Sacred Economics
How to protect and enhance the commonwealth
In my first ever Ain’t Nobody Got Time for That! post, I wrote about Economic Development.
Ray Dalio’s “How The Economic Machine Works” video clicked for me in a way that economics and public policy courses hadn’t, and I wanted to explain my new understanding of why we seek economic growth and how we ought to achieve it. In short (I argued then), growth is good because one person’s spending is another person’s income, and vice versa. And the best way to achieve growth is to increase productivity.
Now, having read the mind-bending book Sacred Economics, by Charles Eisenstein, I feel I understand the issue better, and I see profound problems with our economic machine.
Economic growth is not something that we want, and consciously pursue year after year. It is a requirement that we have built into our financial system in the form of interest.
This need for constant growth of the money supply comes at the expense of the commons and of community. Productivity is not free. And it cannot last forever.
Ain’t Nobody Got Time for Parables?
The parable “The Eleventh Round,” by economic visionary Bernard Lietaer, who died in 2019, demonstrates the problems of a money system built on interest*. If you ain’t got time, skip.
Once upon a time, in a small village in the Outback, people bartered for all their transactions. On every market day, people walked around with chickens, eggs, hams, and breads, and engaged in prolonged negotiations among themselves to exchange what they needed. At key periods of the year, like harvests or whenever someone’s barn needed big repairs after a storm, people recalled the tradition of helping each other out that they had brought from the old country. They knew that if they had a problem someday, others would aid them in return.
One market day, a stranger with shiny black shoes and an elegant white hat came by and observed the whole process with a sardonic smile. When he saw one farmer running around to corral the six chickens he wanted to exchange for a big ham, he could not refrain from laughing. “Poor people,” he said, “so primitive.” The farmer’s wife overheard him and challenged the stranger, “Do you think you can do a better job handling chickens?” “Chickens, no,” responded the stranger, “But there is a much better way to eliminate all that hassle.” “Oh yes, how so?” asked the woman. “See that tree there?” the stranger replied. “Well, I will go wait there for one of you to bring me one large cowhide. Then have every family visit me. I’ll explain the better way.”
And so it happened. He took the cowhide, and cut perfect leather rounds in it, and put an elaborate and graceful little stamp on each round. Then he gave to each family 10 rounds, and explained that each represented the value of one chicken. “Now you can trade and bargain with the rounds instead of the unwieldy chickens,” he explained.
It made sense. Everybody was impressed with the man with the shiny shoes and elegant hat.
“Oh, by the way,” he added after every family had received their 10 rounds, “in a year’s time, I will come back and sit under that same tree. I want you to each bring me back 11 rounds. That 11th round is a token of appreciation for the technological improvement I just made possible in your lives.” “But where will the 11th round come from?” asked the farmer with the six chickens. “You’ll see,” said the man with a reassuring smile.
Assuming that the population and its annual production remain exactly the same during that next year, what do you think had to happen? Remember, that 11th round was never created. Therefore, bottom line, one of each 11 families will have to lose all its rounds, even if everybody managed their affairs well, in order to provide the 11th round to 10 others.
So when a storm threatened the crop of one of the families, people became less generous with their time to help bring it in before disaster struck. While it was much more convenient to exchange the rounds instead of the chickens on market days, the new game also had the unintended side effect of actively discouraging the spontaneous cooperation that was traditional in the village. Instead, the new money game was generating a systemic undertow of competition among all the participants.
This parable begins to show how competition, insecurity, and greed are woven into our economy because of interest. They can never be eliminated as long as the necessities of life are denominated in interest-money. But let us continue the story to show how interest also creates an endless pressure for perpetual economic growth.
The villagers do not like seeing their neighbors suffer. Imagine then that they gather round the man in the hat and say, “Sir, could you please give us some additional rounds so that none of us need go bankrupt?”
The man says, “I will, but only to those who can assure me they will pay me back. Since each round is worth one chicken, I’ll lend new rounds to people who have more chickens than the number of rounds they already owe me. That way, if they don’t pay back the rounds, I can seize their chickens instead. Oh, and because I’m such a nice guy, I’ll even create new rounds for people who don’t have additional chickens right now, if they can persuade me that they will breed more chickens in the future. Show me your business plan! I’ll lend at 10 percent — if you are a clever breeder, you can increase your flock by 20 percent per year, pay me back, and get rich yourself, too.”
The villagers respond, “That sounds OK, but since you are creating the new rounds at 10 percent interest also, there still won’t be enough to pay you back in the end.”
