THE EVILS OF MONEY
An expert argues that our conventional systems
promote the wrong values, and he wants change

By Jurriaan Kamp

YOU HAVE NO IDEA WHAT MONEY IS.
If you did, then you—we—would see to it that we had a different monetary system.

Everything revolves around money. It is more than a cliché; it is the daily experience of just about every world citizen. And this daily experience involves, above all else, a continuous shortage of money. There is not enough money to send the children to school, for hospitals or to care for the ever-greater numbers of old people who are getting ever older. There is not enough money to clean up the environment and keep it that way.

Who among us is not familiar with the feeling of wanting to contribute something but having “no money” to do so? The sad conclusion: if we just had more money, the world and our lives would be better.

Bernard Lietaer, a business professor and former Belgian banker, recommends another solution. We could immerse ourselves in the meaning of money. “Have you ever thought about how much time you spend earning money and managing or spending the money you’ve earned?” says Lietaer. “And how often have you thought about what money is? We expend an enormous amount of energy—and frustration—on something we understand surprisingly little about.”

According to Lietaer, “The weather, indeed, you cannot change. But money wasn’t created by God. We have forgotten that it’s a system designed by people. And that this design, which dates from centuries ago, is at the root of most problems in our society. The good news is that, with a small change to the money system, we can make an important contribution to the solution of a number of those problems.”

Lietaer’s idea is to introduce—alongside the existing national currencies—complementary money systems on a large scale. Based on barter, these systems would fulfil needs and make transactions possible when “normal” money is unavailable.

His idea is less revolutionary than it appears. In history, as well as in the world today, there are many successful examples of such systems—from the construction of European cathedrals in the Middle Ages and temples in Bali today to the present-day care systems for the elderly in Japan and airlines’ frequent-flyer programs.

What these systems have in common is they promote co-operation rather than competition; they support community instead of undermining it; and they make possible important and valuable work. “Complementary money systems put us in a position to be ourselves—to literally cash in on our talents,” says Lietaer, “even when there’s no official financial market for them.”

Lietaer discovered the destructive effects of the prevailing monetary system while working in Latin America during the 1970s. “Enormous loans were being granted for senseless projects,” he recalls. “The banks were throwing money around. I wondered if I was seeing things other people weren’t.” As a professor of international finance at the University of Leuven in Belgium, he wrote a book about his experiences in which he predicted a major debt crisis [Europe, Latin American and the Multinationals]. The book came out in 1979. In 1981, the crisis in South America broke loose.

Lietaer’s belief that the global monetary system needed reform led him to the Belgian central bank, where for several years he was involved in the establishment of the ECU, or European Currency Unit, the precursor of the euro. He subsequently became a general manager of a foreign-currency fund, winning accolades as “the world’s best currency dealer.”

More than that, Lietaer had become a genuine expert on money, privy to the deepest secrets of the financial world, eventually writing two works on the subject: The Mystery of Money (2000) and The Future of Money (2001). The books unravel the present concept of money and show how different approaches have different social consequences.

According to economics textbooks, money is value-free. It is nothing more than a means of exchange and is regarded as having no effect on transactions. Lietaer contests that view. “Money isn’t at all value-free,” he argues. “The monetary system is programmed—albeit not deliberately—to cause certain behaviour. It promotes competition and short-term thinking; it forces economic growth; and it undervalues care, education and tasks crucial to maintaining a society. Economics theory teaches us that people compete for markets and raw materials; I think, in reality, people compete for money.”

This competition is a direct consequence of the manner in which money is created. Banks put money into circulation by means of loans. When someone negotiates a $100,000 mortgage, money is created and begins circulating in the economy. The bank then expects the recipient of the loan to pay back a total of $200,000 in repayment principal and interest over the next 20 years. However, the bank does not create the second $100,000. The receiver of the loan must get hold of that money—the interest—one way or another, and this forces him or her to compete with others. It’s simple. Some people must lose money or go bankrupt in order to put others in the position to pay off their loans.

At the same time, this collection of interest results in a concentration of wealth. Those who have money “automatically” get richer. In addition, the system forces society into an endless loop of economic growth. New money must constantly be put into circulation to pay off old loans. “My conclusion,” Lietaer says, “is that greed and the competitive drive are not inherent human qualities. They are continuously stimulated by the kind of money we use. There is more than enough food and work for everyone. There is merely a scarcity of money.”

A monetary system driven by interest payments also blocks progress toward a sustainable economy. “The environment is a time problem,” Lietaer says. “A company like Shell undoubtedly has a better idea of the next century’s energy needs than any government. But within the current monetary system, we cannot entrust Shell with the future. Shell has to make a profit today. A government bears the responsibility for the future of the society.”

Business investments today are weighed against interest rates. This continually leads to short-term choices. “It is financially attractive to cut down trees, sell them and put the money in the bank,” Lietaer says. “Through interest, the money in the bank grows faster than the trees.”

Businesses are trying more and more often to avoid expensive, competition-promoting money. Barter now accounts for almost 15 percent of world trade. And it’s increasing every year by 15 percent. Barter is also the basis of the complementary money systems Lietaer advocates as a solution to the social and ecological disruption our current money system causes.

The emergence of complementary money systems like LETS, Local Exchange Trading Systems, began in Canada 20 years ago. In this system, communities issue local currencies that people can use to exchange services. You might, say, repair your neighbour’s car and use the proceeds in local currency to pay someone to paint your house. More than 5,000 such systems are now operating in communities of between 500 and 5,000 people worldwide.

The next major step for complementary money systems will involve participation by businesses. “What else are frequent-flyer miles besides a currency issued by an airline?” Lietaer asks. “Initially, they were mainly meant to commit customers to a certain airline, but over time you could use them to buy groceries in the supermarket, book hotel rooms and pay your phone bill. And you can earn miles without even flying.”

Greater involvement by business, Lietaer says, is crucial for a breakthrough of complementary money systems. In the United States, a system is in development in which health insurers will pay customers for healthy behaviour—for example, spending an hour in the gym. “This isn’t just marginal messing around,” Lietaer says. “Everyone knows health care in the United States and other Western countries is a big problem. It devours money. It’s in the system’s interest that people get sick. After all, it can’t earn money otherwise. Healthy people are of no use to the health-care system, or more accurately, medical-care system.”

A complementary system can work the other way around. For instance, only a century ago in China, doctors were paid by their patients when they were not sick. And he paid them, and took care of them, when they were.

“Money is not a thing,” says Lietaer. “It is an agreement, like a marriage or a business contract. And that means you can always make a new and different agreement.”

Lietaer knows money can change the world. “I can see how a crisis in the dollar could cause the global economy to collapse. Don’t forget that in the past 25 years, almost 90 countries have suffered severe currency crises.”

He also knows that “together we have all the knowledge and means we need for a peaceful evolution.” And that he wants to “design money that works for us, instead of us working for it.”