Another Now

by Yanis Varoufakis

  Another of Jerome’s features that enthused Eva was its fully decentralized digital architecture. This mattered both technically and politically. Technically, it meant that all the payment data within Jerome would survive, should any part of it be damaged or destroyed. Politically, it mattered even more because it meant that no one had central access to or control over this information – not even the central bank. This type of distributed payments system sounded familiar to Eva. She asked Eve who had designed it.

  ‘Apparently,’ Eve replied, ‘the computer code on which Jerome was eventually based appeared out of the blue in October 2008. It was posted in some Internet chat room by an anonymous hacker, I believe. It was signed In-Cognito, but whoever that was never came forward to claim the glory.’

  That made sense, thought Eva. In-Cognito must be the same unidentified person or team who called themselves Satoshi Nakamoto, the inventor of Bitcoin. Their systems sounded identical. The difference, of course, was that in Our Now Bitcoin evolved into a pyramid scheme of hyper-speculation, whereas in the Other Now, where money and corporations were democratized, the system became the platform of a plain vanilla public payments system resembling the boring but ever-so-glorious public library.

  Meanwhile, the introduction of corpo-syndicalist legislation, which ended tradable shares, had dealt the final blow to investment banking. Within a few years, cash and share markets were almost gone, and only digital money carrying the central bank’s digital imprimatur and circulating from one PerCap to another remained legal tender. The end of commercial and investment banking did not, however, translate into the complete state monopoly of borrowing and lending that Eva feared. The opposite occurred.

  Countless community-based outfits emerged offering loans, piggybacking on Jerome – the central bank’s free digital payments system. These cooperative money brokers would pool the funds of savers who were eager to lend some of their PerCap Dividend or Accumulation, and would use this to lend to those corporations they identified as being more efficient, and thus bearing less risk, charging a modest commission from both sides. The two great differences between these money brokers and capitalist bankers were, first, that they themselves were shareholder-less partnerships and, more importantly, they could only loan value that had already been created and banked by persons and corporations – banned as they were from pillaging the future via overdraft facilities.

  As for Eva’s question regarding the total supply of money in the economy, the central bank’s charter was clear. The quantity of money was adjusted constantly with a view to regulating prices and enabling the production of socially valued goods and services for society. When average prices rose above a certain threshold, the central bank would increase the interest it offered to people saving in their PerCaps, thereby encouraging the public to reduce spending. At other times, when economic activity was deemed too sluggish, the central bank would reduce the interest rate and/or increase the universal basic amount that it paid into all PerCap Dividend accounts.

  When Eva asked if central banks remained independent of government, as the Fed or the Bank of England supposedly are in Our Now, she got a typically Other-Now-ish answer: central banks remained independent of government but not of society. Their monetary committees, which made all decisions relating to the supply of money, were appointed and supervised by a citizens’ monetary assembly, comprising a rotating panel, chosen by lot, using an algorithm that ensured fair representation of all members of society.

  Eva’s initial terror at the idea of a state monopoly of financial services began to wane once she heard of the boisterous, decentralized market for credit. It abated further when she learned about citizens’ monetary assemblies. And it almost disappeared when she discovered from Eve that there existed a multiplicity of community-based currencies alongside the central bank’s. As Eve explained, any group who wanted to create its own currency was given the digital tools and entitled to do so, and a small fee was charged whenever someone wanted to convert it into the national currency. As a result, from northern California to Kosti’s native Crete, local authorities had issued digital currencies for transactions within their communities using a model very similar to Jerome, their advantage being that they kept value produced locally within the community. Unlike in Our Now, where value produced in Aberdeen can freely emigrate to London, in the Other Now any transfer of wealth could be regulated by increasing or decreasing the amount charged for exchanging local for national currency, in proportion to the imbalance of wealth and trade flows between the two cities.

