"Money" is nothing but a social construct that comes with a number of "rules of the game". In one way, "money" has much in common with computer operating systems: most users are completely unaware of the degree to which these rules are flexible, malleable, and allow very different designs. So, before we ask ourselves: in what way could a different design of rules lead to a different role of money, it is worthwhile taking a look at what sort of phenomena the present arrangement gives rise to. A telling passage can be found in Bill Mollison’s autobiography:

For six days a week, 8 or more hours a day, for years on end, we felled and milled trees; at the end of each day, we had cut all the timber for houses. (…) On bad days, we cut five houses, on good days, seven.

We cut about 35 houses a week. But one lunch time, pondering on this remarkable record, I asked the apparently simple question of all seven of we mill-workers. "Do any of us own a house?" We all looked at each other; none of us did. To get a house, one would in those days borrow $7000, pay for 56 years, and repay $30,000 – 50,000 dollars. It all seemed ridiculous.

After very little discussion, we agreed to work one day for ourselves and easily cut seven houses.

(…)

Many working men must be able to count such wealth, but they never possess it. Something is seriously wrong and you cannot see what is wrong until you follow each product and its financing through. If I build a house for $7000 and it is ten years older, I may sell it for $30,000. The same house is sold for more money again and again and again. A confidence trick indeed. Every time it is sold, someone pays for it all their lives; yet it was already paid for! It seems clear that, in a very few weeks of a whole life, we could provide for all our needs; shelter, food, fuel, fibre, energy, the lot. But we waste our lives in debts. – Travels in Dreams, Tagari, p. 829

Things are quite a bit more subtle than presented here, but this passage certainly is valuable for raising the question: how big are the implications of the rules of the money game for society?

If money is needed for some specific economic activity, there are a number of alternatives to obtaining credit from a bank, which very often is the only strategy considered even though it may not be the economically most advantageous one. One such alternative would be subscription schemes: a book is announced and the money to print it is raised through pre-orders at a reduced price. Such schemes can become quite clever: The Permaculture Designers’ Manual gives the example of a restaurant that handed out dated meal vouchers at a reduced price ("A voucher for 8 dollars, for one 10-dollar meal, at one day in July") to raise the money for major refurbishment. Here, something interesting happens: as these vouchers have an immediately verifiable value, they themselves become a sort of "valid currency" (in the sense of "having a verifiable value", although they are not "legal tender") that can be used to settle debts between people who use them. In the end, what the restaurant did was to enlarge the money supply in circulation themselves, rather than asking a bank to do such a favour for them. (Banks have the exclusive strange privilege to expand the money supply, cf. [1], and charge massively for exerting this holy power, in the form of interest, ultimately paid for in real economic goods and services!) So, the provider is using his customers as a "bank" here. Once one starts to develop an eye for this, one discovers a zoo of such "banking with the customer" schemes already being in place, from cell phone top up vouchers, to customer accounts, and even "company money" [2].

The essential insight here is: banks are not "holy institutions", and there is pretty much nothing a bank can do (save from receiving large government bailouts maybe) which people themselves could not do as well – perhaps even in a much better way, considering the imperative of re-investing surplus from rehabilitative activities to further speed up rehabilitation, rather than re-investing loot to speed up plunder.

Wherever people can agree on rules to regulate the flow of claims on work, they can easily cast this into an own currency. As we have seen, taking away people’s freedom to come up with their own rules of the game for their currency is a serious step towards the destruction of their culture. But, this works in the opposite direction as well: if a culture wants to retain, strengthen, or rebuild its identity, it is well advised to take a close look into the money issue and start to design its own currency according to the rules that fit it best. The objective of such a currency is not to drive out the transregional currency, but it should be made very clear by which schemes the transregional currency in the past has elbowed its way into its present dominance.

There are a number of such regional currency schemes in place, quite many of them being based on ideas of the Austrian Silvio Gesell; a key one being that of "demurrage:" holding on to money rather than getting it back into circulation fast is punished in some form. While this rule seems somewhat popular among alternative currencies, it is by no means the only conceivable option: when it comes to the design of rules, the sky is the limit of our imagination.

A very interesting and quite successful regional currency scheme was set up in 2003 in a rural district in South-Eastern Bavaria (incidentally the home region of the author): the "Chiemgauer" currency [3]. This currency is restricted to a region of about 500,000 inhabitants and is governed by a few rules easily comprehensible by everyone, which, however, achieve quite interesting different effects depending on the role of the participant in the "Chiemgauer" economy.

Key rules are:

• There is a registered association, the "Chiemgauer e.V.", open to everyone, which administrates, runs, and sets the rules for the currency. The rules of the game are not cast in stone, but open for being fine-tuned by the inhabitants of the region (through participatory democracy) as needed in order to deal with positive or negative trends.
• Formally, the "Chiemgauer" is a voucher whose value is identical to the Euro. Available denominations presently are 1, 2, 5, 10, 20, and 50 Chiemgauer.
• When person X exchanges Euros for Chiemgauer, this is done at a 1:1 exchange rate. If, however, Chiemgauer are exchanged back by person Y for Euros, the reverse rate is 1:0.95. Of this 5% difference, 2% are presently used to pay the administrative costs for running the regional currency. The other 3% are passed on to a regional charitable organization (e.g. a kindergarten, a music school, a museum, etc.). This "charity tax" is entirely paid for by Y, the person withdrawing purchase power from the region (the reason for exchanging Chiemgauer into Euros, rather than spending them locally), while X gets to choose the charity (which is registered in a database along with the serial number of the bill). Charities receive the money generated from this scheme as Chiemgauer.
• There presently is a "2% per quarter" depreciation fee on Chiemgauer, i.e. a bill becomes invalid after three months, unless upgraded by a stamp costing 2% of the bill’s value. This provides an extra incentive to keep the currency circulating fast.
• From the perspective of a charity, asking their members to make their regional purchases in "Chiemgauer" with them as the re-exchange beneficiary is a great way of raising additional money at no additional expense to their members. As they receive this money in the form of "Chiemgauer", they have an incentive to preferentially spend it on regional products.
• From the perspective of a shop owner, the fee rates associated with accepting the "Chiemgauer" are comparable to the fees paid when accepting payment by credit card. However, it gives local businesses an interesting advantage over chain store competitors, as an enterprise that works by widely distributing centrally sourced identical goods throughout the country (rather than providing functionally equivalent goods produced from regional sources) is punished by the back-exchange tax not felt by regional businesses (who can pay their providers in Chiemgauer). As members of charitable organizations are keen on making their purchases in Chiemgauer, there is a need for opportunities to spend them, so accepting Chiemgauer means enlarging one’s customer base. Also, holders of Chiemgauer are keen on getting rid of that money fast, i.e. tend to pay their bills as soon as possible.
• From the perspective of a (residential) consumer, exchanging Euros into Chiemgauer is a great way of supporting specific regional organizations that contribute to the cultural strength and identity of the region without extra direct costs.

This fairly clever scheme seems to have proven its value, as is witnessed by the growing popularity of this currency. It clearly illustrates what can be done just through the design of the rules of a currency. One might expect that much more would be possible if a bit of effort were invested into educating people about what money is, and how it works – or rather, how we can make it work to our advantage by appropriately designing its rules.

References:

1. http://en.wikipedia.org/wiki/Fractional-reserve_banking
2. http://www.disneydollars.net/, http://en.wikipedia.org/wiki/Disney_dollar
3. http://en.wikipedia.org/wiki/Chiemgauer, http://vimeo.com/4606454

Patterns are amazing things. Maybe, their fascination comes from the human mind being very good at spotting them, while at the same time also being very bad at spotting them. It is sometimes claimed that "a genius is someone who sees something that is patently obvious for the first time" and, very often, patterns are fascinatingly obvious – in hindsight.

