Sacred Economics: Money, Gift, and Society in the Age of Transition by Charles Eisenstein, 2011
Part 1: The Economics of Separation
We often exchange gifts today in a semi-bartering way, but exchange goes against the true spirit of the gift. Gifts can be reciprocal, but even more often they flow in circles. I give to you, you give to someone else, and eventually someone gives back to me. In a true gift economy, gifts flow continuously, only stopping when they meet a real, present need. As Lewis Hyde writes in The Gift, “The gift moves toward the empty place, toward him who has been empty-handed the longest.”
Gifts embody the following sacred elements: they’re unique and they embody interdependency (“more for you is more for me”).
Barter, in the sense of moneyless exchange, has never been a quantitatively important form of economic behavior – it was (as it is today) for petty, infrequent, or emergency transactions. Much of what we’ve described as barter was actually ritualized gift exchange. It may even be possible that money arose, at least in part, as a way to facilitate gift giving, sharing, and generosity – and it can be used that way again. I give you something you need, and because you’re grateful, you want to give me something in return. Since you don’t have anything I need right now, you give me a token of your gratitude – a wampum necklace or a piece of silver. Later, when I receive a gift from someone else, I can give them that token.
On the level of a family, clan, hunter-gatherer band, tribe, or village of a few hundred people, money isn’t necessary to operate a gift economy. It comes in handy, however, when the range of our gifts extends beyond the people we know personally. Money was invented by the first agricultural civilizations: Mesopotamia, Egypt, China, and India. In these places, traditional, decentralized gift networks gave way to centralized systems of redistribution, with the temple, and later the royal palace, as the hub. In these societies, agricultural and metallic commodities in standard measured units were used as media of exchange, units of account, and stores of value. But as long as 4,000 years ago, money was already failing to create greater abundance for all by facilitating the meeting of everyone’s needs.
Now, money (or the lack of it) actively blocks the expression of our desire to give, and keeps us in deadening jobs out of economic necessity. Most of us are constantly anxious about the scarcity of the money we all depend on for life.
We live in a world of abundance, but experience scarcity because of our money system, our politics, and our perceptions, all based on a belief in separation. When everything is subject to money, the scarcity of money makes everything scarce. Perhaps the deepest indication of our slavery is the monetization of time, something animals, children, and some traditional cultures still experience as free and abundant.
Since most economists define money by its functions, such as medium of exchange, unit of account, and store of value, they put an early date on its origin: 5,000 years ago, with the emergence of standard commodities like grain, cattle, or gold. When Eisenstein speaks of money, however, he’s talking about something that appeared for the first time in the 7th century BC: money as a distinct entity rather than a commodity.
Economists say coins were invented to provide a guarantee of weight and purity for the underlying metal. Actually, the first coins, minted in Lydia, an Iron Age kingdom of western Asia Minor, were made of electrum, a silver-gold alloy, that varied in consistency. Coinage quickly spread to Greece, where, even though coins were fairly consistent in weight and purity, they often had a value greater than the commodity value of the silver from which they were minted. Some city-states (including Sparta) minted coins from base metals like iron, bronze, lead, or tin; such coins had negligible intrinsic value, but still functioned as money.
The new kind of money derived its value from “a social agreement. That this agreement is the essence of money should be obvious today when most money is either paper or electronic. The next step in the evolution of money could be its transformation from an unconscious to an intentional embodiment of new agreements about ourselves, the planet, and what we hold sacred. Money can become the ally, instead of the enemy – as it is now – of the world our hearts tell us is possible.”
Money couldn’t have developed without an increase in abstract thinking (reliance on words and numbers) that amounted to a spirit-matter split. In this way, money turns unique, valuable things – and people – into disposable commodities. It depersonalizes relationship, turning people into mere parties to an exchange driven by the universal goal of maximizing self-interest, and attenuates our connection to nature.
The Trouble with Property
The urge to own money and property is a natural response to an alienating ideology that leaves us feeling alone in the universe, unconnected to the people and things we need.
“Property is robbery,” proclaimed Proudhon. Tracing back the origin of any piece of property through a succession of “legitimate” transfers, we eventually get to the first owner, the one who separated it off from the realm of “ours” or “God’s” into the realm of “mine.” Usually, this happened by force, as in the seizure of the vast lands of the Americas over the course of the last 500 years. Laws were made by the property thieves to legitimize their ill-gotten gains. Starting in ancient Greece and Rome, it was the rich and powerful who both seized the land and made the laws.
