A Not-For-Profit World Economy Can Change the Monetary System

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By Jen Hinton and Donnie Maclurcan of the Post Growth Institute

Positive Money has been doing an excellent job of creating proposals and moving people to act in order to address the fundamental flaws of our current monetary systems.  As most of us sense, monetary and financial reforms will be most effective when accompanied by reforms in the way we do business, as well.  We, at the Post Growth Institute, are working on a book that answers this issue directly.  It’s called “How on Earth: Flourishing in a Not-For-Profit World by 2050”.

Imagine a world in which you know that the full life-cycle of the money you use is involved in creating more wellbeing for yourself as well as everyone else in your community.  Imagine a world in which the banks that handle everyone’s money are no longer solely accountable to a small number of investors and shareholders.  Imagine that the number one priority of all economic activity is no longer to maximize private profit, but rather to maximize societal wellbeing.

Welcome to a Not-For-Profit World, a world economy based on entrepreneurial not-for-profit enterprises that do make profits, but are legally required to recycle them back into their organizations and projects that benefit the community.  You can read more about how this world is already emerging and about the “How on Earth” book project here.

In this article, we are going to focus on how a Not-For-Profit World would affect the monetary system, in particular.

The Role of Profit Maximization in Today’s Monetary System

Currently, the number one priority of a for-profit business (which includes almost all banks) is to maximize profit for shareholders.  Following this logic, it makes sense that we’ve ended up with fractional reserve banking and an enormous financial sector that does very little for the real economy.  In the for-profit world, banks want to create as much money as possible because they maximize profits by doing so.  Maximizing profits also entails selling off, trading and speculating (i.e., gambling) on debt in the form of financial agreements, like the infamous Credit Default Swap.

In a for-profit world, benefitting from someone else’s default is a smart move.  Benefitting from and contributing to the massive levels of societal debt is just a sign of success in a game where the rules are based on a ‘dog-eat-dog’ understanding of human nature.  But there is as much generosity in human nature as there is greed.  In this sense, wouldn’t most of us prefer systems that encourage and enable the more cooperative, generous parts of our nature, rather than greed and selfishness?  It’s time that we design our businesses, including our banking industry, to reflect this deeper understanding of human nature and encourage action for the profit of all rather than private profit allocated to a few.

Not-For-Profit Banks

One way in which the shift to a not-for-profit world would affect monetary systems is through banks. How might not-for-profit banks help change the situation?

As mentioned above, for-profit banks are held accountable to return profits to shareholders; that’s their primary goal.  Not-for-profit banks, such as JAK Members Bank and Charity Bank, exist to provide financial services to their members.  This means that dabbling in the financial sector to return profits to investors and shareholders isn’t their top priority.  Instead, not-for-profit banks are more likely to keep the money where it needs to be: in the real economy that provides real goods and services that satisfy real needs.

Sound too good to be true?  Luckily, there are already lots of instances of this happening.

Credit unions in the US, for example, are all not-for-profit, cooperative, tax-exempt organizations.   Their profits cannot be distributed to members as dividends, but rather must be recycled back into the credit union’s work and projects that benefit the wider community.  In the US, credit unions have 96 million members, meaning they serve 40% of the population.  In the UK, credit unions and building associations are very popular and have been growing their member-base steadily, as the Move Your Money campaign has encouraged and highlighted.

In fact, the number of credit unions world-wide has been rapidly growing for the entire last decade.  As of 2011, according to the World Council of Credit Unions, there were over 51,000 credit unions with a total of almost 200 million members in 100 different countries.

Not-For-Profits Can Help Centralize Money Creation

A Not-For-Profit World Economy will also take pressure off of the money creation system, allowing for more ease in putting the responsibility of creating money into the central bank’s hands.  How so?  In a Not-For-Profit World, competitive markets continue to exist, but instead of seeking to maximize private profits, they seek to fulfill human needs through the provision of services and goods.  This means that the not-for-profit enterprise has efficiency built into its mission, whereas for-profit businesses try to maximize profits often through redundancy and creating new customer “needs” via marketing.  This is highly inefficient and it relies on and encourages the debt-based money system.  A Not-For-Profit World economy would take this pressure off of the system, by reducing the fuel for the debt-based money system (i.e. – businesses based on profit-maximization, often through the inefficient processes of creating artificial consumer needs and compounding debt).  A Not-For-Profit World economy will do for service provision what collaborative consumption is doing for the provision of goods, because not-for-profit businesses exist primarily to meet real needs.

Not-For-Profits Contribute to the Healthy Circulation of Money

As many experts have been quick to point out, a lot of the lingo around money has to do with the metaphor of money as a liquid.  We need a high level of liquidity in the monetary and financial systems because, just like blood needs to reach all parts of the body, money needs to circulate in order to reach all parts of the economy.

In a for-profit economy, the money gets stopped up quite easily, because accumulation of wealth and assets is the goal of the game.  In a primarily not-for-profit economy, however, the circulatory system of the economy is kept healthy because part of doing good business includes the recycling and passing on of all profits. This is a vital part of maintaining a steady flow of money, allowing for more flexibility and resilience in the market.

