October 16, 2008
Brilliant article by Charles Eisenstein. Maybe nothing I didn’t already know, but plenty that strangely has remained secret for most people. What money really is, where it is coming from, and why things aren’t going well for “the economy”.
One should learn it in school, it should be explained on billboards. There should at least be programs about it on TV. But no, I’ve never seen any program on TV that even hinted at it. Strange, as it is so shockingly simple.
There is a much deeper crisis at work as well, a crisis in the creation of goods and services that underlies money to begin with, and it is this crisis that gave birth to the real estate bubble everyone blames for the current situation. To understand it, let’s get clear on what constitutes a “good” or a “service.”
In economics, these terms refer to something that is exchanged for money. If I babysit your children for free, economists don’t count it as a service. It cannot be used to pay a financial debt: I cannot go to the supermarket and say, “I watched my neighbor’s kids this morning, so please give me food.” But if I open a day care center and charge you money, I have created a “service.” GDP rises and, according to economists, society has become wealthier.
The same is true if I cut down a forest and sell the timber. While it is still standing and inaccessible, it is not a good. It only becomes “good” when I build a logging road, hire labor, cut it down, and transport it to a buyer. I convert a forest to timber, a commodity, and GDP goes up.
Similarly, if I create a new song and share it for free, GDP does not go up and society is not considered wealthier, but if I copyright it and sell it, it becomes a good.
Or I can find a traditional society that uses herbs and shamanic techniques for healing, destroy their culture and make them dependent on pharmaceutical medicine which they must purchase, evict them from their land so they cannot be subsistence farmers and must buy food, clear the land and hire them on a banana plantation — and I have made the world richer.
I have brought various functions, relationships, and natural resources into the realm of money. In The Ascent of Humanity I describe this process in depth: the conversion of social capital, natural capital, cultural capital, and spiritual capital into money.
Essentially, for the economy to continue growing and for the (interest-based) money system to remain viable, more and more of nature and human relationship must be monetized. For example, thirty years ago most meals were prepared at home; today some two-thirds are prepared outside, in restaurants or supermarket delis. A once unpaid function, cooking, has become a “service”. And we are the richer for it. Right?
Another major engine of economic growth over the last three decades, child care, has also made us richer. We are now relieved of the burden of caring for our own children. We pay experts instead, who can do it much more efficiently.
In ancient times entertainment was also a free, participatory function. Everyone played an instrument, sang, participated in drama. Even 75 years ago in America, every small town had its own marching band and baseball team. Now we pay for those services. The economy has grown. Hooray…
It is first of all a shockingly well-kept secret that money is created when a bank lends it out, and in no other way. It is very poorly understood that when money is created, more money than what was created is needed to pay it back (the interest), which is mathematically impossible, except for if the pyramid scheme can be kept going indefinitely. And there’s obviously not widespread understanding of the systemic implications of this whole thing.
The system requires that we keep inventing more and more things that we can keep from other people unless they pay us. It is all a big scam, but you’re hard pressed to find anybody who’d admit it.