30 June 2009
The Strong Sustainability Paradigm
The current economic crisis is not about the conflict between capitalism versus socialism, left versus right or about questions of globalisation versus social justice. The current crisis happens at a time when we start feeling the impacts of climate change and the degradation of the biosphere on a large scale. It has become an opportunity to examine our perceptions of our personal and economic relationships with the natural world. The current crisis gives us an opportunity to move from the business as usual of economic growth to an understanding and adoption of ecological economics.
How can we find a real response to the needs of climate change and challenges of our times? In terms of current popular culture, a fundamental realignment of approach and priority and a culture shift is needed. We need an approach of Strong Sustainability. Changing the conventional order of things, this approach postulates that the economy is a subset of society (humanity) and that society is a subset of the ecology. All activities therefore ultimately need to conform to ecological limits.
Ecological systems operate in cycles and are self-regenerating. Consumption and the use of biosphere services need to happen within the limits of this regenerative capacity.
A successful reorientation is possible and it requires that we adopt a new set of ethics. In the new set of ethics, we leave the purely utilitarian approach behind and adopt a set of ethics that values life and the integrity of all systems that support life above all else.
The success of this approach and the the application of policies can be measured by a set of specific indicators. What must be measured, first and foremost, is the health and quality of the ecology/biosphere. Among the available indicators to measure this are the ecological footprint, biodiversity indicators, air, water and soil quality standards.
The next priority must be the quality of life and the development of human society. There are indicators that can be used for hat purpose, like the Human Development Index, and other Quality of Life measurements.
“The economy is a wholly-owned subsidiary of the environment.” What does that mean? Not only does it mean that economic institutions and systems need to function in accordance with nature, but it also means that economic indicators come in third priority only, after the more important ecological and societal indicators. Since a strong sustainability approach cannot accommodate an ever and exponentially growing economy, a set of indicators must be adopted which reflect the quality of economic activity, rather than just its size and trough put. One such such indicator may be Genuine Progress Indicator (GPI).
Following the principle of perceiving the economy as a subset of ecological activities, economic systems, institutions and policies need to be designed in a way that they permit and promote a steady state and ecological economy which flexibly adapts to natural cycles of growth and decline. Economic activity can be steered by ecological taxes, a social safety net that promotes social justice and a raft of other policies. Institutions like the financial and money system and values that are built on the premise of unending growth need to be abolished and replaced with systems that can usefully act within the natural limits of nature.
The financial system needs our special attention because it is the 'operating system' of the economy. The global economic growth imperative is inherent in the nature and integral to our current money system, and as a result one of the main drivers of global warming and environmental destruction. Any challenge to the established economic growth paradigm must not just include the regulation of the financial industry, but extend to a fundamental reform of the money system. Invention and transformation can draw on countless experimental as well as established and proven alternatives to the current financial infrastructure which is based on bank issued debt money with compound interest.
Such an approach is a significant departure from the conventional way of thinking. It will not only provide a new vision for the future, but also require workable ways of transitioning from the current economic thinking to a new economy. Because in current practice economics and financial profitability and safety are the final bottom line, any vision of ecological economics and the policies for transitioning to it must be able to address any economic concerns individuals and the business community might have. We must be clearly able to show that the welfare of people is guaranteed even if we work within the ecological constraints of the planet and the land and abandon the growth imperative, and that overall we will be better off this way, rather than when we keep ignoring the ecological limits.
28 March 2009
(Image from FreeFoto.com)
What does “Zero” stand for?
- Zero stands for the sum of all currency in the system. In other words, if one adds up all the negative account balances and then adds all the positive account balances, one should arrive at zero. This will be true as long as a foolproof accounting system is used where every transaction is recorded on both the credit side and the debit side.
- Zero stands for balance. However, that balance won’t be guaranteed if the Zero point is shifted by giving away “free” Points or if the balance is upset by granting larger credit limits than debit limits. As long as balance is kept, Green Dollars in circulation keep their value.
Zero stands for the dynamic centre. In order for a mutual credit system to work, everyone needs to engage in equal and balanced giving and receiving. There are always enough points in the system for trading. Participants need to trade through Zero at least once per year, or even better, several times per year.