“That won’t be a problem,” says the man. “You see, when that time arrives, I will have created even more rounds, and when those come due, I’ll create yet more. I will always be willing to lend new rounds into existence. Of course, you’ll have to produce more chickens, but as long as you keep increasing chicken production, there will never be a problem.”
A child comes up to him and says, “Excuse me, sir, my family is sick, and we don’t have enough rounds to buy food. Can you issue some new rounds to me?”
“I’m sorry,” says the man, “but I cannot do that. You see, I only create rounds for those who are going to pay me back. Now, if your family has some chickens to pledge as collateral, or if you can prove you are able to work a little harder to breed more chickens, then I will be happy to give you the rounds.”
With a few unfortunate exceptions, the system worked fine for a while. The villagers grew their flocks fast enough to obtain the additional rounds they needed to pay back the man in the hat. Some, for whatever reason — ill fortune or ineptitude — did indeed go bankrupt, and their more fortunate, more efficient neighbors took over their farms and hired them as labor. Overall, though, the flocks grew at 10 percent a year along with the money supply. The village and its flocks had grown so large that the man in the hat was joined by many others like him, all busily cutting out new rounds and issuing them to anyone with a good plan to breed more chickens.
From time to time, problems arose. For one, it became apparent that no one really needed all those chickens. “We’re getting sick of eggs,” the children complained. “Every room in the house has a feather bed now,” complained the housewives. In order to keep consumption of chicken products growing, the villagers invented all kinds of devices. It became fashionable to buy a new feather mattress every month, and bigger houses to keep them in, and to have yards and yards full of chickens. Disputes arose with other villages that were settled with huge egg-throwing battles. “We must create demand for more chickens!” shouted the mayor, who was the brother-in-law of the man in the hat. “That way we will all continue to grow rich.”
One day, a village old-timer noticed another problem. Whereas the fields around the village had once been green and fertile, now they were brown and foul. All the vegetation had been stripped away to plant grain to feed the chickens. The ponds and streams, once full of fish, were now cesspools of stinking manure. She said, “This has to stop! If we keep expanding our flocks, we will soon drown in chicken shit!”
The man in the hat pulled her aside and, in reassuring tones, told her, “Don’t worry, there is another village down the road with plenty of fertile fields. The men of our village are planning to farm out chicken production to them. And if they don’t agree … well, we outnumber them. Anyway, you can’t be serious about ending growth. Why, how would your neighbors pay off their debts? How would I be able to create new rounds? Even I would go bankrupt.”
And so, one by one, all the villages turned to stinking cesspools surrounding enormous flocks of chickens that no one really needed, and the villages fought each other for the few remaining green spaces that could support a few more years of growth. Yet despite their best efforts to maintain growth, its pace began to slow. As growth slowed, debt began to rise in proportion to income, until many people spent all their available rounds just paying off the man in the hat. Many went bankrupt and had to work at subsistence wages for employers who themselves could barely meet their obligations to the man in the hat. There were fewer and fewer people who could afford to buy chicken products, making it even harder to maintain demand and growth. Amid an environment-wrecking superabundance of chickens, more and more people had barely enough on which to live, leading to the paradox of scarcity amidst abundance.
And that is where things stand today.
Protecting and Enhancing the Commonwealth
The “commonwealth” includes the natural bounties of the earth as well as the accumulated knowledge and creations of generations before us, which no individual has earned. As Cory Booker said in one Democratic debate, “We all owe a debt that we cannot repay. We all drink deeply, with freedom and liberty, from wells that we did not dig.”
It is our sacred duty and primal joy to protect and contribute to these commons.
To do so, we need to implement big and globally-coordinated changes, like taxing pollutants and/or using cap-and-trade, forgiving debt (now more vital than ever), and moving toward zero or negative interest (to facilitate steady-state or de-growth).
There is also much we can do as individuals and communities. Offer your time and gifts for free, support local businesses and buy quality goods, repair before you replace, and appreciate nature and quality time with family and friends! Please do not underestimate the power of small actions and shifts of mindset.
*Our society distinguishes between “interest,” which is seen as legitimate, and “usury,” which is seen as unfair and damaging. But our common practice of interest to me is usurious. Interest is comprised of six components: a risk premium, the cost of making a loan, an inflation premium, a liquidity premium, a maturation premium, and a zero-risk interest premium. The latter three in particular basically say, “I have money and you need it, so I am going to charge you for access to it — just because I can, just because I have it and you don’t.”
