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The Future of Money: How New Currencies Create Wealth, Work and a Wiser World

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The Future of Money: How New Currencies Create Wealth, Work and a Wiser World The Future of Money © Bernard Lietaer March 1999 The Future of Money: How New Currencies Create Wealth, Work and a Wiser World (Book #2 - US Version) June 1999 Copyright by Bernard A. Lietaer 1 The Future of Money © Bernard Lietaer March 1999 • The Information Age has already spawned new kinds of currencies: frequent flyer miles are evolving toward a “corporate scrip” ( a private currency issued by a corporation) for the traveling elite; a giant corporation you never heard of is issuing its own “Netmarket Cash” for Internet commerce; even Alan Greenspan, Chairman of the Federal Reserve, foresees “new private currency markets in the 21st century.” • 2,600 local communities in the world, including over a hundred in the US, are now issuing their own currency, independently from the national money system. Some communities, like in Ithaca, New York, issue paper currency; others in Canada, Australia, the UK or France issue complementary electronic money. 2 The Future of Money © Bernard Lietaer March 1999 TABLE OF CONTENTS [New Numbering] TABLE OF CONTENTS 3 PART TWO: CHOOSING YOUR FUTURE OF MONEY 6 Chapter by Chapter Outline 9 CHAPTER 5: WORK-ENABLING CURRENCIES 11 An Important Distinction 12 The Connection to Public Health 13 The Money Connection 13 Unemployed? Who? Me? 14 Today’s Job Problem 14 The Age of Downsizing 16 Economic Consequences 19 Keynes’ Foresight 21 Socio-Political Consequences 22 Case Studies 26 Traditional Solutions 27 Neither Left, nor Right, but Forward? 34 The Path not Taken in the 1930s 38 1930’s Problems: Some Differences and Parallels 39 1930s Solutions 39 The German Wara System 42 Wörgl Stamp Script 45 US Depression Scrips 47 Some Political Lessons 50 Today’s systems 53 Clarifying Some Distinctions 54 LETS 56 WIR 62 Regional Development Currencies 65 Financing Small Businesses 69 Local Loyalty Schemes 70 Conclusion: Complementary Currencies as “Early Prototypes”. 71 3 The Future of Money © Bernard Lietaer March 1999 CHAPTER 6: COMMUNITY CURRENCIES 73 Community Breakdown 74 Community building and the “gift economy” 79 Some examples 80 How communities break down. 83 Currencies that Build Community 86 The Magick Box Fairytale 86 Some Real-Life Examples 87 1. Time Dollars 88 2. Ithaca HOURS 91 3. The Pen Exchange 93 4. Curitiba: the Brazilian City which left the Third World 95 5. Japanese Health-Care Currency 100 6. Tlaloc 101 Complementary Currencies in the Information Age 102 An Example of an Integrated Currency Design: Commonweal Inc. of Minneapolis 102 Internet Money for Virtual Communities 106 Conclusions 110 Another Way than Welfare? 110 CHAPTER 7: SOME PRACTICAL ISSUES 111 Complementary Currencies, Legal and Tax Authorities 112 Are Complementary Currencies Legal? 112 What about Taxes? 112 Complementary Currencies, Central Banks and Inflationary Pressures 113 Central Bank Reactions to Complementary currencies 114 Why New Zealand is right 117 How to Start Your Own Complementary Currency 123 Three Keys to Successful Implementation 123 Some Technical Lessons from the 1930’s usable today 127 CHAPTER 8: A GLOBAL REFERENCE CURRENCY - MAKING MONEY SUSTAINABLE129 Long-term Sustainability 131 Positive Results of the Modern Money system 131 Status Report on Biosphere Earth 133 The Three Tools of Persuasion 134 Relationship between Money systems, Time Perception and Sustainability 135 “Discounted Cash Flow” = “Discounting the Future” 137 Short-term Vision versus Sustainability 140 Relationship with Interest Rates 140 Far-Seeing Glasses? 142 4 The Future of Money © Bernard Lietaer March 1999 A Global Reference Currency (GRC) and the Terra Unit 144 Theoretical and Practical Soundness 148 Implementation Options 150 GRC as a Business Initiative 151 Barter Standardization 151 International Standard of Value 151 An Antidote to the Risk of Depression 153 Business and the Environment: A Business Viewpoint 153 Conclusions 154 CHAPTER 9: A BROADER VIEW - THE TAO OF MONEY 156 Nine Metaphors 157 1. Traditional Economics Viewpoint 157 2. Alternative Economics Viewpoint 158 3. Biological Metaphor 160 4. The Brain Metaphor 162 5. Mythological Metaphor 164 6. A Western Philosophy Viewpoint 164 7. A Humanistic View: Money and the Crisis of Meaning 167 8. A Taoist Viewpoint: All is About Balance 168 9. A Whole Systems Viewpoint 171 CHAPTER 10: SUSTAINABLE ABUNDANCE 184 A Visit to the Stanford Campus 184 Defining Sustainable Abundance as a Yin-Yang Synergy 193 The Three Waves toward Sustainable Abundance 194 1. The Value-Shift Wave 195 2. The Information Wave 202 3. The Money Wave 203 A Monetary System for Sustainable Abundance 204 Why a Multi-level Currency System? 