New Money for a New World

by Bernard Lietaer

  No detailed survey similar to that of Ray and Anderson’s has yet covered the globe. In 1997, however, the European Union’s monthly Euro-Barometer surveyed all its member nations, employing the same values-based questionnaire.195 The findings mirrored those cited above, with at least as many Europeans sharing values similar to those of their American counterparts. Similar results were obtained elsewhere and were as strongly felt in developing countries as in developed ones.196

  Many of those who share similar views are likely participants in what author and social activist Paul Hawken more recently referred to as the largest and fastest growing social movement in history. In his book, Blessed Unrest: How The Largest Movement in the World Came Into Being and Why No One Saw It Coming (2009), Hawken estimates that several million organizations, mostly nonprofits (NGOs), are working to tackle economic, social, environmental, and other concerns in communities of virtually every nation around the world.197 Without much fanfare, their efforts, ingenuity, and creativity are addressing many issues not being attended to by government. These findings mirror Ray and Anderson’s depiction of a new culture being created. As this subgroup’s numbers of this subgroup steadily climb, so does its impact on civil society and the transformation now taking hold.

  In essence, a new worldview is emerging. Its perspective embraces input from many diverse points of view, and is aligned with a new stage of science increasingly identified as integral science.198 This moniker proclaims a profound relationship between values orientation and emerging science. The integral approach is providing insights and benefits in many domains. In medicine, for example, it has led to breakthroughs in the treatment and prevention of a wide range of disorders.

  The same holds true for new monetary choices and economic reforms. For the first time in history, using the same precision and language demanded by scientists, it can now be shown why complementary monetary initiatives and the financial reforms demanded by mounting numbers of concerned citizens are not only popular but empirically valid. This indeed changes many important things.

  New approaches now make it possible to demonstrate why:

  it is far better for the economy to engage in sustainable development rather than mere growth;

  a healthy economy requires resilience, not just efficiency;

  policies that favor Wall Street over Main Street are contraindicated on grounds of counterproductivity;

  a vibrant, stable economy depends as much if not more upon many healthy smaller players as it does upon a small number of big guys;

  caring for our young, the elderly, our environment, and natural resources are not just morally sound, but are also empirically and economically the correct choices.

  New evidence also explains why an assortment of currencies working alongside and complementing our national currency system is of benefit to all, and why monopolies of any kind—particularly a monopoly in the issuance of money—is neither sustainable nor in our collective interest.

  In essence, the integrative scientific and economic framework affirms:

  the triple bottom line approach of building social, economic, and environmental health;

  the rediscovery of Adam Smith’s original vision of free enterprise networks;

  and the vital role played by complementary currencies towards the realization of the kind of sustainable vitality that reliably maintains and enhances the health and well-being of all levels of our global civilization.

  For these reasons alone, the transformation now taking place is quite significant. But other vital reasons add to the enormity of what is currently happening, and deserve brief mention here.

  A Milestone for Humanity

  In historical terms, a new worldview is a very rare occurrence, and as such represents in and of itself a significant shift. The advent of an integrative culture implies an even greater milestone for humanity. Unlike the old changing of the guard, with the replacement of the medieval religious mindset by Modernism, what is occurring now is more than a simple reaction to and substitution of one worldview by another.

  In the words of John Astin:

  The appearance of this integrative culture is about healing the old splits: between the inner and outer, spiritual and material, individual and society. The possibility of a new culture centers on reintegration of what has been fragmented by Modernism: self-integration and authenticity; integration with community and connection with others around the globe, not just at home; connection with nature and learning to integrate ecology and economy; and a synthesis of diverse views and traditions.199

  What appears to be unfolding is a reemergence and healing of human energies and values that have long been repressed in society. The evolutionary shift from modernist to integrative values is of such importance that it can only be compared with the move toward reason in classical Greece, with one significant difference—the current transformation is bound to be much faster. Greek rationalism took centuries to spread to other areas of the Mediterranean world. Civilization had to wait many more centuries still for the Renaissance and the Enlightenment to finally mainstream these concepts into everyday life and spread them around the world. In contrast, as events in our present world and societies demonstrate, the shift toward integrative values is already occurring at the speed of a veritable tidal wave.

  For these reasons and others considered later in this book, the current transformation is considered to be the first instance of Great Change. The implications for humanity of the current transformation are still being assessed and will take decades to understand more fully. What is already apparent with this shift, however, is the potential for fundamental improvements to the human condition and the renewal of our natural life-support systems.

