A major problem of political economy is the inaccurate connection between our monetary economy and nature. Although nature is the source of all real wealth (the source of raw materials and the ultimate sink for waste), the monetary economy is a cultural fabrication based on perception, imagination and speculation.
When the game isn’t rigged, we collectively assign market value to resources, as well as to the expertise that turns them into goods that can be used in society. Elaborate systems of accounting attempt to measure these processes reliably, but are frequently inaccurate.
A general correlation exists between the availability of specific resources and their prices, but it is distorted (among other ways) through flawed human judgment. The Dutch “tulipmania” of the 1600s (when a single tulip bulb could command a price higher than ten times the annual wage of a skilled craftsman) or the dot com bubble of the early 2000s (when companies were selling with p/e multiples in the thousands) are perfect examples of this distortion.
We even less successfully assign value to Earth’s waste sinks such as the atmosphere or the ocean, a generalization illustrated by the rising but poorly assigned costs related to climate change-related catastrophic events—extreme weather, flooding, and sea level rise or ocean acidification, for example.
Today banks create money out of nothing in the process of lending, and privileged bankers assign themselves massive bonuses on the basis of increased shareholder “value,” while the real economy of tradesmen and shopkeepers often remains depressed with high unemployment and low wages. Something is seriously unfair here.
Money fails to represent important aspects of the world: the integrity of the biosphere, healthy and loving human relationships, and too often basic, honest work. Nonetheless, money is used differentially to reward those most successful at environmental exploitation and at financial manipulation at the expense of, well, all of us.
No wonder millions of people embrace direct barter (aside from its obvious tax advantages). We trust goods in hand more than the promises of bank account entries.
Money is an invention, largely an arbitrary construction. At various times and places anything from cigarettes to seashells has functioned as money. It should be based on something concretely valuable. But Canada’s paper money currently is based on—nothing! Examine a five-dollar bill, for example. It simply claims to be “legal tender.” It works because we agree on faith to use it.
Why can’t we construct a more useful, consistent, fair form of money? A number of innovative thinkers have considered the possibilities of a currency based on something besides government promises and bankers’ manic pursuit of paper profit.
In the early 1970s in response to the energy crisis, Ralph Borsodi created a currency for his hometown, the Exeter Constant, based on a basket of commodities similar to the basis of our Consumer Price Index. A printed ‘Constant’ was distributed with the guarantee that it would always be redeemable in fixed amounts of these commodities. During the three years of its experimental use, the Constant retained its buying power while the inflating US dollar lost 15 per cent in purchasing power.
Ithaca, New York, offered its own local currency called Ithaca Hours. Each certificate was to be worth one hour’s work, whether by a dentist or a gardener, a baker or a storeowner. Conversions to the national US currency were not guaranteed, but could be negotiated in any transaction. The idea for this fairly successful (and ongoing) experiment originated in the 1930’s Depression.
Grain, water, and even CO2 emissions have been proposed to base currencies. A recent proposal by the New Economics Foundation argues that since energy is a commodity central to any economic system standard energy measurements could serve as a monetary standard. What would be “wrong” with money convertible to kilowatts? Instead of creating money with debt, we could use solar panels.
Retired teacher Al Lehmann lives in Terrace, BC.