Wealth’s Foundation
One of the primary mechanisms for the creation of wealth is our banking and monetary system. We all put our money into the banks — the black box of the economy — and we assume the money will be there when we go to withdraw it. At least part of our mind probably believes that the money is there. We receive statements every month that say it’s there, and we earn interest on the deposits.
Yet like the myth of the self-made millionaire, the presence of our money in the bank is an illusion. Banks use the deposits they have to loan money out to individuals and businesses — this is how they earn the interest they pay on our deposits, after all. The fractional reserve system, the legal structure governing how banks operate, requires that banks only maintain in the order of 10% of the money we have placed on deposit as a reserve. In other words, for every dollar we deposit, the bank can create an additional $9 in loans to businesses. They have the power to create financial wealth by issuing new money.
So, how is real wealth created? It is not the slips of paper we call cash. History has shown time and again that paper (and now electronic) representations of wealth are only as good as our collective confidence in their value. In this book, we will show how the roots of real wealth lie in our shared values, understanding and institutional structures, but also in the different forms of capital we generate and regenerate as a community. The word capital carries an implicit meaning that speaks to a regenerative capacity — it is, as we will explain in Chapter 3, an asset that can produce other assets. Of course, the foundation of all our wealth is the ecological integrity of the planet we call home. . . it is the source of all the regenerative capacities we need the most — land, air, water, food, materials and energy.
The singular form of money we have created through our laws and institutional arrangements has been a cornerstone of financial wealth through the 19th and 20th centuries. But the demands of the 21st century and the imperatives of the global challenges of climate change, resource scarcity and unprecedented growth in human populations call us to a more comprehensive understanding of wealth and more democratic and resilient wealth creation processes and mechanisms. Most of these alternatives can be initiated at the local level by cities and other organizations. City leaders can play a role in the education, funding and structures required to give us all a voice in the creation of sustainable wealth.
Overview of the Book
The original title of this book was Intentional Cities, Intentional Economies — to emphasize the link between the actions cities take and the health of their local economies. Cities don’t often recognize this link — or realize that they have the capacity to improve their economies. They can do this by bringing the community together around a shared vision, setting goals and identifying strategies to make their local economy more self-reliant, more vibrant. They can help their citizens achieve real and lasting wealth. In this way, cities become more intentional, meaning that they are moving in a direction they choose rather than being buffeted by the winds of change. When they focus on the ways they create wealth, they also choose the focus, the intention, they want to give to their economies.
Part I of the book describes the process by which wealth is created and explains the role of the existing financial system in this process. Part II describes a variety of different forms of local currencies, circulating in parallel with the official currency, that address specific problems that cities and communities face. Part III is designed as a case study and “how to” manual — it describes how several cities have managed to engage their populations in long-term sustainability planning and how these efforts have either supported local currencies or helped create them, as well as some lessons learned about when it might not be possible to succeed.
We hope you find the book inspiring and that it gives you enough information to move forward. Our compendium of community level currencies is not exhaustive — there are many hundreds we have not described. But the structures and mechanisms we include are all replicable in other domains — they are only limited by your imagination and the courage you want to take as a leader. Introducing new ideas is never easy, and we will see that introducing new ideas about money has its own unique challenges. More on this in the book’s conclusion — until then, enjoy!
— Gwendolyn and Bernard
Reykjavik, Iceland
PART I
LOCAL ECONOMICS
CHAPTER 1
What is Wealth?
Wealth consists not in having great possessions,
but in having few wants.
EPICTETUS
The appeal of big prize lottery tickets comes in part from the fantasy the tickets allow. We imagine all the things we could do, charities, projects, real change that we could help make happen. There is no denying the appeal of vast sums of money. In our dreams, money solves all our problems, gives us resources to meet needs we never knew we had. But is it wealth?
You might have picked up this book because you thought it would tell you something about how you can increase your own personal wealth — and it will. But Creating Wealth is not another get-rich-quick scheme — this book will help you find and create wealth in places you might not expect. It also might show you how wealthy you already are.
Redefining Wealth
Wealth. It’s something we all want. Wealthy is rich, after all — but rich in what? In possessions, money, income? This depends on how you define the word. Its original meaning, from the Old English weal (as in commonweal), was simply prosperity or well-being.”1 What a notion! How far from the meaning many of us have come to associate with the word. Wealth is more than the accumulation of money and resources, and it can be generated in ways other than through conventional financial means. In order to truly capture the wealth of our societies, our cultures and our environments, we have to pay heed to that older notion of wealth as well-being. We might think that winning the lottery will make us wealthy and that wealth will make us happy, but we also know that it doesn’t always work that way. While it’s true that poverty does make for unhappiness, lots of money doesn’t necessarily buy happiness.
