Today the money meme rules our lives and interactions in most societies on Earth. How did this happen? Economists analyze money-based markets. Trading is innate in human behaviour. Karl Polanyi describes how indigenous peoples in the South Pacific traded shells in their canoe travels among these islands in his Primitive, Archaic and Modern Economics, (1968). His The Great Transformation, (1944) describes such traditional societies’ markets over-ruled by British laws creating national markets, facilitating global trade and colonial exploitation.
I learned growing up in Bristol, a key port in Britain’s slave trade, in a typically patriarchal family, that money is a tool of power. Money is now widely used in most countries to control and incentivize human behaviour in today’s “global casino”. My businessman father kept my mother penniless, grovelling for cash to pay our grocery bills, while he dined out and golfed. Men were dominant, women subservient, controlled with punishment and domestic violence. Could we run away? Our mother said, “We can’t because I don’t have any money”. Similar domestic violence is personal in US Poet Laureate Natasha Trethewey’s Memorial Drive (2020). Gender-based caste systems, reinforced by the money-meme, are widespread.
Such childhood experience of millions, led me to unravel this controlling money meme and how it limited our freedom and life choices. I document the non-money, unpaid traditional community sharing of goods, services and mutual aid. (Henderson 1981, 1996). Raising children, as Hillary Clinton described in It Takes A Village (2017) requires loving unpaid care maintaining households and serving on voluntary programs. These “Love Economies” buttress all societies. Money metrics overlook them, economic textbooks call them “un-economic” describing human nature as selfish and competitive, and volunteering as “irrational”. Total production in all societies, includes this unpaid Love Economy and Nature’s services in our shared biosphere, photosynthesizing the daily free photons from our Sun, creating our food.
I and Marilyn Waring, a New Zealand parliamentarian, in her If Women Counted (1988) helped the United Nations Human Development Program (UNDP) to look at this unpaid half of all societies. They estimated that $16 trillion worth of these unpaid goods and services ($11 trillion by women and $5 trillion by men) was simply missing from that annual GDP of $24 trillion in 1995. If included, that year’s GDP would have risen to $40 trillion.
In 2000 the Calvert group and I jointly launched the Calvert-Henderson Quality of Life Indicators, measuring values beyond money, using scientific data on 12 aspects of Quality of Life. Ethical Markets Media in 2007, launched with GlobeScan, global polling on Beyond GDP in twelve countries, asking whether their publics favoured either money-based GDP to measure national progress or expanding it with scientific data on health, education and environment. In our series in 2009, 2013 and our 2020 survey, we still find an average 72% favouring expanding GDP. People are ahead of politicians and economists in understanding the limits of the money meme and GDP.
Money is not wealth, but simply information, the ubiquitous metric for tracking and scoring our human goals and activities, a numeraire, like inches, hectares and centimetres. Many communities understand this. If their nation’s central bank creates insufficient money to complete local trades and employ citizens on local tasks, they create complementary currencies. Communities thrive wherever central banks restrict money supplies or governments impose “austerity” or mismanage the design of their economic rules. “Berkshares” in Great Barrington, Massachusetts, issued by the Schumacher Society are accepted by most local banks. Berkshares fund local enterprises create community-supported agriculture, cooperative housing, new businesses and restaurants. These two currencies coexist: Berkshares for local use; US dollars for purchases from the national marketplace.
Ethical Markets co-produced our TV special The Money Fix, on the politics of money-creation and credit-allocation, covering Berkshares, barter systems, and other swap sites. Most people misunderstand money-creation. Viewers find release from the conceptual prison of the money meme. Millions in many countries withdraw from consumerist rat races, focusing on their precious time, deeper key values and goals, as reported by Vicki Robin in Your Money Or Your Life (2018).
How did this money meme overtake our societies, now installed in the hard drives of most institutions’ operating systems? The Money Fix explains how the power to coin our USA money based in our Constitution, fell into private hands, as bankers and their political allies created the Federal Reserve in 1913. The Fed has a publicly appointed chair and members of its Federal Reserve Board, but remains a private institution. Fed chair Jerome Powell was asked in 2020 on the CBS TV show 60 Minutes the usual question whenever anyone proposes any public sector program: “Where’s the money coming from?” Powell responded that the Fed prints its, not just the banknotes, but also digitally in its computer databases and programs. Essentially, the Fed simply moves the decimal points!
Money isn’t scarce and all sovereign governments create it, whether US dollars, Japanese yen, China’s yuan or Britain’s pound. Central banks empower their commercial banks to create money every time they make a loan or mortgage for a borrower. The bank makes a new numerical entry of the loan amount into the borrower’s account. Textbook rules: “fractional reserve banking” allow these commercial banks to make additional loans of up to ten times their digitally-stated reserves on their books. The Bank of England made this process public after pressure from civic groups and money reformers including Positive Money, our partners in the Green Economy Coalition and by Joseph Huber in Sovereign Money, (2018). The Economist cover warned: “Free Money!”, July 25, 2020.
