion? Do you believe we will come to our senses, become one humanity, and do right on our own? That is wishful thinking. God is our only hope. As we are heading for the Great Collapse in one way or another, the End Times could be now. We might live inside a simulation run by an advanced humanoid civilisation.4 Hence, God might own this world, and you might soon discover that you own nothing and be happy. God’s kingdom might be a utopian society as early Christians lived like communists (Acts 4:32-35).

So what can we achieve by taking political control of the world’s resources and means of production by seizing the elite’s wealth and placing it in sovereign wealth funds? You can think of the following:

  • We can direct our means to the goals of a humane society, be respectful of this planet, and plan long-term.
  • We can dismantle harmful corporations or give them a new purpose without starting an economic crisis with mass unemployment.
  • We can make corporations employ people in developing countries and give them an education and decent salaries.
  • We can fund essential government services in developing countries and eliminate corruption insofar as it is due to insufficient pay of government employees.
  • We can make corporations produce sustainably and pass on the cost to consumers.
  • We can determine the pay of executives.
  • We can halt developments like artificial intelligence, genetic engineering, and nuclear energy if we believe they are undesirable.
  • We can end the incentive to produce and consume more and stop the advertising industry from tracking us.
  • We can end stress in the workplace if we axe bullshit jobs and redirect workers to the needs of society. A twenty-hour working week might be enough.

Interest stands in the way of a better future. The economy ‘must’ grow to pay for the interest. We ‘must’ work harder in bullshit jobs to pay for the interest. Corporations ‘must’ sell harmful products to pay for the interest. Corporations ‘must’ pay low wages or move production to low-wage countries to pay for the interest. And because of interest, money disappears from where it is needed most and piles up where it is needed least. Interest is our tribute to the wealthy. If we hope to live in a humane world society that respects creation, ending interest might be imperative. That is where Natural Money comes in.

Latest revision: 28 April 2023

Featured image: You’ll own nothing and you’ll be happy. WEF.

1. Welcome To 2030: I Own Nothing, Have No Privacy And Life Has Never Been Better. Ida Auken. World Economic Forum (2016).
2. Zakenman Gerard Sanderink tierend in rechtszaal: ‘Deze rechtbank deugt voor geen meter!’ AD.nl (2023).
3. Patagonia’s Next Chapter: Earth is Now Our Only Shareholder. Patagonia (2022).
4. Are You Living In a Computer Simulation? Nick Bostrom. Philosophical Quarterly, 2003, Vol. 53, No. 211, pp. 243-255.

Earth from space

The sacredness of Creation

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Thus spoke Chief Seattle

In 1854, the native American Chief Seattle gave a speech when the United States government wanted to buy the land of his tribe. You can read it by clicking on the above link.

That was a great speech. Only, these were not Seattle’s exact words. Based on Seattle’s speech, a screenwriter wrote a text that became a religious creed within the environmentalist movement. I shortened it as it is quite lengthy. The message strikes at the heart of the matter. Nothing is sacred anymore. The pursuit of money destroys our planet and values. This version of Seattle’s speech aims to make Creation sacred. The white man may think he owns the land, but he does not. He may think he controls his destiny, but he does not. Whatever befalls Earth befalls the children of the Earth. We have no destiny, no dream we pursue. Things just happen, not because we intend them to happen, but because they are the outcome of a process over which we have no control.

Perhaps, you care for our planet, but what do you mean? If the last white rhino disappears, the Earth is still there. Most of us will survive the demise of the rainforests. Humans have finished off other species for thousands of years, so why stop now? Soon we might create new species using genetic engineering. And nature does not care. Predators kill prey all the time. So, why should we care? Mr Lind, a professor at the University of Texas, wrote an article, Why I Am Against Saving the Planet. He says, ‘Saving the planet has become the de facto religion of politicians, business elites, and intellectuals in the West, replacing Christianity’s earlier mission of saving individual souls.’1 He claims environmentalism is rooted in German 19th-century Romanticism, typified by a bias against society and civilisation and a pantheistic awe before an idealised Nature. In other words, environmentalists suffer from a religious desire for Eden.