- Zero stands for the fact that relationships are more important than numbers. We’re conditioned in this society that “more is better” and we need to “get rich.” Both propositions are meaningless in the context of a mutual credit system. In such a system we find economic security not because we accumulate, but because we build relationships with other people.
- Zero is also the symbol of a circle, which stands for the community of which the participant is a member. In the conventional economy, we must all fend for ourselves in competition with everyone else. In a mutual credit system, we’re all in it together. When creating the means of exchange (Points, Green Dollars or any other unit), we do so ourselves in a transaction with another community member. What counts are only three positions in relation to the system: we’re either in dedication to the community because we’ve consumed ahead of providing something, or we’re in “recognition” to the community because we’ve provided before consuming. We also stay within the limits that we as a community have all agreed to. The community needs all three, and therefore both dedication (debit) and recognition (credit) are valued equally. The only other necessary ingredient is solidarity with the community: when we seek to trade to fulfil some of our needs and wants, we need to look within our own community first (buy local, so to speak) before going into the dollar economy. A mutual credit exchange suffers seriously if members abandon their solidarity with the community.
- And finally, Zero is our balance when we join and Zero is our balance when we leave. We enter the system at Zero, and the only acceptable way out is at Zero again. Otherwise, a convenience to the individual creates a problem for everyone else in the circle.
Understanding and living the concept of Zero require a culture of “we,” a culture of community. Calling the unit of currency in a mutual credit system a “dollar” is unhelpful, because it tricks us into thinking and behaving according to our mainstream competitive consumer culture. Applying the concept of Zero helps maximise trade while preserving equilibrium within the community and supports functional, fulfilling relationships between individuals and the community. By making everyone a winner, a well-maintained equilibrium increases the quality of life for the whole community.
10 February 2009
14 December 2008
Alternative Currencies are growing in popularity - even the TIME magazine is writing about them:
12 October 2008
Even though we are in the worst financial crisis in decades, it is still very seldom one comes across anyone who can actually see the big picture of what is going on, someone who dares looking at the long term and recognises the money system for what it is. Most people are oblivious to the mechanics of our financial system and its profound influence on human behaviour!
Here is one of the rare articles that clearly outlines the predicament we are in, and that also doesn't sink into doom and gloom, but actually points a way out! I've noticed that so far all solutions to the financial crisis that are being proposed aim to extend the life of the current system. All those solutions will ultimately fail, if we don't start looking outside the box.
The elephant in the middle of the room, that everyone keeps ignoring, is the mechanism of debt-based money with interest, that set in motion the need for an ever and exponentially growing economy. That means that ultimately all social, cultural, natural and any other capital will need to be converted into money, to feed the system. A good example is the creation of tradeable emission rights, where we even convert pollution into money and create yet another opportunity to make profit.
The system is is like an all-devouring monster on the loose. But the borrowing of new money to pay for old debts and interest cannot go on for ever. There are natural limits to growth on this planet. Sooner or later we have to face bankruptcy and collapse.
What are the solutions, what is the way out? The only solution that will ultimately work is to abolish the bank-run interest-incurring debt-money system. A partial solution could be to reform the money system and restore the ability of government to spend currency interest-free into circulation. But, looking at the wide spectrum of how trade and exchange can happen, it would probably be very wise to move away from a monocultural approach of "one currency rules the whole economy", to an approach of diversity, where a host of systems and currencies take care of balancing out all the giving and receiving that is constantly occurring.
The diversity of systems would include local currency systems as well as national and international systems running concurrently, alongside each other. Time banking and various forms of gift economies would offer even more freedom of choice for all participants in our society. This would provide for a smooth running of the economy, even if one particular system, as right now, is in deep crisis.
To restore the social and environmental damage that has been inflicted on the planet, many other accompanying improvements could be implemented, like taxing the 'bads' instead of the 'goods' (an ecological tax reform) and the restoration of the commons. There are probably quite a few other measures that need to be taken to restore balance in both the economy and in our relationship with the environment. In short: to create a balanced, sustainable and empowering economy - based on and respecting the living systems of our planet.
28 September 2008
Alongside that, we also notice that the inequality between rich and poor is not being addressed and will likely keep increasing. Further more, we are in an election year, and the main parties are out in force with easy answers - tax cuts, apparently the panacea for our economic woes.