This money-creation process is obscure in economic textbooks, money is a given: an accounting unit, a means of exchange and a store of value. I point out in Money Is Not Wealth: Cryptos v. Fiats, our currencies, if well managed can still be useful mediums of exchange, but today subjected to trillions of speculative traders pyramiding assets in derivatives on ballooning global FOREX markets, currencies are no longer a dependable store of value. Efforts to curb this currency speculation include taxing all financial transactions, as proposed by economists James Tobin and later by Lawrence Summers, to “throw sand in the gears”. (Summers, 1987). Ethical Markets devised a computer program, FXTRS to collect these financial transaction taxes and add the huge proceeds to the currency stabilization fund of countries’ under attack. (Henderson and Kay, Foreign Exchange Transaction Reporting System, FUTURES, 1996).
Today, with still untaxed financial trading, algorithms driving robot investment advice and negative interest rates, people have few investment choices. They are forced into stock markets dominated by computer trading and unregulated cryptocurrencies, or hoarding cash in their mattresses! After 2008, many computer-driven “flash crashes” followed, due to high-frequency trading described by Michael Lewis in Flash Boys (2013) and Perspectives on Reforming Electronic Markets.
Central banks’ money-creation is often coordinated, documented by Nomi Prins in Collusion, (2018). During financial crises, they increase the money supply in their programs of “Quantitative Easing” (QE), by buying up dud mortgage-backed securities created by reckless bankers. Textbooks theories says that this new money “trickles-down” to fund “Main Street” economies. In today’s globalized money-measured GDP regimes, this new money rarely reaches Main Street, but flows back through the existing financial plumbing to fuel asset bubbles in stock markets. Economists and politicians wonder why all this new money leads not to inflation, but deflation. Stock markets expect the Fed to continue its QE. Efforts to taper it off cause market drops in “taper tantrums”!
Today, the money meme is exposed, as millions see it being printed on TV. Yuval Harari in his Homo Deus (2018) calls the money meme a successful myth of market fundamentalism. Harari describes how humans create such stories to coordinate efforts toward social goals. Popular movements in most democracies, see money exacerbating unfairness and inequality. Media show elites private planes in Davos and other resorts. People and communities in “fly-over country” rust-belts, experience widening poverty gaps and stagnant wages. Middle classes disappear as unions are targeted by corporations and their political supporters. In Europe and the USA, fairness is the battle cry. Following the 2008 debacles, as reckless bankers evaded prosecution, both the US right-wing Tea Party and protesters at Occupy Wall Street carried similar signs :“Where’s MY Bailout?” Bangkok-based Focus on the Global South reports on Rogue Capitalism and The Financialization of Territories and Nature (2020). Founder Walden Bello, advocates that developing countries withdraw from the World Bank and IMF in his Time for an Exit Strategy for the Global South? (2020).
The Covid-19 lockdowns upended old-time economic textbooks focusing on debt, deficits, inflation fears, and GDP. Instead of budget and job cuts, “austerity” and moralizing on children’s debt burdens, the new slogan was “stimulus“, tax refunds, negative interest rates to combat deflation. The Fed created $7 trillion of new money and Congress passed the March 2020 $4 trillion Covid-19 relief bill. This swift, bi-partisan stimulus kept unemployed consumers paying their bills, flowing into aggregate demand. Direct payments went to businesses according to their lobbying funds. $2000 Treasury checks went to individuals.
By April 2020, Congress passed another $3.1 trillion bill. The Senate baulked as market fundamentalists’ textbooks warned of rampant inflation, while deflation loomed. The unfair financial plumbing still blocked much of this new money from flowing to poor people that policymakers hoped would spend into the economy. Instead, money flowed to the rich who saved it or sent it offshore to tax havens, while corporations used these free funds to buy back their stock. The V-shaped recoveries predicted in orthodox theory became the unequal K-shaped recovery of late 2020. The money meme failed every US state and municipal government. Local governments, unlike the national governments and Fed, are unable to print their own dollars. In the US, all states need Congress’s fiscal powers, to replace falling tax receipts, fund overflowing hospitals, pay unemployment checks and keep first responders delivering public services. Republicans revived fears of borrowing and deficits, stalling on $3.1 trillion Congress passed in April 2020.