Not-For-Profits Increase Equality

Just as the for-profit world economy inherently augments inequality through banks and a financial sector that systematically siphons wealth from the lower and middle classes to the financially well-off (via a web of debt, interest, and investor speculation), so would the not-for-profit world economy inherently distribute wealth in a way that creates more equality, as wealth keeps getting passed on and recycled through the not-for-profits themselves.

Changing the Rules of the Game

The examples above are just some of the ways in which a Not-For-Profit World model would help change the monetary system for the better.  Changing the rules of the game changes everything.  When you phase out private profit maximization from the center of an economy and replace it with public benefit, you get a whole different economy.   For more information about the “How on Earth” book project, please see the Post Growth Institute’s website.


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  • Matt

    Will we leave the current private Bank of England and have our own instead?
    Is the problem that banks are corporations ie. institutions which exist solely to make profits? (psychopaths with no empathy). Edward Goldsmith said that continuous growth (profit) is bound to wreck everything in time.

  • http://ralphanomics.blogspot.com/ Ralph Musgrave

    The Cooperative movement was set up over a century ago on the non-profit basis. It gained a significant market share, but it didn’t basically manage to give its customers markedly better value for money than its profit motivated rivals. In that sense it failed to bring what the authors call “wellbeing”.

    Next, every self-employed plumber and shopkeeper is profit motivated. How do you stop them doing that? Do you pass a law saying they must make zero profit each year? Because if so, they’d then have to be supported by the state.

    “In a Not-For-Profit World, competitive markets continue to exist, but instead of seeking to maximize private profits, they seek to fulfill human needs through the provision of services and goods.” But profit motivated businesses do “provide services and goods” don’t they?

    “for-profit businesses try to maximize profits often through . . . creating new customer “needs” via marketing.” Creating artificial needs is obviously undesirable, on the other hand a business should be free to advertise, shouldn’t it? Trying to pass a law that allows advertising while forbidding “need creation” would be a minefield.

    “not-for-profit businesses exist primarily to meet real needs”. So no one is allowed to purchase stuff which is not strictly a “need”? Music, television, different coloured clothes, beer and a million other things are strictly speaking a “need”. But I’m not in favour of banning them. Although I have plenty of respect for people who reduce their consumption to bare minimum.

    • jenniferhinton

      Hi Ralph,

      Thanks for your comment. This gives us a chance to give clear answers to some common concerns about the Not-For-Profit (NFP) World model.

      It is quite problematic to equate private profits with increased wellbeing. For-profit business tends to concentrate wealth (i.e. – accumulation of private wealth as the goal) and create higher
      levels of socio-economic inequality, which is bad for everyone. (See: http://www.ted.com/talks/richard_wilkinson.html) So, when we speak of “better value for their money”, we need to be really wary of what we’re implying there.

      Not every business owner and shop keeper is primarily profit-motivated. Research shows that purpose-based motivation
      is more important to people than profit after they have reached an adequate living wage. (See: http://tinyurl.com/qgso639
      and http://tinyurl.com/2ga47re)

      It is a common misunderstanding that Not-For-Profit means no profits, when in fact, this new wave of NFP enterprises do turn profits. They simply don’t privatize their profits; they reinvest them back into their work or into projects that benefit the wider community.

      We are writing this book for a very general audience, but we would especially like to catch the attention of small- and medium-sized business owners. The NFP model is a way for businesses to
      bring about a more sustainable economy, as opposed to top down regulations from governments. Transitioning to a NFP business model is a totally voluntary move for business owners to make. Due to lower entry costs, more horizontal organizational
      structures, as well as a growing market for socially- and environmentally-conscious companies, we are sure that the NFP World is viable, sustainable and even inevitable. (See: http://tinyurl.com/o33d3s6)

      We are certainly not advocating any new laws about advertising. Our point in this article was just to show that the only reason businesses currently create artificial “needs” (including perceived
      and planned obsolescence (see: http://tinyurl.com/3c3agu)) is to increase their profit margins. When a business no longer revolves around profit margins and the entire point of its existence is to meet social needs, this phenomenon of creating artificial needs will fade out. Beautiful things happen when employers and employees alike work because they want to and not because they feel like they have to.

      The for-profit model is based on an outdated idea of what human nature, human needs and wellbeing are. The NFP business model also meets the need for meaningful work.

      Finally, with regards to “real needs”, again we are not talking about laws and bans here. We are not defining for people
      what their needs are. Rather we feel the NFP model has amazing potential to meet all human needs. Using marketing to make people feel insecure about what they have or don’t have is motivated primarily by making private profits.

      Thanks again for expressing your concerns. We’re really happy to hear/read about how the NFP World model strikes people.


      Jen and the Post Growth Institute team

  • Gazza

    I have patented a board game to help people understand how money works and can be evolved to serve a global society

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