  To this end, to the revitalization that is readily possible, we examine in the following chapters of Part II the highlights of a new economic framework, and some of the many monetary initiatives that are now available to communities and society-at-large.

  CLOSING THOUGHTS

  We are in the midst of the most comprehensive societal transformation in recorded history. All human systems and all living systems are in the process of being affected. Part of this Great Change is a new scientific inquiry that is providing a more holistic approach to the pursuit of knowledge. This integrative inquiry is already revolutionizing our understanding in a great many important domains, from ecosystems and medicine to economics and monetary systems. Some of the many implications for economics are considered next.

  CHAPTER TWELVE - Efficiency, Resilience, and Money

  The very process of the restoring the land to health

  is the process through which we become attuned to Nature

  and, through Nature, with ourselves.

  ~CHRIS MASER

  Our perceptions have undergone great changes over the centuries. Evolving views of our planet, for instance, have matured from a stationary orb at the center of a divinely conceived order, to an immense world in a mechanistic universe, to a living planet with limited resources suspended in a multidimensional, energy-based cosmos.

  This progression in understanding mirrors the continually evolving expressions of governance, economic rules, and monetary paradigms that have taken place from a premodern, theocratic, agricultural-based society, in which most financial exchanges took the form of barter; to modern democracies and industrialized economies, with increasingly concentrated financial wealth dominating a monetized, global marketplace; to an emerging postmodern landscape in search of more sustainable ways and means of meeting the requirements of the world’s many diverse peoples and natural ecosystems.

  In support of humanity’s epic journey and 21st century objectives, we explore herein a conceptual framework that offers new understandings and solutions towards sustainable development, with relief for both the economies and living systems of this planet.

  FLOW SYSTEMS AND ECONOMICS

  Advancements in recent decades in a number of domains—from systems theory, complexity theory, and in
formation theory, to the study of natural ecosystems and what makes them sustainable—have contributed to a new theoretical scaffold for economics. This integrative, empirically backed model likens economies to complex, adaptive, living systems in which matter, energy, and information continually flow.

  Flow systems exist throughout nature. Our circulatory system, for example, provides a nourishing supply of blood to every cell in the human body, without which we would quickly die. Similarly, ecologists view natural ecosystems as energy and flow systems, in which the natural food chain is actually a streaming network of matter, information, and energy built of complex relationships among organisms. Energy radiates from the sun onto the planet. Plants capture the sun’s energy through photosynthesis and transform it into biomass. Animals eat the plants and one another in a chain up to the top predator, only to die and decompose. Bacteria and other microorganisms recycle their decomposed remains.

  Economies, like natural ecosystems, are also complex flow networks. They consist of millions of businesses and productive activities whereby outputs of one entity serve as inputs to others and to consumers, in a vast web that processes and circulates energy, information, and resources through practically the whole planet.200

  Though complex, some structural patterns of these networks are predictable and independent of the nature of what flows through them, be it biomass in an ecosystem, information in an immune system, electrons in an electrical distribution system, or money in an economy. What makes these patterns predictable is the universality of their structures.

  Theoretical nonlinear physicist Predrag Cvitanovič explains:

  The wonderful thing about this universality is that it does not matter much how close our equations are to the ones chosen by nature, as long as the model is in the same universality class…as the real system. This means that we can get the right physics out of very crude models. The existence of such universal patterns and dynamics explains why similar energy-flow concepts and analysis methods apply to economic systems as well as natural ones.201

  In essence, understanding how ecosystems and other complex flow networks maintain sustainability allows us to apply this same knowledge to economic systems. A summary of the findings is described below. With the aforementioned caveats in mind regarding the application of mathematical proofs to real-world situations, interested readers may refer to the relevant paper.202

  EFFICIENCY AND RESILIENCE

  It is now known that long-term sustainability in real world networks such as ecosystems depends on an appropriate balance between two opposing requirements—efficiency and resilience.

  Efficiency in a complex network is defined as a network’s capacity to process volumes of whatever flows through it in a sufficiently organized and streamlined manner so as to maintain the integrity of the network over time.203

  Resilience is that same network’s rebound capacity, that is, the ability to retreat elegantly and safely to fallback positions, to access a diversity of options to meet the needs of unexpected disturbances, and to spawn innovations for ongoing development and evolution.204 For any complex flow system to sustain itself over time, it thus needs to not only be efficiently organized but must also be resilient, able to withstand changes in its environment, be it drought or disease in a natural ecosystem or downturns in an economy.

