Change money, change the world

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This article was written by Michael Taylor, commissioned by Fabrica Art Gallery, Brighton. 

This article takes inspiration from Beautiful Horizon by No Olho da Rua (In the Eye of the Street), a photography exhibition resulting from a collaborative project between a small group of artists and a number of young people who live on the streets of Brazil. The project allows these young people who are socially and economically excluded from mainstream society to express themselves and make connections with the wider world. This article considers how different economic and monetary policies can either widen or narrow the divide between the richest and poorest people. In particular, it considers the systemic failings of a debt-based money supply.

No Olho da Rua is a long-term collaboration between artists Julian Germain, Patricia Azevedo and Murilo Godoy and young Brazilians living on the streets of Belo Horizonte. Since 1995, the artists have worked with young, marginalised children to offer them the chance to express themselves, through photography, writing and interviews. Beautiful Horizon showcases a selection of this work. It was the intention of the artists to fully include the young Brazilians in the whole production process and, in so doing, give them the sense that someone cares about something they do, making them visible. In effect, by including them fully in the project, the artists give a wider sense of inclusion to people who have been excluded socially and economically from mainstream society. In a recent interview, the artists describe the project as “… a response to people’s exclusion founded on principles of inclusion, collaboration, sharing and respect”. These core principles that underpin the work all relate to how people are connected to each other – the real-world networks which form the infrastructure through which we exchange emotions, ideas, information, money and much more.

The images captured by the young Brazilians are intimately familiar yet shockingly alien. The themes are universal – recognisable to any human living at any time during the history of our race. Themes of beauty, friendship, love, birth and death. But the setting of these universal themes is a world away from the safe and well-connected environment with which many people reading this article will be familiar.

The photos show a world of extreme poverty, but one that exists within one of Brazil’s richest cities, literally a stone’s throw from a world of cars, computers and fresh linen that many take for granted. These young people are in absolute poverty, an inability to meet their basic needs that is so severe as to be life threatening. As Richard Murphy points out, absolute poverty may not simply be the inability of a person to meet their material needs, but also their emotional, intellectual and social needs [1]. There is stark evidence highlighting the outcome of this kind of poverty from the artists themselves. When they started the project 17 years ago, they were collaborating with a group of 55 young people. Today 40 of the original group have died, disappeared or been jailed.

The stark contrast of universal scenes of human triumph and tragedy framed by a backdrop of extreme poverty is clear to all who visit the exhibition, and these contrasting images resonate far beyond the borders of Brazil. In the words of the artists, the project shows “the human condition within a context of extreme poverty in modern society. This is not in anyway exclusive to Brazil, but points to the lives of millions of people, an underclass, living on the margins of big cities around the world” .

We have to look no further than our own backyard to see the truth of this statement. Research carried out by the Department for Work and Pensions finds that 3.6 million children are living in poverty in the UK. In other words, 27% of all UK children are classed as living in poverty, with 1.6 million of these classed as living in severe or absolute poverty. Work by the Institute for Fiscal Studies projects that, under current economic and social policies, this figure is set to increase significantly to 4.2 million by 2020 [2].

These shocking figures become even more outrageous when we take into account that the total amount of money in circulation in the the UK has quadrupled in just 15 years, rising from around £500,000 million in 1992 to around £2,000,000 million in 2007 [3]. It is alarming that this dramatic increase in money has coincided with a dramatic increase in poverty. Just as Beautiful Horizon bears testament to the lives of a group of young people who live on the streets of Brazil, it also stands as a challenge to capitalism, consumerism and monetary policy that resonates throughout the whole world.

The current financial crisis in Europe and the US has given rise to a lot of finger pointing. Some blame unwise government spending, some the culture of greedy banking and some the foolish borrowings of the public. This culture of blame is unproductive and misleading, for this dramatic divergence of rich and poor is not the direct fault of any individual group of people, rather it is an inevitable outcome of the current way money itself is created in the first instance. It is a systemic failure of the monetary system.

The process by which money is created is still poorly understood, even by politicians, bankers and economists, but recently things have started to improve. The 2011 book ‘Where does money come from?’  is a comprehensive guide to the UK monetary and banking system and clearly explains how money is created and enters circulation. The importance of this piece of research cannot be overestimated, as the process of money creation is rarely included in economic models and theory. The dominant school of economic thought today is neoliberalism, and its ideas and theories are widely accepted as fact by many economists and politicians. It views money as neutral, a veil over the real economy. But money is far from neutral. It is born with its own nature, its own properties that dictate how it flows around the economy.

It is only by understanding the nature of money itself that we will begin to be able to deal with the pressing economic, social and environmental problems we face today.

Thanks to the hard work of awareness group Positive Money and others, it is now an established, if little-known, fact that over 97% of all money in circulation today was created by private banks as debt. It is beyond the scope of this article to describe the mechanics behind this process, but I point the reader in the direction of the Positive Money website initially and to the work of Ryan-Collins et al. [3] for an in-depth analysis.

In broad strokes, whenever a bank extends credit through agreeing overdrafts, mortgages, credit cards or any other form of credit, this money is not lent, but rather it is created out of thin air. It is recorded as both an asset and a liability on the bank’s balance sheet and, hence, the banks say that they have not created any money as their balance sheets still sum to zero, with the asset offsetting the liability. But try telling that to the person who has just spent the newly-issued credit, or better yet try telling the person who has just been paid with this newly-created credit that it is not real money. Crucially, this process is not how people intuitively understand lending and credit from their everyday experience. If I lend some money to my friend, I give up access to that money for a period. There has to be money in the first place for a loan to take place but this is not the case with banks. Money doesn’t lead to a loan, but rather a loan leads to money. The only thing that makes or stops commercial banks creating more money is their confidence and will.