In doing so, Mr Lind inadvertently tapped into another 19th-century German tradition, that of Friedrich Nietzsche. Nietzsche hoped to leave traditional morality behind, so he said, ‘God is dead.’ He meant to say that religions like Christianity were ruses to enslave us with a false sense of right and wrong under rules imposed by a priestly caste. Nietzsche favoured the values of the aristocracy of ancient civilisations, the values of the strong, to those of the enslaved masses, the values of the weak embodied in, for instance, Christianity and socialism. Slaves think in terms of good and evil rather than good and bad because they resent the ruling class. Nietzsche divided humanity into superhumans and slaves. He aimed to liberate us from our self-induced slavery and realise our potential. But what happens when eight billion people try to realise their potential and strive for wealth and power? We might all end up as free people in hell.

Mr Lind argues for doing away with false sentiments. He goes on, ‘There are costs to mitigating climate change as well as benefits, and rational people can prefer a richer but warmer world to a poorer but slightly less warm one. These individual policies benefit humanity, so there is no need to justify them on the basis of a romantic creed that defines the planet or the environment.’ That may appear nice and dandy from behind the desk of Mr Lind’s air-conditioned Texas room. If you live below sea level or in an area threatened by climate-change-related natural disasters, you might view things differently. Ten million Dutch live at or below sea level, and hundreds of millions more risk suffering climate-related disasters like floods, hurricanes and failed harvests. And Mr Lind is not planning to compensate them for that or invite them to stay in his mansion. And the rainforests and the animals and plants living in them might be better off if the likes of Mr Lind go extinct.

As our production and consumption increase, new problems emerge faster than we can solve existing ones with laws, technology, targets and other solutions. More technology, rules and controls do not solve these problems. In the 1990s, the environmentalist group Strohalm wrote a booklet named Towards a Philosophy of Connectedness.2 It lays out Strohalm’s vision for a sustainable and humane society. The principal founder of Strohalm is Henk van Arkel, a dedicated individual who remained its driving force for decades. Van Arkel is a moderate man who does not blame anyone in particular.

Everything is interconnected, so actions have consequences. We often do not know them and may not be affected ourselves. Wall Street traders who sold bad mortgages contributed to the financial crisis. Do you think there are no consequences if you dump plastic in a river or post hateful comments on a message board? Western thinking, reflected in the scientific method, deconstructs reality to analyse the parts. In doing so, it focuses on detail, and the whole can get lost. It makes us act irresponsibly. A few hateful comments don’t make someone take a semi-automatic rifle and shoot innocent people. But if we think like that, we remain locked in a cynical and uncaring world.

And God is not dead after all. This world is virtual reality. You may think you make your own decisions, but you do not. You play a role in a script. You say the lines and do the things the computer has written out for you. And so, we may soon find ourselves slaves in God’s Paradise. It is not slavery as we understand it, the exploitation and repression of one group of people by another. It is slavery in Nietzsche’s sense, which is living under a self-imposed moral system. God owns this world, so it is not ours to destroy. So yes, the sacredness of Creation is a religion.

If religious zeal could feed us, Mao’s Great Leap Forward would have been a success. Instead, thirty million people died of starvation. So, we should not get carried away. Jesus might have fed 5,000 people with five loaves of bread and two fish, but it is not prudent to bet on a miracle. For instance, if we switch to organic agriculture and do not deal with the lower output, for example, by curbing our meat consumption accordingly, the Great Leap Forward might look like a minor mistake in comparison. We can have goals, but let experts figure out how to get there. Dramatic lifestyle changes are necessary for people who have more than enough. Mahatma Gandhi once said, ‘There is enough for everyone’s need but not for everyone’s greed.’ The change will be painful. But once it is behind us, we will feel better.

You may think it is impossible, but acknowledging the problem is the first step towards a solution. Our belief that nothing will help can become a self-fulfilling prophecy. We need a new starting point, a new foundation for our culture, beliefs, thinking, and our place in the universe. Small steps cannot save us anymore. We need to change the way we live.2 That is what the people of Strohalm said. For a long time, I believed they were naive dreamers. I felt sure their vision of a humane world society that respects nature would never become a reality. As we head to an apocalypse, we cannot allow realism to stand in the way of what we should do. But then my life took an unexpected turn, and I figured Strohalm’s view could be God’s vision of Paradise.

Latest revision: 18 May 2023

Featured image: Earth from space. Public Domain.

1. Why I Am Against Saving the Planet. Michael Lind (2023). Tabletmag.com.
2. Naar een filosofie van verbondenheid. Guus Peterse, Henk van Arkel, Hans Radder, Seattle, Pieter Schroever and Margrit Kennedy (1990). Aktie Strohalm.

