The short answer is that it has something to do with money. Our plight is not, however, simply a matter of the lack of money or the allocation of ever greater amounts of it. Trillions of dollars have been spent on one issue after another, but have not, and cannot by themselves, stem the tide of continued deterioration of our planet, or prevent the next downturn of the so-called business cycle. Our failed efforts are instead linked to a collective lack of understanding regarding money and the use of a limited set of monetary tools.
Sound vaguely similar to another place?
As absurd is it may at first seem, our postindustrial dilemma bears some similarity to the plight of Hammerville. We too are confronted by issues that threaten us as never before. We too are baffled trying to understand what is going on and what to do. We are engaged in short-term industrial-age practices that persist despite mounting evidence of the dangers they pose to us all. In addition, we limit most of our exhanges to the use of one tool that has become as important and ubiquitous in our monetized world as hammers were in Hammerville.
We invite you to take an initial look at our accomplished yet troubled moment in time; a place that we have come to think of as Moneyville.
THE NEW MONEY OF MONEYVILLE
“Fish are not aware of water.” This proverb speaks to the fact that some elements of our lives are ever-present but simply taken for granted. Such is the case with our world and money. Certainly, we pay attention to how much money we have, how much more we need, and ways by which to try and obtain and invest it. Rarely, however, do we stop to question the nature of money itself or the system by which it functions. Money is simply, well…money. And we are all deeply immersed in its currents.
Money plays nearly as influential a role in Moneyville as hammers did in Hammerville, in more ways than we might care to believe. It is at once one of the oldest, most pervasive, and influential of all human-made creations. Yet, despite its enduring, prominent place in our world, money remains a mystery to experts and laypeople alike.
No one actually knows for certain when money came into being. We do know that it predates the written word and recorded history. One of the most celebrated economists of the 20th century, John Maynard Keynes, pointed out:
Money, like certain other elements in civilizations, is a far more ancient institution than we were taught to believe. Its origins are lost in the mists when the ice was melting, and may well stretch into the intervals in human history of the inter-glacial periods, when the weather was delightful and the mind free to be fertile with new ideas—in the islands of the Hesperides or Atlantis or some Eden of Central Asia.3
What is well established is that money’s influence has grown steadily over the centuries. Richard Wagner, former president of the Institute of Certified Financial Planners, notes, “Money is the most powerful secular force within our world today.”4 French monetary theorist, Jacques Rueff, goes a step further, declaring, “Money will decide the fate of mankind.”5 Money is the principal means by which we conduct business and interact with one another through countless daily exchanges of billions of dollars, euros, and other national currencies. Today’s global economy, the affairs of state, and our individual survival all depend on money.
Yet, what do we actually know about this curious human creation? Where does it come from? Who makes the rules? Why is it so hard to come by? Despite its role in our lives, most of us are simply baffled by money. A deep collective blindness is at work that not only contributed to the demise of once mighty Wall Street giants such as Lehman Brothers, but which threatens the fabric of modern society as never before.
Consider, for instance, the gulf that divides our age and the type of money that is in use.
The Mismatch
For some obscure reason, few of the good citizens of Moneyville were ever made aware of a particular disparity regarding our age and money. We are attempting to manage a host of 21st-century issues, while the majority of the components that define our existing banking and monetary systems date back to a former age.
The money that is in use today was actually designed in the 17th and 18th centuries, a mostly preindustrial epoch untroubled by pollution, greenhouse effects, and overpopulation. The vast majority of the world’s estimated 700 million people back then were farmers living in rural settings, who rarely ventured far from their homes or villages, and whose economic activity consisted mostly of local barter exchanges. Money was in limited use, especially in rural England, the country in which much of the world’s current monetary paradigm originated.
But historical changes were beginning to take root. It was the dawn of the Industrial Revolution and modern-day nation states. Both domestic and international commerce were on the rise, as were the monetized transactions through which such commerce was facilitated. Whether by design or happenstance, the monetary and banking systems that came into being back then reflected a new Modernist worldview, and would become the most persuasive instruments of that age’s key objectives: growth, competition, nationalism, and industrialization.
Over the course of the next three centuries, virtually every nation on Earth would come to adopt the same foundational tools that were built into those centuries-old systems. By performing their intended functions, the banking and monetary systems facilitated the most extraordinary technological and industrial achievements in all of history.
But today’s dynamic, interdependent, 24/7, global village is vastly different from even a generation ago, let alone centuries past. Many of the needs of society and our beleaguered natural environs are quite different from any other known period of history. The finite set of tools that served so ably the ethos of another age are far too limited in range and are simply not designed to address the requirements and concerns of today’s many diverse cultures, and the fusion of agrarian, industrial, and postindustrial economies that together constitute our complex, interwoven, socioeconomic reality.