By what process precisely does a culture lose its indigenous money as it gets connected to a more powerful economy? One might of course guess that "bait" is an important factor: Look at all these shiny new gadgets that the new money can buy. There’s even television screens! Still, some may not be that easily seduced, and as, unfortunately, we all feel better about major life decisions if we can avoid permanent confrontation with observations that force us to re-evaluate whether they might have been a major mistake, the question arises how to "connect" those to the new money economy who value their independence of it very highly.

History can tell us a lot about that. As it seems, there are indications throughout the centuries of the same mechanism, albeit dressed up very differently, at work all over the world. The general pattern seems to be that some essential resource is identified without which no one can exist. The rules of the game governing access to this resource are then changed, often for reasons that sound quite compelling and beneficial (in particular – and this is an important point – to those whose task it is to establish and enforce the new rules). Of course, one aspect of the new rules is that people now have to pay for something they previously could provide themselves, hence being forced to earn money. At best, this meant a major disruption of their previous schedule and mode of operation.

In the author’s place of origin – the key resource seems to have been water, even into quite recent times. Back in the 80s, some distant relatives could only get building permission if they signed a contract not to harvest rainwater. (They "illegally" built a cistern nevertheless.) Further back in time, there are local stories of farmers who were forced to give up their own springs, some of them being tracked down for illegal use of their springs due to mismatches between the amount of water they bought and the projected requirements of their livestock. (In a temperate climate with an annual rainfall well above 1000 mm.) The most bizarre case, however, happened to a farmer known to the author who one day got an official request to submit a water sample from their spring to have it tested for bacterial contamination. The farmer, not being stupid, did the most obvious thing, and later he received an (expected) order to stop using his spring, as the pathogen levels found in the water sample made it "unfit for drinking". Once he revealed he had actually submitted a sample of tap water, he got fined for "misleading the authorities".

It felt very eerie to learn that in India, the British colonial empire had established a "Salt Tax", and restricted the privilege to produce or trade with salt (essential in India’s hot climate) to the British. Same pattern here? In Africa, the British used a "Hut tax", which led to the famous "Hut tax war" in Sierra Leone. Looking at the details and history of these cases, it is not easy to draw conclusions as to what degree the destruction of a self-reliant culture through the introduction of novel "needs to earn money" was planned, accidental, or even mostly unrecognized. Salt, after all, has been taxed for a long time in India, the British just dramatically changed the rules of the game. A more recent case might be the U.S. occupation of Iraq, specifically Paul Bremer’s infamous Order 81, condemned by a number of right livelihood award laureates [1], which changed the rules for farmers with respect to seed saving.

Taken individually, none of these cases seem to provide conclusive evidence for a pattern (more likely an unintentional, rather than an actively planned one, anyway) at work that could be summarized as: "Western civilization re-programs other cultures by first destroying their indigenous money, and with it their self-reliance, through introducing an artificial need to earn exogenous currency through changing the rules of the game governing access to an essential resource." But still the observations are suggestive enough to warrant asking: Is there any evidence disconfirming, or further confirming, such a pattern from other places of the world? Comments on this from readers would be most welcome!

Continue to read Part V….

References:

1. http://www.gcn.de/download/Order_81.pdf

A small economy joins the big economy

In the last part of this series, we saw that linking a big economy to a small economy is by no means an innocent act: naively, this might be regarded as just ‘giving everybody more choice’, i.e. more options for trade, hence more ‘freedom’. But everything works in two ways: one cannot link a big economy to a small economy without linking the small economy to the big economy. So, this will simultaneously give the big economy a strong handle on the small economy. What would in principle prevent a small population of economically powerful participants in the big economy from using their sheer weight to e.g. buy up key resources such as land in the small economy? This is not a purely theoretical issue – we see such processes all around us. Note that this is practically bound to happen if the big economy keeps on generating major internal pressure to "grow". And, as one cannot separate a culture from its economy, this effectively means that the largest aggressive-expansive economy, that of the culture called "western civilization", keeps on re-programming other cultures’ economies, and eventually these cultures themselves. Might that even be called ethnocide?

There is one point in this whose crucial importance is often overlooked: expanding the options for trade – easily sold as "providing more freedom" – is reasoned to be harmless, as trade is assumed to be voluntary. Now, ‘voluntariness’ is sometimes regarded as a fairly elastic concept: there are many subtle ways to generate pressure, with the most effective ones being those where the people actually making the decisions that cause pressure are largely unaware of it. Starting from a situation where a big and a small economy just came into contact, an important step to facilitate trade between them is to establish a currency to be used for that exchange. Naturally, this will be the bigger economy’s money. So, from the perspective of the bigger economy, it would be very advantageous if everybody in the smaller economy were compelled to use the big economy’s money. But a need to use some specific kind of money can only come from a novel need to earn that particular money – it has to be novel, because there was no use for the big economy’s money in the small economy before they came into contact. The catch is that a "need to earn money" is always an aspect of non-freedom. So, in order to attain the freedom preached widely (essentially an expanded spectrum of options of what to spend money on), people are often forced into the non-freedom of having to use that money, and having to earn that money. Evidently, the term "freedom" is easily misused. Isn’t the freedom to choose a way of living – maybe just temporarily – where one does not have to earn "external money" an important one? Here, the concept "external money" is broader than that of "money imposed by a big economy": money, after all, was not created by God [1], but actually is just a social convention that comes with a number of rules that are in principle open to design. "External" money is any money where the user has no way whatsoever to influence the design of the rules of the game.

To a culture, a very direct measure of the degree of (loss of) self-reliance is the aggregated need to earn external money. So, if "freedom" is an objective, then, evidently, a very good use of money is to invest it to reduce the need to earn further money. This in itself is an important idea in permaculture, but it in addition has a number of other benefits (only superficially unrelated – if you do one thing really right, more right things will happen automatically): reducing heating bills by insulating one’s home not only produces more financial peace of mind. Note, however, how this runs totally counter to what one is implicitly told in western culture to use money on. So, as a thought experiment, what would happen if we all came to our senses this instant and made it priority one to spend money on everything that makes us less dependent on the (discomfortingly wobbly) economy? To the Gross Domestic Product, that might be a nuclear meltdown scenario – but this just shows the inappropriateness of this concept. In part, this problem already exists, and is being dealt with in quite an ingenious way: home-owners stop paying rent, hence if more people owned homes (which would be quite easily achievable if we allowed more modest dwellings), that would make a serious dent in the GDP – if we would not have "imputations". If you own your home, then for the purpose of determining the GDP, this is counted as you paying yourself the rent you would otherwise pay. The bizarreness of this entire concept has to be brought to wider attention, and art can play a major role in this. Let’s be creative: a ballpark figure for sexually active couples is to have intercourse about 100 times per year. Assuming for guesstimation purposes that roughly half the population are sexually active couples, that brings us to 150 million people x 100 sexual encounters per year. If, instead, couples paid one another, say, US$200 each time for that service, a staggering total economic value of three trillion dollars would have been produced from this alone! Evidently, we cannot let this go unaccounted for. Total US GDP, by the way, is about 14 trillion dollars, including – of course – housing and other imputations.