The only known photograph of Chief Seattle

Towards a spirit of connectedness

nivtric1 Comment

A world without hope?

The future prospects for humanity appear grim. At best we manage to avoid a planetary ecological disaster. And that already may be too high an aim. So what will our future look like? Which direction should we take? Can we build a sustainable and humane world society? And what is wrong with our current way of living? Perhaps the answer can be found in a speech the native American Chief Seattle allegedly gave in 1854 when the United States government wanted to buy the land of his tribe. Here are his first words:

How can you buy or sell the sky, the warmth of the land? The idea is strange to us. If we do not own the freshness of the air and the sparkle of the water, how can you buy them?

Every part of the Earth is sacred to my people. Every shining pine needle, every sandy shore, every mist in the dark woods, every clear and humming insect is holy in the memory and experience of my people.

Only, Seattle never said this. It is fake history. It has been made up by a screenwriter in 1971. Still, the speech strikes at the heart of the matter. Nothing is sacred anymore. The pursuit of money destroys our values and our planet. For instance, it is argued that if we don’t allow the airport to expand, money and jobs will be lost. This is killing us. The speech contains some more interesting words:

This we know – the Earth does not belong to man – man belongs to the Earth. This we know. All things are connected like the blood which unites one family. All things are connected.

Whatever befalls the Earth – befalls the sons of the Earth. Man did not weave the web of life – he is merely a strand in it. Whatever he does to the web, he does to himself.

We know this deep down in our hearts but it is hard to deal with it. What can we do? The people from the environmentalist group Strohalm worked for decades on an outline for the society of the future. They were not hindered by established interests nor did a lack of perspective deter them from continuing their search. They tried to learn their lessons from history and were part of a small group of people that kept on caring and never gave up. Here is another take-away from the speech:

Even the white man, whose God walks and talks with him as friend to friend, cannot be exempt from the common destiny. We may be brothers after all. We shall see. One thing we know, which the white man may one day discover – Our God is the same God. You may think now that you own Him as you wish to own our land, but you cannot.

In 1991 Strohalm issued a booklet named Towards a Philosophy of Connectedness. It lays out their vision for a future society that is both sustainable and humane. It gives possible steering mechanisms that can help to achieve such a society. It is a vision that long seemed unattainable, not because it is impossible to do, but because vested interests stood in the way. Seattle also never said:

That destiny is a mystery to us, for we do not understand when the buffalo are slaughtered, the wild horses tamed, the secret corners of the forest heavy with scent of many men, and the view of the ripe hills blotted by talking wires. Where is the thicket? Gone. Where is the eagle? Gone. The end of living and the beginning of survival.

In 1994 I was an active member of the environmentalist movement. In this way I became familiar with Strohalm. For a long time I believed them to be naive dreamers. Most people I know do not like environmentalists. And indeed, they weren’t always realistic and sometimes decades ahead of their time. I kept on supporting their work because there is no alternative. You can’t allow realism to stand in the way of what needs to be done. And so this vision is here because of the hard work of environmentalist groups like Friends of the Earth and the Strohalm Foundation.

A new perspective

We need a new starting point, a new foundation for our culture, our beliefs and thinking and our place in the universe. There is no other choice. Small steps can’t save us anymore. We need to fundamentally change ourselves and the way we live. The planet we live on is given to us on loan to live off and not ours to destroy. Sadly, the fate of our planet does not compel us to do the right thing so God may be needed to make it happen.

As long as we do not completely change our approach to the major issues of our time, our societies will not become more humane and respectful of our planet. As long as production and consumption increase, new problems emerge faster than old problems can be solved with laws, technology, targets and other solutions.1

We are not confronted with an array of regrettable separate incidents, but with a culture that is on the loose. It is a throw-away culture in which not only materials and energy are wasted. Human relationships and values end up on the waste dump too.1

You probably know that but you may find it difficult to admit. It can make you feel hopeless. And so you may be inclined to ignore this, to focus on smaller and more concrete problems, or to withdraw yourself1 by fleeing into cynicism, new age spiritualism or conspiracy theories.

Most of us believe that massive structural changes are impossible and that we can’t influence the course of history in a meaningful way. And I can’t blame you for having what I for a long time believed to be a realistic view on this matter. And so we choose to manage existing developments with smaller measures. That is not going to help us in the end.

