by John Merryman
Economist and author Bernard Lietaer has explored monetary systems for twenty five years, and come to the conclusion that not just communities, but humanity as a whole, can benefit from the creationof local or complementary currency, which circulate parallel with national currencies.
While at the Central Bank in Belgium (National Bank of Belgium), he implemented the convergence mechanism (ECU) to the single European currency system. During that period, he also served as the President of Belgium’s Electronic Payment System. His consultant experience in monetary aspects on four continents ranges from multinational corporations to developing countries. He co-founded one of the largest and most successful currency funds, becoming its General Manager and Currency Trader.
EAP Economics Editor John Merryman talked to Bernard about how a change in our view about money can change not just our view of our world…but the world itself.
1.) How would you best describe what money is, both how it functions today and how it evolved?
Most simply put, money is an agreement in a community to use something as means of payment. Nowadays, the money we use most of the time are national currencies. But we are not even aware of all other forms of money that we use almost daily, such as air miles, loyalty points and similar – these are all agreements to the use of which we agree, consciously or, quite often, automatically, unconsciously.
At first, various valuable items functioned as money, such as cattle, grain, tools; and later precious metals, from which coins evolved.
Next, receipts for stored goods started functioning as banknotes. Throughout centuries, our understanding of money became more and more narrow and has been reduced down to national currencies, which today we see as the only ‘proper’ form of money. These are a top-down currency, created by an authority that declares that something is the only medium of exchange acceptable in payment of taxes.
2.) Do you feel that the general public has a good understanding of monetary systems. If not, what would you consider the primary misconceptions are?
No, people rarely even think about money, although on one level money is underlying almost all our decisions. The lack of awareness is especially general at the systemic level. Generally, people take the form of money we use for granted, and never even question it. They are not aware of how the system works, let alone what the consequences of that mechanism are. The assumption is that money is a simple facilitator of transactions that would happen anyway, and that it doesn’t change the relationship among their users. Both these assumptions have been proven invalid. As a consequence, people rarely even think it would be possible to use something else than national currencies, and that this would create different relationships among people.
Furthermore, some people still believe – when they do start thinking about money – that national currencies are backed by gold. That hasn’t been the case for decades. Nowadays money isn’t backed by anything except belief.
Another misconception is that money is issued (and we imagine it as coins being minted and banknotes printed) by the government. In fact, most of the money is electronic and is created by commercial banks, as debt money – they simply create it when they provide loans. That is why interest is built into money, which results in three main characteristics of national currencies: they systematically encourage competition, fuel the need for perpetual growth and concentrate wealth.
But perhaps the most blinding is the misconception that national currencies are the only form of money we can use. It turns us into passive ‘victims’ of the system. Once we will really understand that money is an agreement, that we can choose what we will use as a medium in our exchanges, we will enter into such agreements much more consciously and thoughtfully.
3.) What are local currency systems and how do they interact with the community, as well as with the larger economy and national currency?
There are different local currency systems existing in the world. The common basic characteristic of such systems is that they are building resilience in the local community. But by that, they are also building resilience of the global economy – a network of resilient local communities will result in a stable global economy.
Depending on the system, local currency systems are aimed at different goals. Some of them (for example Berkshares, or Totnes Pound) function as loyalty systems for local businesses. They are strengthening local trade and supporting local businesses. But by that they are also strengthening connections in the community and building new connections and relationships. The same with Lets systems, or timeshares. We become conscious of our transactions, our relationships.
So a more appropriate term for local currencies would be ‘community currencies’. They are created by community (bottom-up currency), and they are also strengthening, co-creating community. Not just in an economic sense, but on all levels.
4.) Do you feel the world's national currency systems are stable and why, or why not?
No, national currency systems are very volatile and they are driven by speculative markets. As mentioned before, the money we are using nowadays is not backed, it is in no way linked to the physical world. The value of money is predominantly determined by foreign exchange markets – and great majority of trading on those markets is speculative.
5.) If you do feel that there is potential for a serious crisis in the world's monetary systems, what changes would you like to see implemented, what changes do you think could be implemented and how could a larger public awareness be helpful in affecting these changes?
To deal with any crisis, we need to be flexible and creative. The same goes for dealing with the monetary crisis – which is just one aspect of the global crisis that we can see in the world today.
We need to become more flexible and creative in our thinking about money. To deal with crisis, we need to develop diversity of currencies, use different currencies to address specific issues, on various levels. Diversity builds resilience.
The general public should first become aware of the (systemic) money issues and the possibility to design other systems, better suited to dealing with some problems. The next step is to start using them, make choices, which are aligned with our deepest beliefs.
6.) Are there aspects of local currencies that could be applied to national currencies and could they be combined, or is it best to have separate functions, much like one has local and national governments?
There is not much point in trying to create a currency that will compete with national currencies – national currencies are very powerful money systems and it would be difficult to try to replace national currencies with local. There are payments or exchanges for which we do need national (or global) currencies. Building a strong currency that would be successful at competing with national money would be almost impossible.
But local currencies can complement national money. Efforts are better put into creation of different systems, which will address particular issues in a community, and they will be much more successful at that than national money.
7.) It would seem that real competition within society, or between societies, is tantamount to war, but economic competition is most productive when it is based on a set of agreed upon standards and isin support of some larger goal. So it would seem the economy functions as an internal ecosystem, similar to the digestive tract of an organism. This relationship implies the current global economy amounts to the digestive tract of a supranational entity that isconsuming the worlds indigenous societies, raw materials and otherresources. Is this healthy? Is it inevitable? If it is inevitable, but not healthy, what is the next stage? If the current system fails,he resulting chaos will likely be monumental, so could it be possible to redirect this emerging entity from simply enriching its most clever beneficiaries, toward a more viable goal of being a economic convective cycle that understands the earth as one large organism, with a healthy society, economy and environment as necessary organs, not spoils? Where it is a given that condensed wealth will percolate back down in the most effective manner and is directed toward long term projects and developing a healthy society and environment with human civilization as the central nervous system of the planetary organism, rather then its most effective scavenger? Is this possible or merely utopian?
Any analogy – or a model – can lead us to a deeper understanding of underlying issues, lighting up some aspect of any one problem. But the models that are particularly useful are the ones that open up a positive vision of how we can address those issues.
Your picture of the entity consuming our society could be seen as the macrocosm of the microcosm, which is each human being. As long as our lives are like that, that’s what will manifest for the planet.
Definitely the money systems that are prevalent in the world today are driving the behaviour you described – and if we designed different systems, they would function in a different way. This is already happening in the world, and as much as it can co-create a different future, it is also a sign, a manifestation of the change in the hearts of human beings.