Continue to read Part IV…

References:

1. See, however this quite amusing old article from the Journal of Irreproducible Results: http://www.iijournals.com/doi/abs/10.3905/jpm.1981.408810 ("In the beginning, mammon created commerce and industry. And the marketplace was void and without form, and illiquidity was on the face of the balance sheet…")

Any society practices division of labour to some extent, and hence, needs some way to keep track of who is pulling their weight, and who is not. The fundamental idea is, of course, that someone who contributes to society’s well-being acquires some form of credit that gives him permission to ask society to do him some favour in turn. It is entirely conceivable that in some small societies – such as some close-knit families, or maybe some abbeys, all this bookkeeping on who owes whom how big a favour is done only mentally, without any form of written record or specific token. Usually, however, this keeping track of favours easily gets out of hand and becomes so confusing that societies soon start to rely on some sort of additional device – not for all processes, but at least for a considerable share of them. Let us for now call any such socially agreed upon way of keeping track "a currency". It is perfectly normal in any society to see multiple quite different currencies being in circulation simultaneously, from bank notes to invitations to a barbeque. This is important to note, for we normally associate only one concept with the term "currency": some sort of "formal money" (where we usually think of coins, or bank notes, etc.). Hence, it is sometimes necessary to remind ourselves that this might be overly narrow-minded.

The observation is that just about any culture at some point developed their own concept of such "money". While some see money as an "ingenious invention", it should quite likely rather be regarded as anthropomorphic, i.e. the emergence of "money" is pretty much inevitable in any but the smallest human societies. The reason is simple: (a) People trade. This is nothing but a very specific form of a mutual exchange of favours. But as people do this for a while, they soon find that (b) there are some items that are worth having even if one does not intend to consume them oneself, as they are generally highly desired, and hence can be used to trade them for other goods for personal consumption. Quite remarkably, the concept of acquiring a possession just because it may be useful to somebody else might not be only a human invention. (In [1], one finds a fairly amazing story of a tame fox.) Obviously, some of these prized goods will be more convenient to trade with than others, especially those that keep well, are easily transported, durable, easily partitioned, and assessed for quality (one might e.g. think of spices, or salt). These are a "more convenient money" than other, especially perishable, goods, and (c) hence gradually out-compete such "less convenient money".

In our society, money is understood as the main tool by which the market mechanism allows people to express preferences. If something which previously could not be traded for money becomes available by establishing a market, that means that market participants get a wider choice of options to weigh the desire to have very different things against one another, and "more choice" evidently cannot worsen one’s situation. Or can it? Compelling as this logic may seem at first, its naive application leads to some fascinatingly discomforting proposals, such as the idea of dealing with the shortage of organs for transplantation by establishing an open market for them [2]. Something seems not quite right here – after all, according to this "logic of the market", it should also be possible to buy and sell one’s right to vote, shouldn’t it? Still, it is quite tricky to point the finger at the problem.

One important issue is that "everything works in both ways", so connecting a previously independent society to the market of western civilization may allow great rhetorics of "giving poor people more choice, access to a huge new range of options to use their money, plus a market for their products which did not exist before" – but there is another side to that. In a certain way, there is a physical analogy for the problem: Markets equilibriate, and so do conductors. If we make our environment more conductive, e.g. by humidifying air in a heated room in winter, that prevents the build-up of undesirable pockets of isolated charges, which can cause fairly extreme voltages, and give rise to unpleasant electrostatic shocks. So, linking parts of the environment with conductors to prevent excessive voltages seems to be a good idea. But would that also be the case if one connected the radiator to mains power? What are, after all, a few hundred volts in comparison to the tens of thousands of volts of static electricity sparks? Hmmm… good question, isn’t it? The big difference here is that build-ups of static electricity will only move tiny amounts of charge (hence energy), while the electric grid can push around a lot of charge. A key question is: how much does the pressure (price, voltage) decrease if we move a given quantity of the stuff (goods, charge) that feels it? So, connecting a previously isolated economy to a big market economy will create a situation where even minor fluctuations in the latter may have a devastating effect on the structure of the former. Ultimately, the big market economy will assimilate and hence destroy the formerly independent economy. (There is another interesting physical analog: if one connects two half-inflated air balloons of about the same size, then "equlibiration" will make the larger one grow at the expense of the smaller one. While tension due to surface curvature on the smaller balloon increases in the process (with 1/r), total surface area decreases (with r^2), so total force, hence over-pressure in the link piece, decreases (with r/A).)

The evidence for the power of the "big economy assimilates smaller economy" process is all around us. In itself, it is an interesting phenomenon and hence should be studied closely (rather than condemned, or praised). A crucial step is how the big economy’s money drives out the small economy’s money. Why is this process so relevant? With respect to resilience, a big "everything on the market" economy behaves very differently from the equivalent collage of small economies that would have coexisted in its place had they not been amalgamated. The latter situation might at first seem more prone to encounter isolated problems – but may in part have evolved strategies to deal with them, while the big economy is tougher to knock over, yet at the same time more brittle: If we have the option to economically balance large streams of energy, food, and water against one another, this may be very useful to deal with some sorts of local problems, e.g. to invest a bit more energy to increase the local food supply a bit, or vice versa. If, however, major collective effects occur, the system is prone to failing catastrophically, in particular due to the incredible gap between wealth generating capacity of energy resources and their present price. Do we seriously consider burning grain to produce a kilowatt-hour of electricity worth a few cents to run a modern dish-washer once a day, if the same amount of food per day could easily feed a person who would do quite a good job at washing the dishes, and a hundred other useful things as well in the remaining time? On an energy-conversion basis, human people may seem "inefficient" relative to some machines, but on a "job achieved" basis, people are extremely efficient due to the high "intelligence per watt expended" quotient. Hence, if some minor fuel shortage in the big market economy spills over into food, this can easily have devastating consequences.

Continue to Part III….

References:

1. "Every Boy’s Book of Knowledge", Editor: Charles Ray, Prion Books (2007) On page 260, there is the following anecdote in the article titled "Can the Fox be Tamed?":
   "The cunning of the fox is proverbial, and it shows this in captivity as well as in the wild state. A fox which was kept in a yard was confined by a chain that allowed him a fair range for walking. One evening in the autumn a farm wagon, returning from the field with a load of corn, passed near the shelter of the fox, and an ear of corn dropped from the pile. The fox went out, took the corn, and carried it quickly back into his home. What he wanted with the corn no one could understand, but the next morning he was seen to come out of his shelter and nibble off some of the grains from the ear, scattering them about in view of the poultry which were in the yard. In due course, the chickens went up to the corn, and while they were eating it out sprang the fox and seized one of them, taking it back to his shelter, where he made a meal of it."

   True story? Hard to tell, but this at least suggests that looking into the transaction planning abilities of some animals may be interesting.

2. E.g.: Peter Oberender, Thomas Rudolf, University of Bayreuth, "Das belohnte Geschenk ­ Monetäre Anreize auf dem Markt für Organtransplantate", German with English abstract, http://www.old.uni-bayreuth.de/departments/rw/lehrstuehle/vwl3/Workingpapers/WP_12-03.pdf

Seen like this, it becomes very visible why both essentially self-destructive approaches are ultimately doomed to fail. Soviet-style communism did so quite spectacularly back in the 90s, while western-style capitalism started bleeding more recently. The important point to note is that the key aspect of our collective behaviour so far under both systems was to gradually exploit our then-best resources until they were gone, before necessity – the mother of all invention – forced us to devise "clever" ways to exploit the then-next-best resources that had been ignored before. In principle, the downward spiral we are on could – even in the present situation – go on for quite a while, certainly at least until we are driven to lure the earthworms out of the soil to eat them. There are countless very direct examples of this process all around us: oil certainly was easier to transport than liquefied natural gas. But how many engineers can actually see through the "interesting engineering challenges" associated with LNG infrastructure to see this as just the next step further down in the big picture?