There is another way of looking at the situation. Acknowledging a problem is already solving it half. Our belief that nothing will help can become a self-fulfilling prophecy. As soon as there is a realistic perspective for change, many of us will let go of their cynicism and help to make it happen1 and then it can happen fast. Twenty years may be all we have left. And twenty years may be all we need.

Natural World Order

You do your job and perhaps you achieve something. Your activities do not only have the intended consequences but many others as well. If you succeed and get a promotion, a colleague might get jealous. If you go to your job by car, the exhaust gases can make other people sick.1 The unintended consequences of your actions hardly play a role in your decisions but they change our reality in unexpected ways.

The world is complex so the models we use can’t get a proper hold on what is going on. And so it appears that we can’t change our future in a meaningful way, and that at best we can anticipate what is going to happen. The failure of communism demonstrated that centralised planning does not create a happy society. That left us with capitalism and markets. They brought us prosperity while our living conditions are being destroyed.

Perhaps nature can show us the way. Organisms start relationships with each other. These relationships can become permanent if one organism makes something another organism needs and the other way around so that both benefit. For instance, plants and animals have such a relationship. Plants produce oxygen that animals need while animals produce carbon dioxide that plants need.1

Plants and animals are part of a self-sustaining cycle. They are connected. They are parts of a whole. If plants die then animals including humans die too. There are many of such relationships in nature. Such a natural order emerges spontaneously but it takes a long time. It starts with individual organisms starting relationships. These relationships can grow to a global scale as long as the external conditions allow for it.1

External conditions are like a dictate. If there were no fossil fuels then we can’t burn them. If there was no technology to build cars, we can’t drive them. External conditions are usually taken for granted but when they suddenly change then we must adapt and that can be brutal. For instance, the spread of the corona virus brought long-distance travel to a standstill. And climate change can become far worse than that.

Make no mistake. Running into the limits of our planet will be more brutal than anything that ever happened before in the course of human history. That leaves us with no other choice than setting global limits on human activities before the planet does it for us. But the sudden stop of air travel also teaches us that we don’t really need it. And there are many more things we do not need.

People, businesses and governments must deal with these limits. Once they are in place, communities, governments and businesses all over the world can reorganise themselves via communities, so that the Natural World Order will arise more or less spontaneously. Humans can make this happen fast because they can quickly change the ways they cooperate by changing their cultures. That doesn’t require planning every detail but it does require altering the steering mechanisms of our societies and economies.

One of the most important things we must change is the way we look at wealth and conspicuous consumption. Wealthy people are seen as great examples and their consumption is seen as good for the economy. If conspicuous consumption is frowned upon, there is less fun in being extremely rich, and a lot of crime becomes pointless. For example, what’s the point of risking your life by being drug dealer if you can’t drive around in your expensive cars any more? This way looking at wealth and consumption is essential to make the Natural World Order come to pass.

Steering mechanisms

Money is now the most important steering mechanism in society. Realising goals of any kind usually requires the cooperation of others and therefore money. That is understandable. Everyone needs money but it may be better that we are motivated more by our job or our contribution to society and less by money. Economic decisions are affected by interest as well. Interest is a steering mechanism. High interest rates promote short-term decisions while low interest rates promote long-term decisions. So how does that work?

If the interest rate is 5% then € 1,00 next year is worth € 0,95 now. That makes you prefer to get € 1,00 now rather than next year, even when you need the money next year simply because you can receive interest and will have € 1,05 next year. Interest reduces the value of future income and therefore the future itself. Interest makes people and businesses prefer the present to the future and short-term gains at the expense future generations.

This is why a sustainable economy requires low or even negative interest rates. Ending growth also requires negative interest rates otherwise the interest on debts can’t be paid. Interest is any return on capital so interest doesn’t depend on money but on capital. As the wealthy own most capital, interest is a flow from everyone else to the wealthiest. A humane society may therefore need to end positive interest rates. Central banks do not determine interest rates in the end. The supply and demand for money and capital do. But ending interest may soon be possible.

In markets competition is a steering mechanism. Competition promotes efficiency and progress but it also causes problems. Competition affects economic decisions.1 It can force corporations to produce as cheaply as possible or to produce stuff that no-one really needs because it can be sold at a profit. Some corporations faced with intense competion see little room to treat their employees well or to care for the environment.

If you desire that latest model, the best service, the lowest price, and want more money to buy even more stuff, you are part of the problem like many others, and that includes me. It may be strange to realise that you have enough, or even have far more than enough, and that you can do with less, older models, poorer service and higher prices, so that local businesses may survive.