We may have seen cases where someone who has had very low income wins the lottery or obtains a big court settlement — and yet the money often doesn’t manage to improve their lives very much. In many such cases, things get worse as the stress of possessing money and all its new demands take their toll — how to keep it, suddenly meeting relatives and friends you never knew you had, con artists and an army of “investment advisors.”
How do we obtain well-being, if acquiring more money doesn’t do it? When are we happy? We know the answer to this question — we have a sense of well-being when all of our needs are met. Not just the basic needs of food, clothing and shelter. But also the need to be a creative participant in our community, to have a voice in our own destiny, to pursue our own spiritual development unhindered by social sanction, to have time to rest, play and just be with our families. Our needs are multi-faceted, and yet with the dominant emphasis on the consumer economy, the major economic actors — businesses and corporations — are always advertising to convince us to buy our way to fulfillment.
We don’t need money. We need the things that money can buy.
Overweight? Buy a diet plan and an exercise machine. Unhappy? There are lots of self-improvement programs you can buy. Spiritually lost? Buy a book, a videotape, join a successful megachurch or take a vacation at a resort. Our need for self-expression is increasingly met through the clothes we wear, the cars we drive. Arts and music are left to the professionals who have their own goods and services available for sale. And yet after all this we find that the consumer solutions don’t work — the temporary gratification we get from new products only deepens the underlying need. But if we can’t buy our way to happiness, there has to be another way.
We need to redefine wealth as the first step in charting a course towards sustainable wealth. So what is meant by that? Remember the notion of commonweal (public we
ll-being)? Developing real wealth implies making choices that enable all members of the community to attain well-being. Sustainable wealth means projecting that notion into the future, much as the World Commission on Environment and Development did when it defined sustainable development as “meeting the needs of the present without compromising the ability of future generations to meet their own needs.”2 If we had sustainable wealth, we would have a community with well-being — a community whose needs were met without borrowing its wealth from future generations.
A Systems Perspective
What are our needs, and how are they satisfied? It is possible to do an empirical evaluation simply by looking around at the different institutions, programs, goods and services that are offered in society. Not that all of them meet real needs — some are obviously there because a want or an artificial need has been created, but taking an inventory of the assets we have — assets being defined as need satisfiers — gives us a good starting point.
Human and Social Development needs: health and well-being
Empowerment needs: equity, conflict resolution, self-determination
Economic needs: income, meaningful work
Material needs: housing, communication systems, transportation, energy, waste management, food
Environmental needs: air, water, biodiversity, pollination, stable climate
FIGURE 1.1. Human Needs and Community Systems
Before we can be a contributing part of any community, we have a need for human development. We need education, healthcare, self-esteem, skills, recreational opportunities. There are assets in our communities that meet these needs — schools, universities, child care programs, wellness and medical services, hospitals, recreation programs and facilities. When the systems are in place to help us all be healthy, productive and happy people, we can also say that our community has sufficient human capital. Human capital can be defined as the capacity communities have to further our development as human beings, along with the aggregate skills, knowledge and abilities people in the community have and can continue to maintain.
We also have social needs — the needs that can only be fulfilled by being part of a community. We need to have a sense of connectedness, a sense of community. We need to feel safe, to express ourselves and enjoy the beauty of our surroundings. We need a sense of meaning and purpose, and meaning is invariably generated only through relationships (relationships to our children, our family, our country, or to our idea of the divine). These human and social needs have given rise over the centuries to many of the religions and spiritual traditions. We need supportive relationships, networks of friends and a sense that we’re contributing to the community. When these needs are satisfied, we can say that we have many social assets. When we have systems in place that insure we can continue to meet our social and cultural needs as a community, we can say that we have sufficient social and cultural capital.
To make decisions, resolve conflict and to insure that we all have a level of equity, we all have a need for empowerment. The institutions we have established to govern ourselves, the programs in the community that help people resolve disputes and the laws and regulations we have to provide a just and peaceful society are the assets we have in this area. The institutional capital in our community is the legal framework and the traditions, structures and other foundations that enable our societies to continue to recreate the institutions they need.
When people think of needs, the first things that often come to mind are the basic needs of food, clothing and shelter. These material needs are obviously important, and the buildings, manufactured products, technology and infrastructure we develop in our communities are the assets we have to satisfy these needs. When we have good affordable housing, safe and healthy drinking water, effective systems for recycling and reusing waste, renewable energy systems, healthy local food production, communication systems that link us up with each other and the rest of the world, we have the built and technological capital we need to prosper.
