By Tim Jenkin
Have you read the financial press recently? Have you read a single article that is positive about the economic outlook for 2012? In fact, have you read anything that is not positively scary?
It is not just marginal reporters exaggerating the current situation for sensationalism but the most influential individuals and organisations that are telling us that things are bad, very bad and getting worse. That is unusual because mostly we are told that things are getting better, even when they are not. The powers that be know that they need to maintain confidence in ‘the system’ at all times, otherwise negative sentiment and raw fear will drive the actual negative situation over the edge.
Economists, politicians and sundry pundits tell us we are experiencing a recession or a depression or some other such rebounding economic ailment. All of these terms imply that the present condition is temporary and that things will soon bounce back to ‘normal’, as they have always done. Economic cycles are described as a normal feature of market economies.
We are encouraged to tighten our belts temporarily and not get too stressed about things because the ‘good times’ will inevitably return. Then there will be robust growth all around, businesses will be thriving and creating jobs, investors will be getting good returns and we’ll be able to afford the things that were out of reach during the downturn.
This has been the pattern of things while economic growth was possible, and growth was possible while there was plenty of cheap energy to power it. But now that we have reached what is known as ‘peak oil’ or ‘peak energy’ or in fact ‘peak everything’, growth can no longer be taken for granted. Since money is always a reflection of energy, it could be said that we have also reached ‘peak money’ or ‘peak credit’. The current depression is symptom of that.
Perpetual economic growth is taken as axiomatic and essential by economists, politicians and the wise people who offer advice on how to fix the current economic malaise. Banks and investors lend money on the assumption that there will be growth, so that borrowers can pay back both the principal and interest or dividends some time in the future. Growth, we are told, must be maintained at all costs as it is the solution to all our economic woes: unemployment, poverty, lack of return on investment, pensions, debt, crime, etc.
Despite the obvious fact that we are running out of our primary energy source, oil, practically everyone still assumes that infinite growth is possible, or at least a ‘good thing’. Every economic projection made by governments, economists and businesses assumes there will be growth, but none consider how this will be possible in a finite world with rapidly declining energy and other natural resources. Energy is taken as a non-problem as it is assumed that science will come up with a solution and the ‘invisible hand’ of the market will provide what we need when the price rises enough.
These beliefs are based on faith, not reality. The reality is that we have run out of easy oil and other resources and what is left will become increasingly expensive as it becomes more difficult to extract, at the same time as demand for these declining resources rises. Rising prices at the same time as rising demand means that energy and other natural resources become increasingly unaffordable, and therefore economic growth becomes more difficult to maintain. There is ample evidence now that our economies cannot function on oil prices much above $100 a barrel or when total oil expenditure exceeds about 5.5% of GDP.
Even if rising energy prices temporarily brings forth more of the ‘difficult oil’, it is not going to change the situation because if we spend more on energy then we spend less on other things. If we can’t afford the ‘other things’ then what’s the point of growing the economy?
In short, don’t expect any meaningful growth in GDP any time soon. You can completely forget about ‘sustained growth’ because it is not going to happen and we should stop expecting it. What we should be expecting, and in many ways desiring, is economic descent. It is the only way to stave off the multiple converging crises facing humanity and planet earth, and preserve what precious resources we have left.
So what is the solution to all this doom and gloom? Well, the current situation is one of gloom if you are expecting it to turn around, and will certainly lead to doom if we continue to follow the same old unsustainable growth path. Something has to change!
What keeps us locked into the current economic paradigm is the prevailing money-based exchange system. It requires constant growth because it is based on debt and usury. A small parasitic class has usurped complete control over the exchange system and charge us for using it by demanding tribute in the form of interest. This makes us all beholden to an anonymous elite who control the direction and behaviour of our economies.
Adopting another economic system that uses the same or a similar money-based exchange system, such as socialism, is not a solution because the growth dynamic is preserved and control over the exchange system remains in undemocratic hands. Socialism, after all, is just a variant of industrialism, one which its proponents tell us will be even more efficient at delivering the goods than capitalism.