  Impressed by these local innovations, Eva was eager to learn how things worked on a global scale. If such a system regulated imbalances between Aberdeen and London, were similar systems in place to lessen imbalances, not to mention injustices, in the trade between, say, Britain and Botswana? In reply, Eve described what Eva considered the most intriguing feature of the Other Now’s international monetary system.

  Trade

  As an employee of the International Monetary Project, or IMP, the successor to the IMF, Eve was perfectly placed to answer Eva’s questions. The first surprise for her was Eve’s denunciation of the IMF before it turned into the IMP in 2013. ‘Our job at the IMP,’ Eve declared, ‘is to do exactly the opposite of what the IMF used to do.’

  The IMF is, indeed, notorious in Our Now. Since the 1970s, it has loaned money to bankrupt countries on terms that are the equivalent of debt bondage for their citizenry. Typically, when a country in Africa, Latin America or more recently Europe could no longer repay its government debts to foreign bankers, the IMF would step in to loan the money on neo-colonial conditions: wholesale transfer of public property to the international oligarchy, school and hospital closures, cuts in pensions and wages below the poverty line for the majority. Wherever the IMF visited, it left behind a black hole filled with pain.

  By contrast, according to Eve, the IMP was not in the business of lending money. With private bankers gone, the world had no use for a cruel international bailiff, which is what the IMF had turned into; the IMP’s remit was on the one hand to stabilize the world economy, and on the other to invest money directly in the regions of the world that needed it to develop, but without indebting them.

  ‘You mean to tell me that the socialists have finally invented the magic money tree of their dreams?’ Eva asked.

  Unfazed, Eve reminded her alter ego of that which they both knew intimately: the magic money tree had been invented decades before by bankers like their ex-employer Lehman. No, Eve explained, the IMP imposed a couple of levies upon net exporters of goods and money that helped stabilize world trade and global money flows. And the proceeds from these levies were then channelled as free development funds to the world’s least advantaged regions.

  For decades, some countries in Our Now have been net exporters, while others have been net importers. For example, Germany has always exported far more to Greece and many other countries than it imports from those countries. For Germany, this is known as a trade surplus, the mirror image of Greece’s trade deficit. This is a very common situation, even between rich countries. For example, Britain has been in a persistent trade deficit with Germany, indeed the rest of the world, since the Second World War, as has the United States. Since the 1960s America has bought more stuff from Germany, Japan and, increasingly, from China than it has exported to these countries. The problem arises when these persistent trade imbalances grow and grow and grow.

  The reason that expanding trade imbalances reliably lead to trouble is that to pay for, say, German car imports, a deficit country such as Greece must ultimately borrow more and more from the surplus country in order to afford them. The same goes for the United States: having run trade deficits with Japan, Europe and China for decades, the only way it has been able to maintain its superpower status is by ratcheting up its reliance on Wall Street to attract money from Chinese banks, Japanese capitalists and European oligarchs. Borrowing constantly f
rom Peter to pay Paul is an ill-advised strategy, but borrowing from Peter to pay Peter is more foolish still, as the deficit countries spiral into ever greater indebtedness and deepening reliance on chronically unreliable bankers.

  The problem gets worse when the loans used to pay for a country’s net imports are in a currency that the country does not issue. For example, Argentina, which has the peso as its currency, finds it impossible to borrow in pesos from American banks to import, say, oil because of the fear that the peso will devalue, in which case the American bank will lose money. So Argentina is forced to borrow in dollars, despite the fact that the Argentinian central bank can only print pesos. Similarly, Greece uses the euro, a currency that it cannot issue.

  The moment American bankers stop lending dollars to Argentina, the country is unable to refinance its mountain of dollar debt. Again, Greece is similar. Even though it has the same currency as Germany, the euro, the chronic Greek trade deficit with Germany translates into a constant flow of loaned euros from Germany to Greece so that the Greeks can keep buying more and more German goods. The slightest interruption in the flow of new loans from the surplus country to the deficit country causes the whole house of cards to collapse. This is when the IMF steps in. Its personnel fly into Buenos Aires or Athens, take black limousines to the finance minister’s office and state their terms: we shall lend you the missing dollars or euros on condition that you impoverish your people and sell the family silver to our mates, the oligarchs of this country and the world. Or words to that effect.