It might be time to explore a bit further what is underlying all those symptoms we are experiencing. At the core of our economic system is something we call money and the financial industry. Most people never think about how money works, except that we will hurt if we don't have it, and therefore the best thing is to have as much of it as possible. The amount of money in circulation is rising rapidly - between 10% and 15% any given year, which is far beyond the increase of population in New Zealand - and this is far beyond the growth of the economy. Yet there never seems to be enough.
If we take a closer look at how the money system works, then we see that the current difficulties were entirely predictable. Price rises across the board are caused by different things. There are at least three major reasons for why everything becomes more expensive: a) offer and demand in the international market place, b) expectation of profits and c) the cost of money.
We are currently experiencing significant increases in the cost of basic items we need in life, like food and fuel. For both of these necessities, and for many other items, we depend on the global market. Peak oil and political uncertainty in many regions drive commodity prices up, fuel and food get more expensive because of higher transport costs, export restrictions and speculation. The demand and supply mechanism of the world markets is further enhanced with exchange rate uncertainties, with the highly valued NZ$ making imports even more expensive.
The second reason for expensive prices is the expectation of profits. Oil prices, after hitting a high of almost $150 in July, have come down to below $100. Why is that in such a short period of time? Has there been a significant change in production – or is this rather a result of speculative trading with investors taking profits? In any case, those variances have a significant impact onto the prices we have to pay as a consumer. The same applies for food items.
The third reason why prices (and mortgages and rents) keep rising ia the cost of money! There is hardly any property in the country that doesn't have a mortgage on it and most businesses operate on borrowed money as well. Despite the recent lowering of interest rates by the Reserve Bank, mortgages and other loans are still really expensive. At today's mortgage rates, one pays about 1.5 times the price of a house to the bank for the service of creating the money – that makes the buying of a house more than twice as expensive than the price advertised by the real estate agency. The cost of money creation – interest – is factored into all prices we pay, for everything, not just for major items like houses.
This takes us right to the heart of how our money is created. It is a fact that about 98.5% of our money is loaned into existence by a bank that is collecting interest for the privilege to do so. Nowadays, money doesn't represent the value of gold anymore, as it used to do in the past. Today's currencies are 'fiat' currencies – money is just created by a key stroke on a computer – out of nothing!
The only protection (or value!) money has, is the law that makes it 'legal tender' – that means that the government requires you to use a particular kind of 'money' to pay taxes. At the same time, if traders cannot agree to use another means of exchange among themselves, the law requires that one uses legal tender to settle any outstanding debt.
When money is loaned into existence, the banks are required to balance the numbers keyed into an account with a balancing account entry – in the case of a mortgage the value of the property mortgaged. This is how the 'sub-prime' crises arose at the first place, when money was created for people who could not service the mortgage and didn't have enough property value to cover the loan. This all got worse when the real estate bubble burst and property values slumped. Since we live with a 'financial monoculture', where we have only one kind of money to run our economy, we all are extremely vulnerable to any upsets in the financial industry.
Well then, what is being done about it? Having only one kind of currency to oil the economy, there are not many means to guide it. Reserve Banks in many countries believe that they only need to adjust interest rates to guide the economy. Currently the main aim seems to be to create a lot of money, by lowering interest rates, to keep the economy oiled – especially the speculative stock and currency markets, which far exceed 95% of all economic turnover.
And still - why is there never enough money? Simply because the system is designed to be that way on purpose!
What can we, the people, do about it? Maybe there is a great opportunity in this crisis! We've been putting all eggs into one basket: bank-issued money. Now, with the financial industry in dire straits, we might start looking at other solutions. Maybe it is time to transition from bank created money to community created money, from money created for private gain to money created for the common good, from money which is very expensive to money which is an almost free medium.
There are many thinkers and economists who have developed concepts of monetary reform and monetary transformation. Monetary reformers usually call on government to retake the power of money creation and to do so in the service of the people. Monetary transformers, often coming together in community groups, go ahead and create their own means of exchange and use it to empower and grow local communities, insulating them somewhat from the ravages of globalisation and insensitive government policies. Both have in common that currency should be issued without interest, and therefore radically reduce the cost of money.