Another important steering mechanism is the distribution of cost. Short-term gains are for corporations while societies deal with the long-term cost like pollution and unemployment. Education and health care are public costs that corporations often do not pay for. Taxing systems do not take into account the limits of the planet. They need to be changed in order to attribute the true cost to the products and services people buy.

Shifting taxes from labour to raw materials and energy can help. This measure can induce people to use items longer and promote repair and recycling. Corporations must be responsible for the entire life-cycle of the products they produce. Non-essential products that are harmful can be banned completely. The advertisement industry can be regulated to stop people from buying items they do no need.

Laws are a steering mechanism too. What is legal isn’t always fair. Unethical behaviour is often not punished by the law. A greater role for ethics in law is needed, most notably in matters of business. Savvy people and corporations use loopholes to their advantage or bribe politicians into changing the law into their favour. Exploiting people, misusing public funds, and harming the planet should be sufficient ground for persecution and conviction, even if the specific activity is not declared illegal.

Most people take the existing steering mechanisms for granted. A few people like the anti-globalists and religious extremists think of an alternative. Only most people would not like a reign of terror. And so we limit ourselves to taking small measures in order to reduce the fall-out. It is hard to believe that the steering mechanisms themselves can be changed. Perhaps technology will save us, we hope. That may not be the case.

The throw-away culture

Science, technology, society and culture are closely interconnected. It is fair to say that we live in a technological society and a throw-away culture. If we have a problem then we look at scientists and engineers to solve it. Even our emotional problems we address with therapy sessions and pills. This is also true for environmental problems.

A good example is perhaps a report of the Dutch research agency TNO in the 1980s about replacing milk bottles by milk cartons. Milk bottles were used many times while cartons are thrown away. The discussion that followed was about the number of times a bottle was reused, which determines whether or not the bottle is better for the environment. That depended, amongst others, on the number of times a bottles was reused.

These discussions can be useful. What was not discussed however, was the throw-away culture. Milk bottles were part of a culture of reuse that was disappearing. The cartons are part of the new throw-away culture. Discussions are about quantity, objectivity and efficiency, but not about fundamental questions about the way we live.

The things we use deserve more respect. Valuable resources and energy have been used to make them. We should not depart from them until they are worn out completely. If they are broken we should fix them until they can’t be fixed any more. And why should we buy frivolous items or make long distance trips for recreational reasons?

The fourth way

The damage done to our planet is escalating. There is a lot of excess. Nowadays there are more obese people than hungry ones. The end of our way of living is here. Communism and state planning have failed. Capitalism and free markets have failed too, but most people have yet to find out. Many countries have combined state planning with market economies and called it a third way. That didn’t change much either. Many people have become cynical. But there is no need for poverty.

It is not surprising that people distrust stories that have a claim to the truth like religions, ideologies and science. But it is the absence of great stories we can believe in that makes our societies directionless. Individuals and their desires are now at the centre stage. So is there anything left that binds us together? Sure there is. A soon as a crisis emerges people join and help each other. The future is not without hope.

There is a fourth way. It can be called the Natural World Order. It is setting limits on a planetary level and letting people deal with them via communities, governments and markets. It is not clear from the outset what will happen because this can’t be planned from the top. Developments can take different turns. For instance, if energy is to become expensive, international trade would diminish and local products would be favoured. If most people do what needs to be done then it can be done.

This is the time to act. The current order can’t be sustained. The limits of our planet should be respected. Administrating these limits would require a global government and the same laws everywhere around the planet. It can only work if people, communities and businesses help to make it become reality. It can work when we want to make it work whatever it takes. It all begins with admitting that enough is enough.

We want more stuff because the advertisement industry tells us that we need this or that product or that buying it will make us happier. Our current economic system needs growth. We must buy more to keep the economy from collapsing. That is why fundamental change freaks us out. There can be enough for everyone. Eve and Adam had everything they needed. And so we may enter the Final Gardens of Paradise that await for us at the End of History. The change is not going to be easy but there may be no alternative.

Featured image: the only known photograph of Chief Seattle taken in 1864

1. Naar een filosofie van verbondenheid. Guus Peterse, Henk van Arkel, Hans Radder, Seattle, Pieter Schroever and Margrit Kennedy (1990). Aktie Strohalm.