Yet, notwithstanding the great divide that sets our current world apart from centuries past, we continue to employ almost exclusively the most persistent driver of the Industrial Age’s values—its monetary system. This mismatch between our age and the ongoing monopoly of centuries-old money is at the core of so many of our most important issues.
The following story helps illustrate what is now taking place today with regard to society and money.
THE MONEY GO-ROUND
A group of prominent citizens from a small town in Germany, which included the mayor, the head judge, and a number of leading businessmen all dined together at a local restaurant. There was plenty of wine with the meal, followed by after-dinner schnapps. It was well past midnight when the entourage finally got up to leave, with everyone by then quite tipsy. But the festivities were not yet over.
The plaza just outside the restaurant was empty at that late hour, with a seasonal carnival then shut down for the night. Nonetheless, one member of the inebriated group thought it would be good fun to take a spin on the carnival’s merry-go-round. He turned on the motor and leapt onto a chair. The others followed suit.
The initial laughter soon ended, however, as one by one, each member of the group came to realize their situation. The merry-go-round’s control button was now well out of reach, and no one could dismount the ride without incurring serious injury.
The machine had been started easily, but the capacity to manage it was lost once it was in full swing.
Given the hour, the group’s ongoing cries for help went unheard. It was not until after six o’clock the following morning that the local police and fire department were notified and the ordeal finally brought to an end. But by then, one member of the group had died of a heart attack and three others were unconscious. Following the incident, one of the survivors joined an obscure religious sect, while others suffered psychological scars that lasted years.
The absurdity of this story is amplified by the fact that it is a true tale.6 For our purposes, it serves as a metaphor for the state of the world’s current monetary
system.
We are riding on a huge planetary machine that is on autopilot and accelerating out of control. Money functions mostly without our awareness and in opposition to many of our current needs, placing each of us and life on this planet increasingly at risk. Our collective unconsciousness with regard to money impedes our ability to reach the stop button of this gigantic money-go-round, and has obscured our ability to identify and address the root causes of some of our most serious concerns.
As mentioned, our troubles persist not because they are insurmountable, but rather because we are treating symptoms instead of systemic causes and confining our efforts to the almost exclusive use of one type of monetary tool—national currencies. Such currencies act as the monetary equivalent of a hammer, and their exclusive use results in the persistence and escalation of the issues of our day.
Fortunately, there is another side to the tale of Moneyville, characterized instead by significant hope and promise. Many new monetary tools are available to us today, made possible in large part by thousands of communities around the world that are currently rethinking money. Like Curitiba, they are finding innovative ways to match unmet needs with unused resources. In the process, they are helping the rest of us to gain a greater understanding of money and its potential.
But before exploring what is possible in greater depth, we first need to better understand the relationship between the issues of our time and the current monetary paradigm.
CLOSING THOUGHTS
Our present-day monetary system, in the form of a monoculture of national currencies, has not changed essentially in centuries. This industrial-age paradigm continues to influence and dominate every important aspect of our lives and the many personal and collective choices we make—whether we are aware of it or not, whether we like it or not. Economists, financial experts, and laypeople alike have simply accepted the de facto monopoly of this one type of money as if it were an immutable fact of life.
CHAPTER THREE - Megatrends and Money
The modern crises are, in fact, man-made and differ from many of their predecessors in that they can be dealt with.
~REPORT TO THE CLUB OF ROME
There are a host of increasingly critical issues in Moneyville that require our attention. In ways that are both obvious and obscure, each concern is related to money. We know, for example, that many commercial practices, such as the clear-cutting of forests and unregulated pollution, are linked to long-term ecological consequences. We appreciate as well that issues such as unemployment, poverty, and the challenges of eldercare are each linked to a chronic insufficiency of money.
Far less evident, however, is the connection between our vital concerns and the particular type of monetary system in operation.
Examined below are five large-scale shifts in conditions of vital concern to society, hereafter referred to as megatrends. These megatrends include: the age wave, the ecological credit crunch, the financial divide, the job crisis, and economic instability. Each megatrend is followed by a money-related question intended to encourage critical thought about the link between such matters and money.
In the examination of the following megatrends, we ask that the reader put on a special kind of lens that allows for a “journey less travelled.” Certainly, the megatrends are of serious concern and if not dealt with effectively, have the potential to cause irreversible damage. In this context, it is quite common to view these global concerns as the enemy, intent on doing us harm. And like the chick below, we might prefer to run for shelter.
These very same concerns, however, present us with a unique opportunity. Like taskmasters, they guide us to places we would rather not explore. Though seemingly ominous, these megatrends oblige us to face deeper insights and truths about ourselves and our ways of life. They also invite us to explore new options in moving forward.