What is needed is not another growth-fixated economic system but a Copernican revolution that again re-orders the arrangement of the planets.
We have been taught that human society develops from primitive to modern through the evolution of ‘economic systems’. Viewing these systems as the defining characteristic of human society is the same as viewing the earth as the centre of the universe, as the pre-Copernicans did.
Human society does not hop from one economic system to another, and it is not possible to apply a new system as if there were ready-made systems waiting on the shelf to be adopted.
Economic systems are like the earth, but as Copernicus taught us, the earth is just one of several planets that circle the sun. The real ‘sun’ of human society, around which everything else revolves, are the systems or ‘modes’ of exchange that humans have created. These define how economic systems work, not the other way around.
Capitalism works according to the logic of money. That is why it is called capitalism. What we have today is the logical outcome of an exchange system that requires an exchange medium to effect exchange, the creation and control of which has been monopolised by a closed nexus of ‘financial institutions’ and governments.
An exchange system that demands that we use an exchange medium to obtain the goods and services of others means that we all direct our efforts towards obtaining the medium rather than exchanging with one another what we have to offer. We form collective enterprises (‘businesses’) to help us ‘scoop up’ the exchange medium more efficiently than we could do alone. Our entire economy is geared towards the production of a single product – money. The goods and services that get produced are mere by-products of the money-making process.
This single activity to produce a single product is what defines and distorts our economies today, and it is what infects our thinking about the reasons for and consequences of our economic activities.
A money-based exchange system is just one of many historical exchange systems. It derives from a time when there were no electronic communications and hence physical exchange media were required. Today there is no longer a need for physical exchange media, or exchange media of any kind for that matter. With computers and global networks we can do away with the need for money completely, and with it the means for anyone to usurp control over the exchange system and hence control over our economies and lives.
The CES is an example of a moneyless exchange system and it is proving by its expansion all over the world that it is possible to trade globally without money. Its full potential can not be realised while the money-based exchange system still dominates, but it does help us to realise that a very different economic system would evolve if the growth imperative was removed and a different set of exchange principles operated. If the need to ‘make money’ was removed as the guiding principle of economic activity we could then concentrate on the production of what people really require.
It is impossible to say what kind of an economic system would emerge should we adopt a moneyless exchange system but we can be sure it would be very different to the current money-dominated one (capitalism). It will likely have some or all of the following characteristics:
- It will be locally focussed as exchange groups will be local instead of national
- It will be democratic because there will be no way for any entity to manipulate and control the exchange mechanisms and processes for private gain
- It will be non-exploitative because it will be open and transparent
- It will be less alienating as we will all be pursuing our passions instead of money
- It will be more cooperative because we will not be competing for exchange media artificially made scarce
- There will be no growth imperative so the economy will be more sustainable
- There will be no scope for speculation as there will be no money to manipulate
- There will be no scope for parasitism as the only way to receive from others is to provide in equal measure
- There will be no scope for freeloading because an open system will reveal who such people are
- Production will be smaller scale because exchange groups will be limited in size
- Production will be for real requirements and not for the abstract reason of ‘making money’
- And many others…!
That a financial storm is coming is not in doubt. There are many ways to prepare for it but it is beyond the scope of this article to go into all of them. There is plenty of advice on the internet.
The one thing we can do is to encourage you to take the CES seriously. The CES was not created as another frivolous internet plaything, like Facebook or YouTube; it is an experiment in alternative exchange systems, an attempt to show that it is possible to trade without the use of money and a way to create a more caring and cooperative economy. We are going to need a lifeboat to take us to safety when the sinking ship of the money-based exchange system finally goes under.
So prepare yourself for the financial storm by getting to know how the CES works and by building up your networks. Make sure your offerings are up to date and get used to pricing your goods and services in CES credits only. By charging part national currency you give away that you don’t trust the system to provide what you need, and it won’t until we all let go of our national currencies and trust the system to deliver.
Published in the Cape Town Talent Exchange Newsletter, No.37, August 2012