But does it all have to be like this? Looking at us as a species, what are we most proud of? Perhaps, a good answer is: "Head, Hand, Heart". Given those, we actually have an unparalleled potential for system stabilization and damage repair – it almost seems as if Nature originally intended humans to be the ultimate gardening pioneer repair species. At some point in the past, we must have become confused and embarked on a destructive mega-project that allocates human creativity (literally, "the power to create") to ever more cunning schemes for exploitative destruction. The dissonance between this sort of "cleverness" and "wisdom" could not be any stronger. Personally, I sometimes wonder whether the book of Genesis is all about man’s dissociation from gardening, and hence the beginning of this doomed project that was started by the one fellow who first ploughed the soil ("adamah") and actually was named after it by his contemporaries ("Adam"). "In the sweat of thy face shalt thou eat bread." Now, could we not just get rid of much of that sweat once again by getting our carbohydrates from trees? And, might all those apocalyptic prophecies in the Bible actually be just nothing else but warnings that the basic scheme underlying that civilization, exploitation, is ultimately doomed to fail?

In some of the recent literature on education, an important useful concept is that of "alignment": When designing an assessed educational program, it is important to pay attention to designing the test in such a way that it actually effectively tests the desired competence. While this may sound painfully obvious, widespread use of multiple-choice tests in inappropriate ways is one of many indications of a real problem here. It seems useful to also think about our unnecessarily destructive behaviour in terms of an "alignment" problem. Viewed like this, the obvious question to ask is: "How would we have to re-design the rules of the (economic) game in such a way that human creativity gets allocated towards earth repair?" This question comes with an imperative, the imperative to dream, to consider daring ideas that completely run counter to our life experience – to think what has not been seen before. My impression is that many of the ideas that seem promising will in some way involve re-thinking money. After all, allocation of human effort is the central economic question, and money is a central mechanism for making economic decisions.

What is money? Interestingly, history of economic thought shows that this is a highly confusing question, and widespread beliefs on what is a good answer have changed in time. But isn’t it strange to be confused about the nature of something so fundamental? It is not as if, say, physicists were confused about the nature of energy. Let us, for now, consider the simplistic idea that "money = gold". The comedian Mike Harding came up with an interesting observation [4]:

Gold, n.: A soft malleable metal relatively scarce in distribution. It is mined deep in the earth by poor men who then give it to rich men who immediately bury it back in the earth in great prisons, although gold hasn’t done anything to them.

It is not that if we could just agree on "money = X" for some arbitrary X that has a number of desirable properties without expecting this to have any consequences towards our collective behaviour. A quite immediate consequence of the equation "money = gold", for example, is to have poor villagers on the Philippines poisoning their environment with mercury and cyanide, i.e. allocating human effort towards producing a more poisonous environment for their children. This strongly smells of a "misalignment" problem. Would it then be possible to turn this around by thinking about "money = X" as a design problem? An idea that almost suggests itself here is to take something as X that is fundamentally related to ecosystem health, such as e.g. forested area, stabilized dunes, or fertile topsoil. What consequences would such a scheme have for an economy that has to extend its monetary supply? While caution is strongly advised here, as there easily can be unexpected side effects, and one very easily becomes blind to the flaws of an idea one is in love with, the direct answer seems to be: this is only possible if people plant more forests, and improve soil fertility, hence providing a compellingly strong incentive towards repair. (Of course, these thoughts are just a crude first outline that may need a number of refinements.)

Our present money is based not on gold, but debt, which brings with it a host of problems, in particular in situations where – e.g. due to declining availability of cheap work in the form of fuel energy – there is a systemic reason for promises pledged becoming unfulfillable. One curious very different sort of money is the stone money of the ancient Yapese, Rai stones [5]. Essentially, while a key idea again is scarcity (based more on a difficulty to obtain, rather than limited natural abundance of raw material), this in effect is "merit money": one can "make new money" by embarking on an adventurous journey and then investing even more work to produce new "money stones". To society as a whole, such activity may not be overly damaging, like poison-dependent mining, but it still seems somewhat strange, as it uselessly burns up human creativity. So, the idea of "merit money" seems to be more beneficial than the idea of "scarcity-based preciousness money". Still, would it not be even much better if the actual "merit" were tied not to an essentially nonsensical activity, but to actions providing ecosystem abundance, such as repairing degraded soils?

A naive "formula" seems suggestive here: money based on scarcity will bring scarcity, while money based on abundance will bring abundance.

Continue to Part II of this series….

References:

1. http://en.wikipedia.org/wiki/Cuban_Missile_Crisis
2. http://www.wired.com/politics/security/magazine/16-03/ff_nuclearwar,
   http://en.wikipedia.org/wiki/Operation_Giant_Lance,
   http://en.wikipedia.org/wiki/Madman_theory
3. http://en.wikipedia.org/wiki/Stanislav_Petrov
4. http://www.mikeharding.co.uk/books/comedy/armchair/armchair2.htm
5. http://en.wikipedia.org/wiki/Rai_stones

The last decade was quite an eye opener to the world. Multiple converging events collided to shake many awake out of their apathy, and the proliferation of the internet helped spread the word like never before. Environmentalism went from a concept that was scoffed at to being the overriding concern of the majority. Today you’ll find sandal wearing tree huggers side by side with briefcase wielding wannabes. The tanked economy woke people up, worldwide, with the startling realisation that free market capitalism has completely failed them. Celebrations for the fall of the Berlin Wall and communism were half-hearted and filled with cynicism, with the realisation that the greed that forms the basis of capitalism brings very real consequences. We watched in horror, while the ‘invisible hand‘ (see also) went AWOL when we needed it most and governments worldwide took trillions of taxpayer dollars and spent us all into the next century to salvage the largest industries from their own stupidity and lack of foresight. By now we were so punch drunk we could only stare as the Wall Street bankers who orchestrated the collapse made off with golden parachutes and bonuses that defied belief. And, although the economic slowback reduced oil prices from the through-the-roof highs of 2008, thus muting alarm over this for too many with short attention spans, we now have millions more people the world over conscious of the outright vulnerability of our present situation as we ride the crest of peak oil. The unjust wars fought with a veiled but obvious motive disgusted and infuriated all but the most callous or ignorant, and the decade was peppered with annual, high level international talks about climate change that were doomed to fail from the outset.

With these thoughts in mind, I share the video clip below. Despite only being uploaded onto YouTube three days ago (Dec 29), it’s already been watched 173,000 times.

I think this clip can get us all thinking about the potential of weakening the banking stranglehold by simply moving our money out of their hands. As well as moving our money to more community-minded institutions, isn’t this also the time to think seriously about local currencies, like those we see featured in the recent In Transition 1.0 video, and really get serious about buying local and working cooperatively to build relocalised resiliency?

I’d be very interested to hear your ideas on changing the system from the inside out. If you’re involved in financial aspects of Permaculture, comment to tell us about it. Or, better yet, write up a post and send it along (editor (at) permaculture.org.au).

Further Viewing:

• Money as Debt
• The Crash Course

Fishing boats rest on the shores of a lake in Sri Lanka
Photos © Craig Mackintosh

Shattered Dreams

Anniversary celebrations for the fall of the Berlin Wall have just recently ended. It was twenty years ago that the most symbolic, and literal, barrier between two economic ideologies was pulled down by restive, festive spirits. But, the celebrations of November 2009 were tempered with a heightened sense of objectivity – in a way perhaps never seen before in modern history, and certainly not seen in 1989.

A recent BBC poll indicates widespread discontent with the now all-pervasive capitalist system. Global economic meltdown tends to dampen party spirits, and this is especially true when what you’re celebrating is a major milestone for the very system responsible for the collapse.