From this framework, the real enemies are not necessarily the problems, per se, but paradoxically our very reluctance to face up to them and embrace the opportunity to transcend our imagined limitations and grow. Such inquiry has led to profound insights and understandings about the influence of systems, and the monetary system in particular, with the realistic potential to bring about a saner, more sustainable world.
The megatrends examined below are not intended as a comprehensive list of concerns, but are among the most serious. Additionally, the data points cited below were last verified in September 2011. They do not reflect the most current conditions but instead serve as markers to help indicate the general direction and extent of change taking place in our time.
We start with the Age Wave, the slowest of these megatrends, but the one that is most inexorably certain.
THE AGE WAVE
When Baron Otto von Bismarck set up Germany’s first social insurance system in the 1870s, the retirement age was established at 65. The catch was that the average life expectancy at that time was only 48 years. A mere two percent of the population would be left alive to enjoy their “golden years.”7 It was likely inconceivable back then that such a social security plan could ever pose a burden to the state.
For 99 percent of humanity’s existence, life expectancy has averaged about 18 years.8 This is obviously no longer the case. One remarkable consequence of improved medicine and living conditions over the last century is that two-thirds of all people who have ever reached the age of 65 are alive today.9 Within the 30 developed member nations of the Organisation for Economic Co-operation and Development (OECD), one out of every 11 people in the 1960s was 65 or older.10 Today, that number has increased to one out of every seven people. By 2030, the proportion of elders living in the OECD is expected to swell to one out of every four.11
While one can hope that this global greying trend will transform the incoming Information Age into an Age of Wisdom, sobering economic issues must first be addressed.
One such issue is unfunded liabilities—benefits earned by today’s workers but for which no reserves exist. Funds that were supposed to be secure for future retirement repayments by the U.S. Social Security system and other pension plans, have been paid out to those already in retirement and may not be fully recovered. Unfunded liabilities have already accumulated to more than $35 trillion in OECD countries alone. Adding healthcare to these costs could easily double that figure.12
Meanwhile, healthcare is becoming increasingly expensive. In 2008, as the global recession deepened, the cost of total national health expenditures was expected to rise 6.9 percent—twice the rate of inflation.13 At current rates, it is estimated that retiring couples in the United States will need at least $250,000 in savings just to pay for the most basic medical coverage.14 As the availability of funds continues to decline, the pressure on retirees and on society-at-large to assist them becomes ever more difficult.
There are no historical precedents that we can draw from to handle the issues raised by this Age Wave.
The following hard “money question” synthesizes the dilemma that this Age Wave presents: How will society provide the elderly with the money and resources needed to match their longevity?
THE ECOLOGICAL CREDIT CRUNCH
The Earth’s natural systems provide many products and processes vital to our economies and lives. Increasingly, however, the resources that enable these critical life-support functions are being consumed faster than they can be replenished. Human demand on the planet’s living resources—our ecological footprint—now exceeds nature’s regenerative capacity by nearly 30 percent.15
The World Wildlife Fund (WWF) reports, “Just as reckless spending is causing a recession, so reckless consumption is depleting the world’s natural capital to a point where we are endangering our future prosperity.”16
Over the past 150 million years, the rate of speciation—the creation of new species—is estimated to have either equalled or exceeded the rate of extinction. Humanity’s impact over the past two centuries, particularly recent decades, has turned that upside down. Up to 150 species are now becoming extinct every day.17
Human encroachment is also shrinking the world’s rainforests. According to the Food and Agriculture Organization of the United Nations (FAO), “Deforestation continues at an alarming rate of about 13 million hectares a year,”18 an area half the size of Great Britain. By way of an escalating feedback mechanism, tree loss both contributes to and is exacerbated by other ecological concerns, including biodiversity loss, soil erosion, and rising temperatures. The UN Climate Change Conference in Bali 2007 warned, “If we lose the forests, we lose the fight against climate change.”19
Regarding climate change, global surface temperatures are rising. According to NASA’s Goddard Institute for Space Studies, the decade from 2000 through 2010 was the hottest on record.20
The financial costs of climate change are staggering. Some 40 percent of world trade is based on biological products and processes.21 A report commissioned by the British government estimates that by 2050 climate change will account for a yearly loss of at least five percent in global growth ($2.2 trillion at current values). If the environmental, health-related, and known subsidiary effects of rising temperatures are taken into account, the losses could amount to as much as 20 percent of annual global GDP ($9 trillion).22 Even after tallying the total insurance losses from September 11, 2001, the world’s largest reinsurance company, Munich Re, stated that its deepest concern for the future was not terrorism but rather climate change.23
New Money for a New World Page 3