Yet, the Fed is actually authorized to buy the sovereign bonds issued by all US states, beyond dud mortgage securitized bonds. In California, hurt also by climate-related droughts and fires, a coalition of non-profits, NGOs, businesses and Green New Deal supporters emerged. Some demanded the Fed use some of its new money to buy California’s sovereign bonds and help restore the COVID-related budget shortfalls. Monetary experts, Ellen Brown, Robert Hocking and I agree with Nathan Tarkus, in his 2020 paper Is It Legal for the Federal Reserve to Provide State and Local Governments Unlimited Credit Lines?, that states and local governments should issue their own complementary currencies, allowed in many countries, as they did in the USA, Canada and Mexico during the Great Depression, documented with illustrations in “Standard Catalog of Depression Scrip of the United States in the 1930s“ (1961). We also urged that the Fed should use its authority to also buy states’ sovereign bonds --- preventing firing essential workers and declines in public services.
While markets and all useful forms of trading will continue in all societies, they must be limited, steered by social norms, with excesses curbed by enforcing regulations, as I describe in Markets’ Problem Twins: Trading and Advertising. Economists’ fantasies of “market completion “spreading use of money to mediate all human transactions are revealed. The multiple market failures in financial globalization were exposed by former World Bank economist Nicholas Stern, The Stern Report (2006), seeing climate disruption as the biggest market failure in human history, as social and environmental costs “externalized” from government and business balance sheets reached the IMF’s worldwide estimate of $5 trillion annually.
These hidden costs, risks and dangers of market failures, further revealed in the pandemic, illustrate the limits of the money meme. Money-based transactions cannot dominate all other values of health, education, equality, justice, fairness and environmental quality, as I describe in [Steering Societies Beyond GDP to the SDGs, the Sustainable Development Goals ratified by 195 countries in 2015. This systemic set of goals with science-based indicators reflect planetary realities and risks that we humans face going forward. A positive scenario Pandemics: Lessons Looking Back From 2050 describes all the available tools to steer our societies toward peaceful sustainable futures. Milton Friedman’s “negative income taxes” re-emerged in 2020 in US election platforms including Andrew Yang’s universal basic incomes and disbursing “helicopter money” for optimal stimulus.
The pandemic reversed obsolete paradigms, invalidating most concepts of economics I described in Mapping the Global Transition to the Solar Age: From Economism to Earth Systems Science, (2014). Modern Monetary Theory (MMT) at New York’s Bard College, emerged with Stephanie Kelton, former chief economist of the U.S. Senate Budget Committee, in The Deficit Myth, (2019). She focuses on misunderstandings miscasting debts and deficits, using politicized money arguments to obstruct needed public investments, social services and infrastructure, for the growing US population of 330 million people.
Of course deficits matter! But so do the private and public assets they create: schools, hospitals, roads, bridges, dams, broadband, R & D, as well as military weapons, the VA, Social Security, Medicare and public health plans to counter pandemics. We lose sight of these valuable assets because GDP in addition to its other failures, does not have an asset account, as is proper in double-entry accounting. GDP is a cash-flow statement, ignoring all these public assets created by Congress as vital investments underpinning all modern societies, balancing out the debits. GDP classifies education as “consumption”. Yet, educating the next generation is the most important investment all democratic societies make in their future!
These errors in money-based GDP and macroeconomic statistics concealed in algorithms send false signals to investors, pension fund managers worldwide, managing our societies and our children’s future. Financiers follow inflated “debt-to GDP ratios” still ignoring the public assets these investments have created. If corrected, many countries’ “debt-to-GDP ratios” could be cut by up to 50% with a few keystrokes! Similarly, proponents of the USA’s “Green New Deal” and Europe’s “Green Deal” see stimulus as creating future prosperity. Such mega-investments in the US New Deal created the Hoover Dam --- without which Los Angeles would still be a village!
Financing by governments creates guarantees, bonds and public contracts on which companies bid to build such national infrastructure, including the US interstate highway system in the 1960s and the Moon Mission. Absurd ideas of market fundamentalists that such “moonshots” can be funded by private companies and passing the hat among taxpayers are revealed by MMT theorists. Public investments underpin future prosperity, create new technologies, industries and jobs, education, healthcare, extending safety-nets, while supporting workers displaced in obsolete, fossilized sectors as societies continue transitioning to global renewably-resourced, circular economies.
These global transitions involving structural and cultural shifts toward systemic SDGs are all viable with existing technologies and achievable within the ten-year window advised by the UN’s IPCC to reduce CO2 emissions. Political will steering beyond the money-meme can put markets and money in their rightful place. Banning fraudulent “externalities” with correct metrics’ full-spectrum accounting, internalizing all forms of global pollution and health risks, shifts risky old investments to cheaper scaling of renewables, avoiding many costs. Shifting from GDP which incentivizes bad behaviour (the Seven Deadly Sins!) toward the SDGs can restore our traditional community sectors of sharing, caring and the Golden Rule we were taught and teach our children, as we describe in Transitioning to Science-Based Investing (2019-2020).