Between Two Evils

A couple of years ago I watched PBS’s six-hour historical look at the last century’s ideological struggle between east and west, left and right, communism and capitalism. Commanding Heights is without doubt a fascinating watch and does provide some greater context to the massive political shifts that shaped the turbulent twentieth century and which have deposited us here in this new millennium. Although apparently trying to walk objectively, the production remains right leaning. Completed in 2002, during the boom years prior to 2008’s energy, mortgage and banking mayhem, the documentary ends giving – albeit with some hesitant reservations – the globalised, ‘free market’ the winning trophy for Best Economic Model.

I would love to see how the documentary would end had it been made today, in November 2009….

I keep meeting people who have just lost their jobs. Many are relocating in search of work, or are returning to the support of their family home. It’s ironic. There is so much work that needs to be done to transform our world into sustainable functionality, yet more and more people are unemployed. Apparently there’s nothing for them to do.

The present is bleak for many, but the future is not brighter. Most of the young people I meet are still studying themselves into redundancy. Their ‘education’ is fully based on an energy rich dream time – an era that is all but over. The system – the ‘invisible structures’ that frame our economic activities – have and are failing us in almost every way, and not least of these is making best use of our most valuable resource: people. Thoughts on the need for real, expedient, practical training for the world fast arriving have yet to reach mainstream consciousness, and this is setting us up for very difficult times.

But Where From Here?

The tug of war between communism and capitalism always ends the same – with a lot of people laying flat on their faces. Both systems end in massive centralisation, whether the totalitarianism of a socialist government run amuck or the resource- and capital-accruing power of unrestrained, capitalist captains of industry. Whilst the ivory towers of our world are inhabited by an ‘elite’ Corporatocracy (a system I call ‘corporate feudalism’), at the base of all this, dealing with the realities of existence and scrabbling for resource crumbs, are individuals – those that industry has affectionately labelled ‘consumers’. The majority inevitably become mere pawns in the game.

Yet, can we even begin to visualise a new form of society – one where mankind’s net impact on the planet is neutral, or positive? What would such a society look like?

A Sarvodaya villager sells a diverse range of organic produce roadside
– with more than 95% of it grown behind the stall, and by her own family

As we don’t live on an inflatable earth, logic dictates that we recognise resources as being finite – that they must be constantly cycled. The one sure ingredient to a ‘third way’ is that it cannot, and must not, be based on perpetual growth. Consumerism is the enemy of what we need to build, yet in the framework we’ve grown up within, this concept seems foreign and absurd. (Can you picture purchasing a lawn mower – but having the salesman encourage you to consider a goat, or a food forest, instead? Bush is famous for encouraging us to "go shopping" in a time of tragedy, yet can you see Obama orating about the need to unplug from markets, stay home and build environmentally friendly, community-centric self-reliance?)

Getting to the Heart of the Matter – the Heart Itself

It is what people want, or can be made to want through media and peer pressure, that is at the heart of our problems. We simply can’t constrain ourselves, and industry and government encourage and manipulate this to their own ends.

And, while we know we must stop consuming the planet, for us to suddenly depart from this entrenched system would translate to widespread economic turmoil and immense suffering. Building a new framework to transition to is critical, yet environmentalists worldwide grapple with this concept, resorting instead to talking about efficiencies and ‘green technologies’, studying how to make ourselves merely less bad, but struggling to comprehend, let alone implement, the real necessity – inner, motivational change of the individual, and shaping greater society to foster that.

A boy learns in the village of Lagoswatta – Sri Lanka’s first eco-village – a
collaboration between Sarvodaya and the Sri Lankan government

Setting Priorities

The effectiveness and transparency of the now-enormous Sarvodaya network has encouraged many philanthropic organisations to funnel aid through them rather than other potential channels. A.T. Ariyaratne told me that often, however, Sarvodaya declines donations due to the strings attached. Many aid organisations measure their success by the number of food or clothing items distributed; the number of boxes shifted. But, for the Sarvodaya Shramadana movement – personal development, or ‘awakening’, is the beginning and the end of their ambitions, and this is not so easy to quantify.

As I’ve shared, the Sarvodaya Shramadana movement aims for individual, voluntary simplicity in combination with shared labour. For an individual to function in such a way it necessitates having a mutually cooperative community around him. Building those communities – those that nurture the values of self reliance and self restraint – is the central thrust of the movement.

The Village Republic

In contrast to the rapid centralisation and government dependence we witness today, the ideal for every Sarvodaya village is Grama Swarajya, or self governance, where every village effectively becomes its own village republic.

Bandula Senadheera, Executive Assistant of the Sarvodaya International
Division, explains the village graduation process
Click image for detailed view

Rather than the IMF/World Bank/WTO model that seemingly prioritises (but fails to achieve) economic ‘development’, villages enlisting with Sarvodaya go through a five step graduation process that begins with the hearts and minds of individual villagers.

The five steps are:

1. Psychological infrastructure development
2. Social infrastructure development and training
3. Satisfaction of basic human needs and institutional development
4. Income and employment generating and self-financing
5. Sharing with neighbouring villages

Contrary to mainstream thinking, meeting basic needs is only step three in the Sarvodaya village development process. Before you’re assisted to improve your condition, you are first awakened to the consideration of what the true needs of a peaceful, sustainably contented society is. The village is infused with enthusiasm and agreement on a fully holistic level.

Continue on to Read Part IV

I could very much relate to an article I read today, albeit with some reservations:

WOULD ANY SANE PERSON think dumpster diving would have stopped Hitler, or that composting would have ended slavery or brought about the eight-hour workday, or that chopping wood and carrying water would have gotten people out of Tsarist prisons, or that dancing naked around a fire would have helped put in place the Voting Rights Act of 1957 or the Civil Rights Act of 1964? Then why now, with all the world at stake, do so many people retreat into these entirely personal “solutions”?

Part of the problem is that we’ve been victims of a campaign of systematic misdirection. Consumer culture and the capitalist mindset have taught us to substitute acts of personal consumption (or enlightenment) for organized political resistance. An Inconvenient Truth helped raise consciousness about global warming. But did you notice that all of the solutions presented had to do with personal consumption—changing light bulbs, inflating tires, driving half as much—and had nothing to do with shifting power away from corporations, or stopping the growth economy that is destroying the planet? Even if every person in the United States did everything the movie suggested, U.S. carbon emissions would fall by only 22 percent. Scientific consensus is that emissions must be reduced by at least 75 percent worldwide. – Orion Magazine

I have heard so many people tell me that the way to change the world is for us each to change our own lifestyles. It’s all "in the simple things we do every day" they say. Take shorter showers, change your lightbulbs, keep a garden. While many pass responsibility for our present condition on politicians and faceless corporations, these lay the blame squarely at our own feet as individuals.

What is the average concerned consumer meant to do (after determining, once and for all, to stop calling himself a consumer!) – should he concentrate on only his own actions, or should he concentrate on changing the system, or both?

The article I quote above, in my personal opinion, is on the money in many respects, although perhaps a little imbalanced as well – and I also think it falls short by not providing some kind of direction or road map to address the issue raised. This post is a small attempt to do this, and stimulate discussion on the same. Please forgive the length, but I think it’s an important issue.

First we need a little background on why focussing only on our own individual behaviour, on its own, will never be enough.

Note: The next section covers the realities of the corporate takeover of the world. This is information everyone should know. If you’re already painfully aware of these things, then feel free to skip the first half to jump to the solution.

Industry and government teamed up = democracy for sale

A little while ago I wrote about global dimming, and how it is veiling our true predicament in regards to climate change. Today I want to consider another facet of this story – how politics and industry are effectively doing the same, not just in regards to climate change, but in regards to every aspect of our lives.

Power is shifting away from governments and politicians and being invested instead in transnational corporations and institutions. We now live in a world where corporations are taking over from the state, where business appears more powerful than politics, and where commercial interests are paramount.