  Two structural variables of any complex system govern the degree of efficiency versus resilience. One such element is diversity, the existence of different types of agents acting as nodes in the network. The other is interconnectivity, which measures the number of pathways between the given agents. Diversity and interconnectivity play key roles in the efficiency and resilience of any complex system, but in opposite directions.

  All other things being equal, a system’s resilience is enhanced by both greater diversity and connections, as they provide more agents and channels to fall back on in times of trouble or change. Efficiency, on the other hand, increases through streamlining, which typically implies reducing diversity and connectivity. A dynamic push-pull between efficiency and resilience is crucial to the long-term health of a system whose optimal fitness requires a specific balance between these two poles.

  Figure 12.1 – Simplified Sustainability Curve of a Natural Ecosystem205

  A predator animal, for instance, may eat a variety of species, or depend instead on only a single species for its food supply. In the latter case, this hunter will likely be more skilled when it comes to catching its favorite prey, but find it hard to adapt if that one food supply becomes scarce. Consequently, the feeding network of this predator, while efficient, is not very resilient, and is at risk of dying off with unfavorable changes to its environment.

  Efficiency and resilience are both controlled by diversity and connectivity. Since diversity and connectivity can each be precisely measured, the fitness and sustainability of any given complex flow network can be mathematically determined as well. In all real-life sustainable systems, the relationship between sustainability, resilience, and efficiency follow a conceptual curve that is illustrated in a simplified manner in Figure 12.1.

  Note that in nature, the optimum point whereby sustainability is maximized invariably lies closer to resilience than to efficiency. Moreover, all sustainable ecosystems have their most critical parameters within a very specific and narrow range, which can be computed with precision. This range is referred to as the “Window of Viability.”206

  Healthy ecosystems keep their diversity and numbers of pathways within a certain range that is neither too much nor too little. This is because flow networks that are overly efficient tend to become too brittle, whereby one small break may cause the whole system to collapse. On the other hand, overly diverse networks tend to become stagnant, in which energy, resources, and information wander through a tangle of meandering pathways that lead to nowhere.

  Let us emphasize that the relationships between efficiency and resilience, the role of the structural variables of diversity and interconnectivity, and the “window of viability,” are all requirements and emergent properties of not only natural ecosystems but of any complex flow network system.

  The concept of efficiency is so deeply ingrained in our thinking today, especially in engineering and economic thought, that it may be difficult for most of us to imagine how anything could be too efficient. But the lesson of recent crises is precisely that—over-efficiency. Consider, for example, the blackouts of entire electrical distribution networks that have occurred in the Northeastern United States and other parts of the world.207 These failures followed decades of engineering optimization for greatest efficiency, an unintended consequence of which was that these distribution systems became brittle.

  The same principle of a balance between efficiency and resilience also applies to the viability of enterprises and economies. To address multiple contingencies and survive challenging times, organizations must be adaptable and resilient, able to change their ways as needed. Healthy businesses must maintain resilience by creating and maintaining appropriate systems of production, marketing, delivery, accounting, and training. But organizations must also maintain competitiveness by honing the efficiency of their processes, which is typically accomplished by streamlining.

  Today’s emphasis on maximizing efficiency underscores the current general belief that all improvements need to proceed further in this same direction. But when managers over-emphasize streamlining and other short-term efficiencies at the expense of long-term resilience, they may be sacrificing viability. Such an orientation keeps driving us further away from sustainability.

  One dramatic example of what can happen when efficiency is pushed too far comes from global supply chains that revealed themselves incapable of dealing with the aftershocks of the Japanese 2011 disaster. For instance, two Japanese companies that have damaged factories produce 90 percent of the market of a speciality resin used to bond parts of microchips that go into all smartphones. These lean, “just-in-time” supply chains should be reviewed with
a “just-in-case” approach.

  These considerations have direct relevance to our monetary and banking paradigms and to the credit crunch of the last several years.

  Money, Efficiency, and Resilience

  Money, the codified agreement that circulates throughout our global economic network, is maintained as a monopoly of a single type of bank-debt, fiat-based, interest-bearing currency. The technical justification for this monopoly is to optimize the efficiency of price formation and exchanges in national and international markets. Massive legal and regulatory mechanisms are in place to ensure and maintain this monopoly, mainly through the requirement that only national currencies are acceptable as legal tender for payment in taxes.

  The current monetary paradigm is, in effect, equivalent to a planetary ecosystem where only one single type of plant or animal is tolerated and artificially maintained, and where any diversity is eradicated as an inappropriate competitor because it would reduce the efficiency of the whole. Only one end result is possible in such a scenario—the collapse of the system as a whole.