205 The Monetary System of 2020: a Four-Level Gear Box 209 The Four Seasons of 2020 Revisited 216 The Four Scenarios Revisited 218 Conclusion 220 EPILOGUE AND PRELUDE 221 5 The Future of Money © Bernard Lietaer March 1999 PART TWO: Choosing Your Future of Money “Sure, money’s all wrong, and the devil decreed it; It doesn’t belong to the people who need it.” Piet Hein, Danish physicist “Money is a mode of organizing our life in the material world; money is an invention, a mental device, very necessary, very ingenious, but, in the end, a product of the mind.” Jacob Needleman1 “Money to be money […] does not have to be legal tender. It can be what one might call ‘common tender’, i.e. commonly accepted in payment of debt without coercion through legal means.” 2 Richard Timberlake In Part One we became mindful of the old money story; in Part Two we will explore some new ones. We saw that the conventional national money system enforces a competitive ethos in all aspects of economic life. In contrast, other money systems have now been implemented which have proven compatible with cooperative values. They enable us to attain socially desirable aims with less regulation, taxation and bureaucracy than has ever been thinkable. However, to seize that opportunity we need to become aware of the implications of different money systems, and of the pragmatic options available. 1 Needleman, Jacob Money and the Meaning of Life (New York: Doubleday Currency, 1991) pg, 177 2 Timberlake, Richard H. “Private Production of Scrip-Money in the Isolated Community” Journal of Money, Credit, and Banking Vol 19 # 4 (November 1987) pg 437-447. 6 The Future of Money © Bernard Lietaer March 1999 In Chapter 1, I illustrated through the Time Compacting Machine how the transition from the Industrial Age to the Information Age will be one of rapid change entailing a whole range of adjustment problems for everybody in society. The core idea of Part Two is simple: the possibilities offered by money innovations to tackle some of the key problems in this transition are extensive, and have remained so far mostly untapped. This does not mean that we should expect the national currencies to disappear, replaced with another kind of money. Instead, what is already happening is that other parallel currency systems are developing to complement the existing system, to fulfill roles that the national currencies do not, cannot, were never designed to play. A Note for Economists This book was written for the general public, not for economists. However, as the solutions presented here affect economic processes, input by economists are relevant, and a few of the sidebars will be dedicated to providing answers to potential objections. *** Neo-classical economics defines three different types of quantities of money: M1 = Money issued by Central Banks, also called "High Powered Money" (see Primer for more details) M2 = M1 + checking accounts and short-term deposits (up to 1 year) M3 = M2 + savings accounts and longer-term deposits (up to 4 years) Let us now define M4 as M3 + Complementary Currencies whose emergence is described in this book. These complementary currencies involved in M4 include two types of non-conventional currencies: - commercial complementary currencies, such as barter-currencies used by barter companies, frequent flyer miles, frequent purchasing bonuses, and other types of loyalty currencies; - socially motivated complementary currencies including all those described in the next chapters (LETS, Time Dollars, etc.) The non-conventional currencies whose quantity is captured by M4 have now become increasingly important in the economic system. They clearly facilitate transactions that otherwise would not occur. The commercial complementary currencies involve both substantial volumes and significant corporations all over the world; while the socially inspired systems, although less important from a volume viewpoint, are significant in terms of resolving problems such unemployment, community creation and other functions. M1, M2 and M3 measure quantities of money originating from different sources, but deal all with the same currency. In contrast, M4 deals with different types of currencies, including currencies whose unit of account is different than the national currency (e.g. Miles, or Hours). The emergence of M4 poses therefore many questions that have yet to be formally evaluated such as their impact on the economy, on unemployment, or on inflation. While this books deals with some of the issues qualitatively, a formal quantitative expression still needs to be formulated. Topics for some interesting thesis work? 7 The Future of Money © Bernard Lietaer March 1999 *** One objection to complementary currencies is that their introduction may be economically less efficient than a single national currency. This objection is valid from a purely theoretical economic viewpoint. However, in practice, some 80% of complementary currencies use the national currency as a reference (e.g. “Green Pounds” in the UK, “green dollars” in Australia, etc.). In those cases, the efficiency of the price formation process in not affected at all. Most of the other ones tend to use the hour as a unit, which particularly in the services domain doesn’t create a problem either. However, conceptually the possibility nevertheless exists that new units would be introduced in the exchanges (eg. Miles for the airline industry).
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