More and more people are discovering that we have a multitude of ways at our disposal of trading and exchanging services and goods among each other. Money was invented because direct barter is often inconvenient. Money that is universally acceptable is a tangible form of trust – trust that we will receive something back for what we have provided on one hand, and trust that we contribute for what we have taken and consumed on the other hand. This trust could very well and easily be expressed in the form of complementary community currencies, timebanks and other non-exploitative exchange mechanisms. Trust could also be an implicit part of a culture of a community or nation. Such a culture would provide naturally occurring opportunities to share in the abundance that exists, unconditionally, without fear of lack. Ultimately, every individual human being can come to the realisation that we are all part of Nature, and that Nature and its intricate and interwoven systems will not stop providing – except of course if we destroy it in the process of satisfying and 'servicing' our current scarcity based money and economic system.
07 September 2008
I haven't been very active on this blog recently, though quite busy elsewhere. I've been discovering social networking - though in a more sensible fashion than I usually get with Facebook and Co.
My current online social network of choice is Transition Aotearoa, a ning application that has managed to gather 372 members since 18 April this year, attracting 5 new people every two days.
A lot of my online activities went in there! Transition to a new culture of doing this - a promissing start!
05 June 2008
The Christchurch City Council has ordered the destruction of six trees along City Mall on World Environment Day.
The trees were removed early this morning from an area between Colombo Street and the Bridge of Remembrance as work progresses on Project City Mall.
Concerned residents, who contacted The Press to report the destruction, said it made a mockery of the idea of sustainability on what was World Environment Day.
The Christchurch City Council said the trees were identified for removal either because they were in decline or because their root systems would be affected by the construction of a new service lane planned for the area.
Project director Sean Whitaker said removal of the trees would also open up the mall to create a clear view of the Bridge of Remembrance.
New Zealand has been chosen to host this year's World Environment Day, which was aimed at raising awareness around the wiorld about climate change.
01 June 2008
Of course, high oil prices have been a big problem for many people around the world for some time now (Shocked! How the oil crisis has hit the world.)
The oil price has been creeping up for a long time now. It's been at $135, and is currently at $127 as I'm writing this post. It will continue to rise, and together the price of petrol will rise, too!
What consequences does this have for me? What options do I have to reduce my petrol use? There are several options, though there are also constraints. The obvious constraint that comes to mind is family: currently we are taking our two little girls to the preschool. It would be an inconvenient and time-wasting procedure if we didn't have a car. This, simply, because the way our city is built and the way public transport operates. For my way to work I have a convenient direct bus line, and I suppose I could take up bicycling again - even though I don't feel particularly safe riding a bike. Again, that is mainly due to the way our roading system is built. And yes, of course, we could down-scale the car we are driving, to something more modest, more modern and more fuel-efficient.
However, putting those personal actions into the big context, I realize that it won't bring about the change we need. Nor does government policy that spends millions for transport, where only a tiny little fraction of the budget goes to public transport and bicycling. Because of the general increase of living costs, certain voices call for the reduction of taxes on fuel - that would be a futile move as well, as the temporary relief it gives to the consumer will be voided by further oil price increases in the short term, while government would be permanently losing a source of income. I'm convinced, only radical change really make a difference.
Given our culture of mobility and the layout of modern settlement, it is likely that we will continue to depend on individual personal transport. The only way out is if we finally disconnect our transport modes from the consumption of fossil fuels. It is about time that we develop alternative car engines, and mass-market them.
For years now I've been intrigued by the idea of an air powered car. It seems that now, finally, the Indian company Tata is starting to build them. How long will it take until they come to New Zealand? I hope we don't have to wait for very long ...!!!
21 May 2008
30 March 2008
The Earth Hour in Christchurch was a success, far exceeding the expectations of the organisers. Yet, it was a small step on a long path. In order to succeed, our society needs to transition to a culture of sustainability. The 12.8% of reduction in electricity use during one hour, preceded by a long media campaign needs to lead to comprehensive Energy Descent Plans for each village, town, city and country. Our mentality of 'more is better' will have to be replaced with the common sense of 'less is better' and our economic systems and ideology need to turn away from the need of constant growth at all costs. Still a long way to go, indeed ...