Guest blog by Ocean Love:
As I sit at my computer trying to find a way in to this article, I feel like Alice attempting to report from Wonderland. Put frankly, economics inhabits a different reality stream to Transition.
Spring financial figures saw a break in the UKs 18-month economic flat-line. Although the rise in GDP was a paltry 0.3%, George Osbourne wasted no time in assuring the public that fiscal austerity is helping to “build an economy fit for the future”. Just another example of the ‘growth-is-good’ mantra endlessly repeated by politicians worldwide. Unfortunately, despite defying both common sense and the laws of physics, continuous economic growth is a foundational tenet of the business-as-usual model.
”Anyone who believes exponential growth can go on forever in a finite world is either a madman or an economist”. This lovely quote from the late economist Kenneth Boulding exposes the heart of the issue beautifully.
In his last book The End of Growth, Richard Heinberg argues that perpetual growth is not only unfit to serve a future characterized by global environmental challenges, but has already met it’s physical limits. The financial crisis of 2008 represented the end of the era of growth. Heinberg recommends that we stop chasing a fictional recovery and begin adapting to our new economic reality immediately. However, he also points out a fundamental barrier to change, “We have created monetary and financial systems that require growth.”
Attentive readers of TFP will already know that 97% of the nations money supply is created out of nothing, as debt, when high street banks make loans. Consequently, money is debt. If there were no debt, there would be no money. Your mortgage does not represent the life savings of a fellow bank customer, the numbers that appear in your account when a loan is approved are conjured into existence by the very act of making the loan.
The accounting process responsible for this digital alchemy also destroys money when loans are repaid, effectively shrinking the money supply. Herein lie the roots of the perpetual growth machine. “In the current system there can only be a growing or shrinking economy”, say campaign group Positive Money, “A zero growth economy desired by environmentalists is not possible, as it will collapse into a negative growth economy. This is not the economy of declining resource use and sustainable lifestyles that is required to deal with the environmental and energy crisis; it is one of recession and unemployment.”
Transitioners understand the frustration of swimming against the tide. Sadly, every ounce of grass roots dedication, effort and ingenuity is pushing against a background system that is structurally incompatible with sustainability. Fortunately, in true Transition style, Positive Money have a plan and are working hard to bring it to fruition. Their proposals would prevent banks from creating money and return that power to the state. “It’s actually quite easily done through a few small changes to the way banks operate”, explains Ben Dyson, PMs founder. “Debt-free money would then be created by a publicly accountable body and spent into the economy by the government”.
The implications are very exciting: The possibility of a monetary system, not only compatible with sustainability, but actually capable of facilitating the changes necessary to achieve it. As Ben Dyson points out, “Transitional work would make so much more of a difference if you had a solid foundation to start from. Banks are creating money out of nothing for private investment. Why not let the state create it out of nothing to invest in the future?” Why not indeed.
For more information and to see how you can get involved, visit bsd.wpengine.com