There is plenty of evidence to back up these assertions. Multinationals are now as big as many nation states – 300 TNCs now account for 25 per cent of the world’s assets. Individual companies now have more wealth than whole countries. Mitsubishi is the 22nd largest economy in the world, General Motors the 26th, Ford the 31st. Each is larger than the economies of Denmark, Thailand, Turkey, South Africa, Saudi Arabia, Norway, Finland, Malaysia, Chile and New Zealand, to name but a few. Corporate sales account for two-thirds of world trade and one-third of world output, while as much as 40 per cent of world trade now occurs within multinational corporations.

Their economic dominance gives TNCs huge amounts of power. Their unprecedented strength and mobility means that they are increasingly able to play one state off against another in the search for ever lower standards and cheaper locations to base business. Governments are becoming trapped in a regulatory ‘race to the bottom’ to achieve international competitiveness. Under economic globalisation, democratic efforts to ensure corporations pay their fair share of taxes, provide their employees with a decent standard of living, or meet environmental targets are met with the response that such measure could undermine their international competitiveness – followed closely by a threat to relocate to countries with less stringent controls.

The implication is, as Hans Tietmeyer, former president of the German Bundesbank, has said, that, ‘Politicians have to understand that they are now under the control of the financial markets and not, any longer, of national debates.’ The sorry tale of Oskar Lafontaine, the former finance minister of Germany, is a case in point. Revenue from corporate taxes in Germany has fallen by 50 per cent over the past twenty years despite a rise in corporate profits of 90 per cent. In 1999, Oskar Lafontaine dared to attempt to raise the tax burden on German firms. He was simply blocked by a group of companies all of which threatened to relocate investment or factories to other countries if government policy did not suit them. Their threat was successful – and it was Lafontaine who was relocated, out of the government. – Green Alternatives to Globalisation, p. 18, 19.

Just in my own ‘neighbourhood’, where I was recently stationed in Eastern Europe, I witnessed several large Trans National Corporations being granted incredible privileges by the current government in a bid to attract them to locate there. Amongst other benefits, these businesses secured a ten-year grace period, excusing them from all taxation. Once this period has elapsed they are free to pack up and move elsewhere if subsequent conditions do not suit. In the meantime, taxpayer dollars are being diverted into roading and other improvements so as to make life easier for their large scale transport needs, whilst workers’ rates are set at a bare minimum, with employees being sold the idea that the privilege of working for them should be reward enough – that having their globally recognised name on their resume is of more value than present financial security.

To attract companies like yours … we have felled mountains, razed jungles, filled swamps, moved rivers, relocated towns … all to make it easier for you and your business to do business here. – Advert placed by the Government of the Philippines in Fortune magazine

The trend is the same the world over. If cheap labour, and lax or non-existent environmental regulations make it cheaper to relocate, then that’s exactly what happens. Incentives to build and invest in the ‘people and place’ of local communities thus give way to the primary concern of shareholder profits. In a world where, as mentioned above, the vast majority of world trade is under the auspices of these companies, and the primary motivation is to look out for the interests of the corporation and its shareholders (this motivation, unfortunately, being built right into the corporation’s central charter), then our present environmental woes should have been not only easy to predict, but also recognised as the only logical conclusion to our present ‘Democracy-for-Sale’ combination of corporate feudalism and political commercialisation.

… We are witnessing a ’slow motion coup d’etat’, a process of political osmosis by which power is seeping out of increasingly flaccid national governments to swell the already turgid TNCs and international trade and finance institutions. Any resistance to the coup from conventional politicians ceased long ago. They have become its willing accomplices and the distinction between government and big business is becoming increasingly blurred. - Green Alternatives to Globalisation, p. 20.

This is true in several ways – from industry sponsored ‘progressive governance’ events designed to ‘educate’ politicians in ‘correct economic systems’ (‘correct’ according to the WTO, IMF, and World Bank’s view of the world – i.e. policies that favour TNCs), to direct ‘donations’, to the revolving door hiring process that sees industry heads being absorbed into politics – where they end up being responsible for forging (relaxing) regulations for the very industries they’ve just left.

One would wish that our governments were, without vested interest, objectively considering the fate of present and future generations – making wise and precautionary decisions that will improve the long term sustainability of our society whilst working for the betterment of our lot in the present. But, this is clearly not the case when regulations and subsidies all favour the very industries whose underlying strategy is out-competing and swallowing up the community-minded, locally based, Ma & Pa type stores of yesteryear.

And, if the environment somehow manages to become a pressing concern in the eyes of the public, instead of bringing actual solutions to the table – government and industry instead attempt to veil the realities of our predicament, granting us either a reluctant admission of the same, or a watered down rhetoric expressing the need to implement ‘positive strategies’ for resolution – especially focusing on those ‘positive strategies’ that result in increased benefits for those same corporations – at yet greater costs to people and place.

A current and alarming example of this, amongst many, is the topic of biofuels. I’m not talking about your recycle-the-chip-fat scenario here – but the land/food-for-fuel scheme that is blindly marching across the world’s already-strained topsoils. This topic is of great concern amongst many in the public and scientific sectors, regarded by many as a “science fiction solution” to climate change, but it’s interesting to note there’s little to no debate about it in political circles:

McCain Changes His Stand on Biofuels

The whole ethanol craze is centred on economics only, but discretely covered in a light-green mantle of ecological concern. It is aggressively pushed forward despite being scientifically and ecologically unsound. Rather than reasoned public debate, the most likely hurdles to its progress could be the complete collapse of the agricultural systems it relies on. It shouldn’t have to be this way.

An excellent, practical example of how change at the top is essential to get agriculture back on track, is the U.S. Farm Bill. Every five years in the U.S. legislation is reworded and renewed that impacts to some degree or another almost every person, field and creature in the U.S., and also a large percentage of the rest of the world’s population. Yet, most people in the U.S. are blind to this fact, leaving politicians and industry lobbyists alone to beat out a ‘deal’ most satisfactory to themselves – to destructive large scale monocrop, fossil fuel intensive, chemical laden conglomeratic industrial farming – and even when the average Joe does take note, industry lobbyists inevitably get their way. (Read more on the Farm Bill here.)

Our politicians are: 1) skillfully presenting themselves as concerned environmentalists, 2) excusing and promoting the industries that are the biggest contributors to global warming and environmental destruction, whilst 3) shifting the guilt for the same onto the average Joe Citizen (one factory can do more environmental damage in a single afternoon than an ordinary citizen can in his entire lifetime), and 4) veiling our true ecological predicament to mute public outcry and to protect the status quo.

Often, any attempt to scrutinise the actions of big business is met with the cry ‘protectionism’. We would do well to note that ‘free trade’ organisations like the WTO encourage their own kind of protectionism – working within a framework that is either above the law, or shaping its own; a system that protects corporate profits at the expense of the public good. This is not democracy at work. It is, in fact, quite the opposite.

For example, WTO ‘like product’ rules render it illegal to discriminate between imports of similar products on the basis of the way in which they were produced. They therefore prohibit discrimination between GMOs and non-GMOs, or between imports of clothes made with child labour and those made in decent conditions, or between meat and dairy products made through the appalling mistreatment of animals and those made with high animal welfare standards. Governments are now unable to exercise their responsibility to protect their citizens from products that damage the global environment, or from foods made with appalling animal welfare standards. By giving up the right to condition investment in a country on certain societal standards, or to make the entry of products into domestic markets dependent on compliance with national rules, governments have deliberately eroded the leverage they once held over corporate behaviour on behalf of the people. - Green Alternatives to Globalisation, p. 22.