  That’s when TV screens fill with images of angry, and often hungry, demonstrators in Buenos Aires or Athens. Time and again history has shown that the periodic economic recessions that result from trade imbalances poison the deficit country’s democracy, incite contempt for its people in the surplus country, which then prompts xenophobia in the deficit country. Simply put, sustained trade deficits – and surpluses, their mirror image – never end well.

  How does the IMP prevent this tragedy in the Other Now? Eve was pleased to explain. For starters, the IMP issued a new digital currency called the Kosmos. This was decided at the IMP’s inaugural congress in 2015 in Mumbai. There it was agreed that the Kosmos would never be printed, nor used for actual transactions between persons or companies, but used exclusively for accounting purposes by states and trading blocks. People on the streets of London or Birmingham would still transact among themselves in pounds, Americans deal in dollars, the Japanese in yen. Similarly, no one would notice a difference when they travelled or imported goods. Britons travelling to China or buying a computer from Japan would still need renminbi and yen.

  The great innovation was that all trade between countries or blocks affiliated to the IMP is denominated in Kosmos, or Ks for short. When, for example, a German car crosses the Atlantic to be sold in America, the buyer pays in dollars and the German manufacturer receives euros. Except that, in between, the dollars are first converted into Ks before then being converted again into euros. The IMP, which keeps a ledger of all transactions, then adds that sum of Ks simultaneously to the United States’ tally of total imports and to Germany’s tally of total exports. Periodically, the IMP penalizes countries in proportion to their trade deficit or surplus. For example, if the US–German trade becomes grossly skewed, both Germany and the United States are charged the Trade Imbalance Levy. This works simply and automatically: a certain number of Ks are withheld from the German central bank’s account at the IMP in proportion to Germany’s trade surplus with the United States. And an equivalent number of Ks is withheld from the United States’ account at the IMP in proportion to America’s trade deficit with Germany.

  Eva wanted to know what the IMP does with these Ks that it withholds.

  ‘They flow into a common fund called the International Redistribution and Development Depository,’ Eve explained, ‘which uses them to fund green investments, especially in public health, education, renewable energy grids, transport systems and organic agriculture. Most of them go to the less developed regions in the world, which may include parts of the United States or, indeed, Germany – regions with low levels of domestic savings. Additionally, the IRDD funds migration flows in association with the Human Movement Project, where my partner Ebo works. What makes these monies so effective is that they are not loans but transfers.

  ‘To avoid paying this levy,’ Eve continued, ‘a country needs to export more or less the same Kosmos value of goods and services as it imports. Initially, it was decided that the levy should be fixed at 5 per cent of deficits and surpluses before rising to 10 per cent by 2031. In practice, this means that, in the current year, 2025, any country that has a trade deficit of 100 billion Ks will have to pay 5 billion Ks, money that will go to the poorest humans and regions. Importantly, the exact same applies to a country running a surplus of 100 billion Ks.

  ‘The beauty of the Trade Imbalance Levy is that it works well even when it fails. If by penalizing trade imbalances it succeeds in balancing trade flows, great. But even if it fails fully to eliminate trade imbalances, it generates funds that are then invested directly in underdeveloped regions via the IRDD. And that’s not all.

  ‘The key to world economic and political harmony,’ Eve explained ‘is the curtailment of all global imbalances – not just imbalances in the flow of goods and services but also in the flow of money from one economic block to another, from one country to another.’