Not only do private banks have the privilege of determining how much new money gets created, they also decide where it goes. Werner [4] notes that the economy can be split into two parts – the productive and the unproductive economy. Investment in the productive economy leads to the creation of new jobs and infrastructure, adding value to the real economy. Investment in the unproductive economy, through financial speculation or the purchase of existing assets, simply leads to price inflation and adds no new value whatsoever.

Of all the credit created by commercial banks, only 8% of this newly-created money is invested in the productive economy, the other 92% is spent on financial speculation and asset purchases. This simple fact explains housing bubbles for example, and the constant boom-bust cycles that we have experienced at regular intervals for the last few centuries. The difference between a boom and a bust period simply lies the expansion or contraction of the money supply. In boom times, banks hand out new credit far quicker than people pay off old debts, leading to an increase in the money supply. In bust times, banks are reluctant to lend and so people pay off old debt quicker than they can take on new debt, leading to a reduction in the money supply. This highlights the paradox at the heart of a credit-based money supply. The only way we can get more money is to take on more debt, and so the seeds of its downfall are sown at inception.

The implications of this process are profound. Money is born into this world in two halves: a ‘positive’ interest-earning half and a ‘negative’ interest-paying half. If you have £x in your bank account, this implies that £x of debt exists somewhere else. If you are the owner of the ‘positive’ side of this picture, your money multiplies through interest, making money desirable for its own sake. The question is one of ‘how can I make money?’. The current UK monetary system gives us a form of money that behaves very differently to the real, natural objects over which it is supposedly acting as a veil. Most natural resources degrade rather than multiply over time if they are horded, whereas money will grow and grow through the interest it gains. Of course, at the same time the ‘negative’ side of the debt-credit divide is multiplying even quicker, and in the opposite direction.

Returning to those people who are living in poverty, it is inevitably the poorest who end up with the biggest debt burden. Any money that they do earn has to first go to paying off debt. This removes their money from the real economy, money that they could otherwise have spent with businesses in their community and further afield, and thus we have a vicious circle. There is a systemic funnelling of money from the poor to the rich, leading to an everwidening gap between the richest and poorest in our society. Indeed, you need to reach well into the 99th percentile of people as ranked by income earned before you find someone who earns more interest than they pay [3].

This is not the result of a conspiracy, it is an inevitable outcome given that money is created in this way as credit issued by the private banking sector – a systemic failure rather than a conspiracy.

In a society where money has become as essential to life as water, it is surely of fundamental importance that money is created in the first instance for the benefit of the people, and not for the profit of private banks.

But all is not lost. Money certainly doesn’t grow on trees. Neither do we mine it, farm it or hunt it. Money is a social construct. In the words of John Maynard Keynes money is “a social relation of abstract value” [4]. It is something we create and, thus, it is something we could create differently, should the will exist.

This sort of reform is not without precedent. In 1844, the Bank Charter Act was passed to stop private banks printing their own bank notes. This Act was in response to a succession of banking failures and financial crises that sound very similar to the crisis we find ourselves in today [5]. The modern advent of digital money, internet banking and deregulation have allowed the banking sector to exploit a loophole in this law by creating digital money instead of printing paper money. This loophole could be easily closed by updating an important law through simple legislative means.

In addition, there are already fully-formed proposals of alternative monetary and banking systems on the table (see here for an explanation of full-reserve banking, or here for a proposal of seigniorage reform). Not only would these alternative monetary systems bring money creation back under democratic control, they would also change our very relationship with money and with each other. Instead of asking ‘how can I make money?’, the question would become ‘what can I make with my money?’.

To close the circle and return to where we started, it is no coincidence that Brazil has experienced a massive economic boom over the last few years as it has not only entered into the free-market economies established by the west, but has adopted our monetary policies too. What is clear is that, if they follow in our footsteps, the gap between the world inhabited by the street children of No Olho da Rua and the world inhabited by the rest of Brazil will grow ever wider. It is our responsibility to look at the people excluded from our modern society, to look at the widening gaps between rich and poor, and to ask ourselves if this is acceptable. We have the power to change things for the better. The question is, do we have the courage?

If we want to make the world a safer, more secure, peaceful and permanent place, first of all we need to have more control of how our money gets created and where it gets spent.

Change money, change the world.



Beautiful Horizon by No Olho da Rua is presented by Fabrica in partnership with Autograph ABP and BPB 2012. Fabrica is part funded by the Arts Council England, Brighton & Hove Council and the European Union.


[1] R. Murphy, The courageous state (Searching Finance, London, 2011).

[2] M. Brewer, J. Browne, and R. Joyce, Child and working-age poverty from 2010 to 2020 (Institute

for Fiscal Studies, London, 2011).

[3] J. Ryan-Collins, T. Greenham, R. Werner, and A. Jackson, Where does money come from? A

guide to the UK monetary and banking system (New Economics Foundation, London, 2011).

[4] J. M. Keynes, A treatise on money (Palgrave Macmillan, New York, 1930).

[5] G. Davies, A history of money (University of Wales Press, Cardiff, 2002).

Michael Taylor has donated the fee for this article to Positive Money.



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