Getting to the heart of the matter: Corporate greed is a CEO’s legal obligation

Most of us have watched The Corporation, prompting us to go "tsk, tsk" and giving us increased scepticism about the pro-social and pro-environmental claims of Big Industry. Hollywood even presents us with dramatisations of David and Goliath type stories of small community underdogs battling greed and corruption – winning after mega effort and against the odds – or they present us with the tale of an idealistic, yet sincere and determined employee changing the course of his company for the better. These kind of stories appeal to our inner desire to see good triumph, but they never examine the root obstacle to that change – that being the legal structure of corporations themselves.

The following passages begin to shed light on why we’re in the mess we are in, and can also get us thinking about how we can, finally, get out of it.

After 23 years as a corporate securities attorney–advising large corporations on securities offerings and mergers and acquisitions–I left my position as partner at Skadden, Arps, Slate, Meagher & Flom because I was disturbed by the game. I realized that the many social ills created by corporations stem directly from corporate law. It dawned on me that the law, in its current form, actually inhibits executives and corporations from being socially responsible. So in June 2000 I quit my job and decided to devote the next phase of my life to making people aware of this problem. My goal is to build consensus to change the law so it encourages good corporate citizenship, rather than inhibiting it.

The provision in the law I am talking about is the one that says the purpose of the corporation is simply to make money for shareholders. Every jurisdiction where corporations operate has its own law of corporate governance. But remarkably, the corporate design contained in hundreds of corporate laws throughout the world is nearly identical. That design creates a governing body to manage the corporation–usually a board of directors–and dictates the duties of those directors. In short, the law creates corporate purpose. That purpose is to operate in the interests of shareholders. In Maine, where I live, this duty of directors is in Section 716 of the business corporation act, which reads:

…the directors and officers of a corporation shall exercise their powers and discharge their duties with a view to the interests of the corporation and of the shareholders….

Although the wording of this provision differs from jurisdiction to jurisdiction, its legal effect does not. This provision is the motive behind all corporate actions everywhere in the world. Distilled to its essence, it says that the people who run corporations have a legal duty to shareholders, and that duty is to make money. Failing this duty can leave directors and officers open to being sued by shareholders.

Section 716 dedicates the corporation to the pursuit of its own self-interest (and equates corporate self-interest with shareholder self-interest). No mention is made of responsibility to the public interest. Section 716 and its counterparts explain two things. First, they explain why corporations find social issues like human rights irrelevant–because they fall outside the corporation’s legal mandate. Second, these provisions explain why executives behave differently than they might as individual citizens, because the law says their only obligation in business is to make money.

This design has the unfortunate side effect of largely eliminating personal responsibility. Because corporate law generally regulates corporations but not executives, it leads executives to become inattentive to justice. They demand their subordinates “make the numbers,” and pay little attention to how they do so. Directors and officers know their jobs, salaries, bonuses, and stock options depend on delivering profits for shareholders.

Companies believe their duty to the public interest consists of complying with the law. Obeying the law is simply a cost. Since it interferes with making money, it must be minimized–using devices like lobbying, legal hairsplitting, and jurisdiction shopping. Directors and officers give little thought to the fact that these activities may damage the public interest.

Lower-level employees know their livelihoods depend upon satisfying superiors’ demands to make money. They have no incentive to offer ideas that would advance the public interest unless they increase profits. Projects that would serve the public interest–but at a financial cost to the corporation–are considered naive.

Corporate law thus casts ethical and social concerns as irrelevant, or as stumbling blocks to the corporation’s fundamental mandate. That’s the effect the law has inside the corporation. Outside the corporation the effect is more devastating. It is the law that leads corporations to actively disregard harm to all interests other than those of shareholders. When toxic chemicals are spilled, forests destroyed, employees left in poverty, or communities devastated through plant shutdowns, corporations view these as unimportant side effects outside their area of concern. But when the company’s stock price dips, that’s a disaster. The reason is that, in our legal framework, a low stock price leaves a company vulnerable to takeover or means the CEO’s job could be at risk.

In the end, the natural result is that corporate bottom line goes up, and the state of the public good goes down. This is called privatizing the gain and externalizing the cost. – How Corporate Law Inhibits Social Responsibility – A Corporate Attorney Proposes a ‘Code for Corporate Citizenship’ in State Law

No environmental movement will meet with success if it only operates on the typical patchwork process – that of trying to scold and chide industry and consumers into lessening their impact on the world. Indeed, regulatory controls alone will never be sufficient either, and work on the same after-the-fact premise. What is required is major surgery to the central chartered legal responsibilities for businesses (currently just to protect their own interests), and personal accountability for their directors. Without embedding broader social and environmental responsibilities, inter-business competition and shareholder demands will always ensure investment in the future gives way to a mere striving for market dominance, at any cost.

By the people, for the people

In no way am I discouraging noble efforts in all the little areas of our lives. It is through our purchases, activities and habits that we create ‘niche habitats’ for industry to thrive in, but at the same time we must recognise that society is shaped by more than just consumer demand. Indeed, consumer demand itself is shaped by industry, through stealth marketing tactics, planned obsolescence and more. Big industry is favoured and even subsidised by government, and government is increasingly subservient to industry demand. As shared further above, the line between industry and government is blurred.

At the moment we live in a world of ‘corporate watchdogs’ and ‘whistleblowers’. We have law suits where powerful well financed corporations ably defend themselves against the small budgeted claims of people’s whose concerns are well off the radar of stock-tracking shareholders. This scenario is farcical. Why do we bother? Since it is a legal obligation for industry heads to make the interests and profits of the corporation their primary concern, then trying to get them to consider the collateral damage of their activities is like trying to get water to flow uphill.

The good news is that, unlike the law of gravity, we can change the laws governing corporations.

The Corporation documentary showed clearly how corporations have been given the rights of ‘individuals’, yet actual individuals learn ethical values from an early age, and suffer shame or penalty for their indiscretions. Decision makers in industry, however, hide behind the ‘corporate individual’. The Corporation may come under scrutiny, but the real life people behind the logo are almost never subject to prosecution. This needs to change. Personal accountability needs to be ‘incorporated’ into the laws of incorporation.

In this sense, I have to agree with the author of the initial quote at top, that we do indeed need to confront and take down the systems that have been taking so much from so many for so long. The growth economy must go. The every-man-for-himself mentality must die.

If we are to hook our ailing planet up to a life support system – shouldn’t we double check who is holding the stethoscope? Those making the greatest profits from our resources have garnered the support of government to all but completely externalise the real costs of their plundering. Yet, we have fallen, or have been manipulated into, a level of social and political apathy that’s far beyond any previous generation that has ever existed. We watch and wait for those in power to solve our problems – ignorant of the fact that whatever ’solutions’ they have will only be a profit-making hybrid of any potential real solutions, since no action can be taken unless profit is the result. This is not a time to allow ourselves to be serenaded by political and industry greenwash. While we’re greening our personal lives – let’s not ignore the fact that our composting and light bulb swap-outs will mean little in the grand scheme of things if we leave unchecked the great industrial machine that put us into this predicament in the first place.

We need to see democracy return to a community hall near you.

Further Reading:

• Can Permaculture Save the World?
• Forget Shorter Showers
• The Corporation
• The People’s Business: Controlling Corporations and Restoring Democracy
• Sins of the Fathers: How Corporations Use the Constitution and Environmental Law to Plunder Communities and Nature

Pay drivers to scrap their cars? We might as well burn ten-pound notes in power stations.

The magic numbers spin before our eyes. No one can grasp the scale of the hand-outs, or understand how public money which didn’t exist – could never exist – for hospitals or schools or public toilets begins to flow as soon as the bankers fall to their knees. We are punch drunk, reeling, uniquely vulnerable – because none of it makes sense any more – to new demands from every species of scrounger.

