Money, or at least the desire for it, is at the root of our biggest problems, from injustice and economic inequality to environmental destruction. The need for money always seems to make us do the wrong thing: Hoard wealth, strip the land.
But it needn't be so. In his 2011 book Sacred Economics (Evolver Editions), Harrisburg-based author and speaker Charles Eisenstein proposes fresh, even radical ways to think about how money is created, and even what it's for.
Money as we know it is created through interest-bearing debt. It's born when a central bank, like the Federal Reserve, purchases securities, or when your neighborhood bank makes a loan. The issuers of money demand to be paid back, with interest.
But as Eisenstein explains, such money conflicts with both nature and human needs. It's unnatural because while everything else in nature decays, money can grow indefinitely ... which means that to satisfy money's bottomless demands, we keep pushing a finite natural world toward the brink. And money harms community because the need to pay interest requires everyone to forever compete for more money than actually exists. Thus we must "grow the economy," either by converting more of nature into goods, or more of our own lives into services for sale. All this degrades both the environment and the ties binding us together.
Eisenstein, a nationally touring speaker who visited Pittsburgh last summer, notes how in recent decades Americans have spent much more on things like day care and dining — "services" we once received free from family and friends. Just as we must drill ever deeper beneath the ocean for oil, so we monetize ever more of our daily lives, simply to grow the economy enough to pay off debt that never stops accumulating interest.
And still people are less happy than before.
By contrast, Eisenstein argues, the proper purpose of money is simply to connect people who need something with people who have something to give — "to facilitate the flow of gifts."
But how? Eisenstein argues for creating money differently.
Rather than fabricating it from interest, or basing it arbitrarily on, say, piles of gold, "My idea is that we create money out of what's becoming sacred to humanity today," he says in a phone interview. "Intact ecosytems, rainforests, the beauty of the planet. The integrity of indigenous cultures. The health of the watershed. The sustainability of the aquifers, and the well-being of all human beings on earth."
Eisenstein proposes setting up bioregional governments that would issue money based on things like the ability of the atmosphere to absorb air pollution, or the amount of water that can be sustainably drawn from a region's aquifer.
"Today, there's really not much of an incentive to conserve water," he says. "But if aquifer depletion became very expensive, then conservation would have a financial incentive, and you'd be aligning money with what is sacred."
Eisenstein also proposes that we reform the money system by making interest rates negative. In other words, the longer you held money, the less it would be worth: It would "decay." And an interest rate of, say, negative-3 percent would encourage people to spend money and to loan it out (even at a low, or a 0 percent, return). That would spur economic activity. And it would help redefine wealth as a flow of resources, rather than an accumulation. (Negative interest differs from inflation, he says, largely because it would affect everyone equally — unlike inflation, which tends to raise prices and wages at different rates.)
Negative interest would also help the environment. Imagine owning a forest that you could either clear-cut now for $1 billion in profit or log sustainably, forever, for $10 million a year. Today, says Eisenstein, you'd clear-cut, to realize the interest income. With negative-interest money, you'd go sustainable. Negative interest "encourages long-term thinking," says Eisenstein.
Negative-interest money sounds crazy — but it has worked.
Proposed in modern times by Argentine economist Silvio Gessell, and noted favorably by John Maynard Keynes, negative-interest currency was tested most successfully in the small Austrian town of Wörgl, in the early 1930s. And during those Depression years, employment in Wörgl increased. (The Austrian government quashed the experiment.)
Eisenstein contends that economic growth as we've known it is faltering because we're running out of nature to exploit and services to monetize. (Bottled water, anyone?) Already he sees a "gift economy" taking shape, in everything from open-source software to the freecycling movement.
He believes a negative-interest currency backed by nature would complement a resurgent gift economy to improve life for all. Because it circulates faster, negative-interest money would offset the "recessionary" effects of things like more people cooking for themselves, or providing cooperative child care.
Because reforming money also means limiting what we use money for.
"It is a really big piece of the picture that we want to reclaim the personal, the unquantifiable, the gift — community, intimacy, connection — to reclaim those from the money realm," Eisenstein says.