Our material needs go beyond what we make ourselves, obviously, and so we can also speak of the environmental needs we have. We need clean air to breathe, diverse ecosystems that support a wide variety of plant and animal life, a stable climate, assimilative capacity for our waste products, water to support other forms of life as well as for us to wash, drink and enjoy. We need healthy soils, pollinators; all of these things are the environmental assets that serve as our basic life-support system. When the ecosystem is healthy and productive, the core regenerative capacity of the ecosystem is the natural capital that we need for sustainable communities.
We’ve described several kinds of assets and capital that satisfy the needs we have, and still there has been no mention yet of the financial assets and capital we typically associate with the words money and investment. That’s partly because money is really more of a means to an end than a need in itself. We don’t really need money. We need the things that money can buy. We don’t need financial capital for its own sake if we can obtain the things it buys. The exchange capacity of money is now, and hopefully in the future, one of the key reasons we need it. Money helps us exchange things that are of value to us — like our time and labor — for things that are of value to someone else.
Money, however, is not the only medium of exchange. After all, people have been exchanging goods and services with each other for millennia without using money. You help your neighbor put on a new roof. He fills your cavities and gives you a new crown. You drive your friend’s kids to school. She baby-sits your kids. In both these examples, no money changes hands, but goods and services do. The value of this type of exchange is another asset and a form of capital — potential exchange capital.
Our community systems have developed over centuries, driven by our needs and the necessity of satisfying them. When we speak of a wealthy community, we mean one that has the capacity to meet a wide variety of human needs, one that had invested in all these forms of capital: social, cultural, human, institutional, built, technological, natural, financial and potential exchange. Creating and maintaining these diverse forms of capital over time is the sustainability challenge.
FIGURE 1.2. How Needs, Assets and Capital Relate to Each Other
More than half of humanity now lives in cities, and this trend is expected to continue for at least another decade. So our community wealth is often the wealth that can be found in our cities. Cities are monuments to collective human endeavor over thousands of years. They form the physical, spatial and even the cognitive structures that meet so many of our needs. Realizing this, the bulk of the concrete examples of wealth creation we discuss will focus on cities.
The Wealth of Cities
To understand alternative paths to individual, community and economic well-being in an urban context, we need to look at how cities work, and we need city leadership to address the critical issues of a sustainable economy. In Cities and the Wealth of Nations, Jane Jacobs identified urban regions as the most important driver of economic growth throughout history. She documented both how cities and regions had the economic clout to import goods from other areas and also how they devised new ways to replace these imports with locally produced goods and services. This import replacement was the key source of urban economic expansion.3
Since the Earth Summit in Rio de Janeiro in 1992, cities all over the world have played a leading role in the efforts to stabilize global climate and address environmental destruction. There have been several different movements — sustainable cities, healthy cities, ecocities, resilient cities and most recently transition towns — and several different new organizations organized to support cities’ efforts. ICLEI was one of the first; it was originally the International Council for Local Environmental Initiatives, but has been renamed ICLEI: Local Governments for Sustainability.4
The scope and depth of this movement is confirmed by the proliferation of other organizations that have emerged over the past two decades. This includes, for instance, the Institute fo
r Sustainable Communities, the World Health Organization’s Healthy Cities program, Healthy Cities International, Ecocities International, the Center for Resilient Cities, the Cities PLUS Network, Global Community Initiatives and the largest one of all — United Cities and Local Governments (UCLG) — a new international congress of cities established in 2004 when several global coalitions of cities (The International Union of Local Authorities, Metropolis and the World Federation of United Cities) merged into one organization.5 UCLG’s Millennium Cities Campaign embraces the United Nations Millennium Development Goals, which put a sustainable environment and a sustainable local economy on the same page. Cities are increasingly aware that the solutions to climate change and environmental problems are embedded in the economies we have created. These cities are positioned to be key catalysts for large-scale change.
Cities take action on several levels, ranging from broad policy changes like rezoning an area of the city from commercial to industrial to even small actions like buying paper towels for public restrooms. The policies take different forms — long-term planning documents with a vision statement, goals, targets and strategies, operating budgets and capital plans, ordinances and regulations, annual goals and policies to guide operations such as personnel and purchasing policies. The long-term plans guide ordinance changes and budgets, and in turn, the budgets, capital plans and annual goals shape the implementation activities that occur every year. Other policies provide direction for day to day operations.
Creating Wealth Page 2