So prepare yourselves, ladies and gentlemen, for the worst scam of all. It’s another reward for failure, but this one offers no prospect of rescuing the economy. Thanks to its cunning disguise as an environmental measure, we seem willing to be conned. I want to show you why we should resist it.

I’m talking about the scrappage payments being proposed by almost everyone linked to the motor industry: the Society of Motor Manufacturers and Traders(1), most of the big car firms(2), the AA(3) and the unions. Lord Mandelson is said to be a fan(4). They argue that drivers should be paid around £2000 a head to scrap their old cars and buy new ones. As well as saving the jobs of hundreds of thousands of workers, this, they say, will catalyse a low carbon transport revolution. It’s bunkum.

Let’s start by getting a misconception out of the way. The media are reporting the proposal as a subsidy for switching to smaller, more efficient cars. But the manufacturers have called for no such thing. The model they keep referring to is Germany’s. Here drivers are being offered E2500 to trade in cars at least nine years old for new models. The only requirement is that the new cars meet the Euro 4 standard on exhaust emissions(5). This is another way of saying all cars: since 2005 every new car on sale in the EU has to meet this standard, which has nothing to do with CO2. So £2000 from the government could help you trade in your old Citroen C1 for a new Porsche Cayenne.

There is a simple way of working out whether or not a green subsidy is worthwhile: how much does it cost to save a tonne of carbon dioxide? No one appears to have done this yet so, if you’ll bear with me, I’ll attempt it here. I’ve had to make a few assumptions where data don’t exist, but it gives us a rough idea of what we are exposing ourselves to (all the sources, as usual, are on my website).

Let’s imagine that the average age of the scrapped cars is 12 years. In 1997 new cars in the UK produced an average of 189.8 grams of CO2 per kilometre(6). If they’ve become 10% less efficient since then, their average output will be 208g/km today.

Cars manufactured this year will put out an average of around 160g/km(7), which means a saving of 48g/km. This translates – with a mean annual driving distance of 16,500km(8) – into a cut of 792kg/car/year. Assuming that drivers are each paid £2000, that’s a cost of £2525 for every tonne of CO2 avoided, divided by the average age of the cars on the road – 4.9 years. You’d get almost as much value for money by reclassifying ten-pound notes as biomass and burning them in power stations.

The management consultants McKinsey have calculated the costs of saving CO2 by other means(9). We could do it for £3.50 a tonne by investing in geothermal energy, or £9 if we put our money into nuclear power plants. Mini hydroelectric schemes would save money as well as carbon against normal electricity prices. So would energy efficiency: switching from incandescent light bulbs to light-emitting diodes, for example, saves £80 for every tonne of CO2 you cut.

I would have liked to give you some transport comparisons, but McKinsey doesn’t publish figures for public transport or for promoting walking or cycling (a McKinsey consultant wouldn’t be seen dead on a bus). Nor, as far as I can discover, does the government. The carbon payback for other projects – creating better cycle lanes in towns and coach lanes on motorways, helping children to walk to school, better enforcement of speed limits, better timetabling for buses – is likely to be hundreds or thousands of times higher than any returns from the scrappage scam.

In fact I have grossly overstated the scheme’s value for money. My rough figures take no account of the rebound effect: when driving costs you less (after buying a more efficient car), you are likely to travel further(10,11). Nor have I considered the fact that many people would have bought new cars anyway, which means they’ll be given the money for nothing. Without this subsidy, others might have stopped driving altogether and started cycling or using public transport instead: in this case the scrappage scheme will have raised their emissions. Nor did I calculate the carbon costs of manufacturing the new cars.

A paper published in 2000 by the journal Transportation Research comes to even grimmer conclusions: that replacing old cars with new ones increases carbon pollution(12). Because between 15 and 20% of a car’s emissions are produced during its manufacture, the optimal age for a car, the paper says, is 19 years. (The average age of the UK’s fleet is 4.9 years(13)). If the paper’s assumptions hold (they may be out of date now), it would make more sense for the government to pay us to keep our old bangers on the road.

Low-carbon transport? Pull the other one. Scrappage schemes are nothing but hand-outs for the car firms, resprayed green to fool the incautious buyer. The motor trade wants the money because it’s collapsing. Some companies – notably Vauxhall and the rest of the General Motors group – are in imminent danger of insolvency(14). So the question changes: should we support them regardless of their impact on the environment?

No. State aid rules forbid scrappage schemes from discriminating between cars made here and cars made abroad. So, given that British car plants assemble only around 15% of the vehicles sold in this country(15,16), and given that the motor industry is highly automated and has vast capital costs, this subsidy is likely to be just as bad at saving jobs as it is at saving carbon. Every pound we spend on driving is a pound withheld from the alternatives, many of which (such as buses and trains) employ far more people for the same amount of money.

This leaves only the value of preserving the industry for its own sake. It is hard to think of a less deserving cause. The motor companies have repeatedly failed to anticipate trends in demand. They have carried on producing thunderous gas guzzlers long after the market collapsed. Every so often the bosses wring their hands about jobs, put out the begging bowl, get the money then shaft their workers anyway. Like the bankers they have wrecked their own industry. And like the bankers they want the rest of us to pay.

References:

1. http://news.bbc.co.uk/1/hi/business/7925484.stm

2. eg http://news.bbc.co.uk/1/hi/business/7924534.stm

3. http://news.bbc.co.uk/1/hi/business/7917643.stm

4. http://www.whatcar.com/news-article.aspx?NA=237910

5. http://www.smmt.co.uk/articles/article.cfm?articleid=19162

6. http://www.foe.co.uk/resource/press_releases/uk_motor_industry_failing_25042006.html

7. Average emissions in 2007 were 164.9g/km. They fell by 1.4% from 2006 – http://www.lowcvp.org.uk/news/866/bulletin/. If this trend has continued, they’ll be 160.3g/km this year.

8. The latest available figures are for 1999-2001: http://www.statistics.gov.uk/StatBase/ssdataset.asp?vlnk=7231&More=Y

The average distance might have increased a little since then.

9. McKinsey & Company, 2009. Pathways to a Low Carbon Economy: Version 2 of the Global Greenhouse Gas Abatement Cost Curve. http://globalghgcostcurve.bymckinsey.com/default/en-us/requestfullreport.aspx

10. There is a wide range of estimates for the rebound effect in driving. See for example this:

Kenneth Small and Kurt Van Dender, January 2007. Fuel efficiency and motor vehicle travel: the declining rebound effect. The Energy Journal. http://www.entrepreneur.com/tradejournals/article/156418724.html

and this:

11. http://www.rff.org/rff/Events/upload/20209_1.pdf

12. Bert Van Wee, Henri C. Moll and Jessica Dirks, 2000. Environmental impact of scrapping old cars. Transportation Research Part D 5, pp 137-143. http://ivem.eldoc.ub.rug.nl/FILES/ivempubs/publart/2000/TranspResDvWee/2000TranspResDvWee.pdf

13. http://www.channel4.com/news/articles/science_technology/ukbuilt+toyota+most+reliable+car/1084747

14. George Parker, 8th March 2009. Mandelson says Vauxhall is in ‘trouble’. Financial Times.

15. The Office of National Statistics stopped collating data on car production in 2007, on the grounds that the sector was no longer sufficiently important (ONS, pers comm, 9th March 2009). So the last comparable figuires are for July 2007, when 28,000 cars were manufactured in Britain for the home market – http://www.statistics.gov.uk/cci/nugget.asp?id=376

and

16. 186,000 new cars were sold here – http://www.statistics.gov.uk/downloads/theme_compendia/MD-Feb-2009/MD-Feb-2009.pdf