  It was at IMP’s congress in Shanghai in 2021, she explained, that the IMP’s Kosmos payment system was extended to prevent sudden influxes of speculative money into poorer countries’ economies. In Our Now, such invasions resemble a plague of locusts. Every time Wall Street sniffs the opportunity for a lucrative deal in a poor country – the discovery of an oil field, a boom in house prices, a new crop of soya beans – they flood the place with their easy money. Very quickly, that flood inflates local house prices and the country’s share market. A semblance of enrichment leads local people to do stupid things: they take out loans to get in on the money-making, usually by investing in white elephants. Before long, the bubble bursts. Always quicker to react and better informed, Wall Street extracts its money swiftly at the first whiff of danger, and the whole economy collapses.

  To keep a check on these money invasions and subsequent exoduses, the IMP instituted a second penalty: the Surge Funding Levy. It is, very simply, a fee levied on monies wired across borders that kicks in above a certain threshold and increases in proportion to the speed and volume of these transfers. Once triggered, the IMP withholds from any transfer between, say, the United States and Brazil a number of Ks in proportion to the scale of the surge. As in the case of the Trade Imbalance Levy, the withheld Ks flow automatically to the IRDD.

  ‘In fact, by shifting wealth to the global south,’ Eve added, ‘these measures have given the governments of developing countries the necessary latitude to agree to stricter emission limits as part of our International Green New Deal.’

  Eva’s last question was a technical one: ‘How is the exchange rate between the IMP’s Ks and all the national currencies determined?’

  ‘By me,’ answered Eve, half-joking. Eve explained that she worked in the IMP’s Currency Auctions Directorate, which held daily international auctions in order to work out appropriate exchange rates, so that the demand for each currency, expressed in Ks, matched almost exactly the quantity of that currency on offer from its central bank and private actors.

  The IMP had, in summary, instituted a market-based, almost fully automated system of global discipline with the potential to balance out trade and money flows. Built into that system was a mechanism generating money that funded the transition of developing regions to low-carbon energy, green transport, organic agriculture, as well as decent public education and health systems. And all of it relied on the international agreement – first struck in Mumbai in 2015 and then extended in Shanghai in 2021 – that all trade and money flows should pas
s through the IMP’s digital ledger and be denominated in Ks.

  Eva had to admit she was much impressed.

  Land

  On 27 January 1967, the day three NASA astronauts died tragically in an Apollo launch test, the United States, the Soviet Union and Britain signed the Outer Space Treaty. It stipulated that everyone had the right to explore the moon and other celestial bodies but no one could take ownership of them or parts of them ‘by claim of sovereignty, by means of use or occupation, or by any other means’. Ever since Eva had become aware of this obscure treaty, she had wished it applied also on earth.

  A true liberal, Eva disdained monopoly. And to her mind there could be no greater monopoly than ownership of a piece of land. In this respect, she was in good company. Her favourite dead Englishman, J. S. Mill, once wrote that landlords ‘grow richer, as it were in their sleep, without working, risking or economizing…In what would they have been wronged,’ Mill wondered, ‘if society had, from the beginning, reserved the right of taxing the spontaneous increases of rent, to the highest amount required by financial exigencies?’ Another hero of Eva’s, the French economist Léon Walras, had gone further. He argued that land must be publicly owned and the accrued rents paid to the public as a social dividend, either in the form of money or public services.

  So Eva was even more impressed to discover that Walras’s idea had been adopted and written into law in the Other Now. In her dispatches Eve reported that, in a stunning reversal of the enclosures, which in eighteenth- and nineteenth-century England had privatized common land and sparked off capitalism, in the Other Now all land titles had been transferred to regional authorities. The UK’s Great Ground Reform Act of 2017 established a ground commons authority for each county. Something similar transpired a year later in the United States, where Congress passed the Ground Trusts Act. On both sides of the Atlantic, every county’s freehold titles were then transferred swiftly to its gComms, as the ground commons authorities or ground trusts came to be known. To appease the current owners of land, the acts included transitional arrangements granting existing private landlords life-long free leases. As for companies, the shift to one person one share one vote made it easier to strike agreements with the ground trusts on land use.