James Leroy Wilson's one-man magazine.

Wednesday, April 02, 2008

Usury and the Abolition of Community

Charles Eisenstein has a remarkable essay, Money: A New Beginning, at Reality Sandwich, on the nature of interest. Eisenstein quotes a passage of a fable by Bernard Leitaer in which a banker comes into a barter-exchange community and offers each member 10 pieces of money to better facilitate their exchanges. All he asks if for each person he's loaned 10 pieces, to come back in a year with 11 pieces - what he lent them plus an extra piece as a "token of appreciation" (that is, interest). If no more money is produced, this means one person would have to lose all his pieces in order for ten others to pay the interest.

Eisenstein writes that there are "only three ways the story could end: inflation, bankruptcy, or growth" and "in a real economy, all three pressures operate simultaneously." Key point:
As Lietaer's parable explains, because of interest, at any given time the amount of money owed is greater than the amount of money already existing. To make non-inflationary new money to keep the whole system going, we have to breed more chickens -- in other words, we have to create more "goods and services." The principal way of doing so is to begin selling something that was once free. It is to convert forests into timber, music into product, ideas into intellectual property, social reciprocity into paid services.
Eisenstein elaborates, providing examples of how "production" and "growth" means taking what was once free, or the result of gift networks and social reciprocity, and turning it into a product or service to be sold for money. He proceeds to explain how this cuts off the individual from nature, because modern money itself is cut off from nature, and because the land itself is something to be bought and sold. The environment itself is threatened.

I do not believe we should thereby ban the charging of interest, because I don't see anything wrong with "buying time," buying time is "natural," in that it could be done in a barter economy, and in any case I believe it's wrong to infringe on trades and contracts individuals voluntarily agree to. Where it is wrong, and where our society has gone completely wrong, is through:
a) monopolizing one form of money through legal tender laws
b) producing money out of thin air with a few computer keystrokes and a printing press, instead of attaching the value of money to something from nature: gold, silver, oil, animal hides, or whatever people actually value.

Money should either be coins of desired metals, or paper certificates representing ownership of some desirable commodity. Different certificates representing different commodities could be traded, and their value could go up and down depending on supply and demand. Money should be just a facilitator of barter exchange, not a replacement for it.

It always seems hypocritical to condemn a system that has seemed to facilitate great leaps forward in production and technology. But it has also fostered over-production and waste in an world where a great many still starve because they can't "afford" what the planet so abundantly provides. Also, it's hard to fault a society that increasingly caters to individual tastes, but at the same time individualism can give way to atomization. If disaster strikes, will you be in with your neighbors for food and supplies because who are strangers, or will you cooperate with them because they are friends?

Even if one disagrees with some points, Eisenstein's article is highly recommended.

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