Eisenstein isn’t advocating the abolition of private property, but he doesn’t believe anyone has the right to profit from the ownership of land through rent or money through interest. Money is “the corpse of the commons,” the embodiment of all that was once common and free. It even preys on the social capital of relationships – the skills and services people once provided for each other in a gift economy, such as cooking, child care, health care, entertainment, advice, and the growing of food, making of clothes, and building of houses. The monetization of social capital is the “strip-mining of community,” with every service paid for and people not knowing or caring about their neighbors. In the absence of community bonds, atomized individuals depend on remote authority – the state – for many of the social functions community structures once performed: security, dispute resolution, and the allocation of collective natural and social capital. Important needs go unmet today, and money, because of its impersonal nature, is incapable of meeting them. The community of the future, Eisenstein says, will arise from the needs money can’t meet.
Technological improvements haven’t led to increased leisure, as we used to be told they would, because of our current money system “will always compel us to choose growth over leisure.” We need a different kind of money, one that continues to coordinate human activities, but no longer compel them to expand.
“Money power” consists of robbing someone of his property, then making him pay you to use it: charging rent, imposing taxes, or charging interest on money, the “distilled essence of property.” Interest is more than just the ongoing income from a crime committed in the past – it’s also the engine of continued robbery, a force that compels us all into willing or unwilling complicity in the stripmining of the earth.
Eisenberg isn’t talking about an evil cabal of bankers, the “Iluminati,” controlling the world through such instruments as the Bilderberg Council or the Trilateral Commission, though he believes “it’s clear that there’s much more to such events as 9-11 and the Kennedy assassinations than we’ve been told, and that the financial industry, organized crime, and political power are closely interlinked.” More important than the elite’s efforts to “manage and control complex systems,” are our ideologies and belief systems – a conspiracy in which everyone’s a puppet and there are no puppet-masters, a money system, credit-based and interest-driven, arising from the longstanding and rising tide of separation. It generates competition, polarization, and greed, and compels endless exponential growth, but it’s coming to an end as the fuel for that growth – natural, social, cultural, and spiritual capital – runs out.
Eisenstein believes that with a different kind of money system we can have sharing instead of greed, equality instead of polarization, enrichment of the commons instead of its stripping, and sustainability instead of growth. This new way of using money will be the embodiment of a belief that we’re all connected, that we stand or fall together.
The Economics of Usury
Usury, better known as interest, is the antithesis of the gift, for instead of giving to others when one has more than one needs, usury seeks to use the power of ownership to gain even more – to take from others rather than giving. Usury is built into the very fabric of money today, from the moment of its inception.
Money originates when the Federal Reserve or other central bank purchases interest-bearing securities on the open market, not with already existing money, but with the stroke of a pen or keyboard. In other words, money is created with a corresponding debt that’s always of a higher value. Known as the “monetary base” or M0, it exists as bank reserves and physical cash. The next step occurs when a bank makes a loan to a business or individual, again creating new money. This new money is known as M1 or M2, depending on what kind of account it’s in. It’s money that actually gets spent on goods and services, capital equipment, employment, and so forth.
Because of interest, at any given time the amount of money owed is greater than the amount of money already existing. To make new money to keep the system going, we have to create more goods and services, and the main way of doing this is to sell something that once was free: convert forests into timber, music into a product, ideas into intellectual property, or social reciprocity into paid services. Completing the vicious circle, the more of life we convert into money, the more we need money to live. The insufficiency of money drives us into competition with each other, as we become increasingly indebted and, thus, need to provide more goods and services (economic growth, defined as growth in total goods and services exchanged for money).
Even in good times, growth is rarely fast enough to keep pace with interest. In less good times, instead of paying a portion of new growth to bankers, borrowers have to pay all of it, plus a portion of their existing wealth and/or future earnings. Concentration of wealth – both income and assets – is an inescapable corollary of debt growing faster than goods and services.
Concentration of wealth had been seen many times by 350 BC. During Roman times, as long as the empire was expanding rapidly, acquiring new lands and new tribute, everything worked passably well, and there was no extreme concentration of wealth. But when the empire slowed, concentration of wealth intensified and the once-extensive class of small farmers, the backbone of the legions, fell into debt peonage. The empire became a slave economy.
Today, many individuals and nations have fallen deeply in debt. A larger and larger proportion of income is going toward servicing that debt, and when that doesn’t suffice, assets are seized until there are none left. Thus it is that U.S. home equity has declined without interruption for half a century, from 85% in 1950 to about 40% today, including the one-third who own their houses free and clear. Even corporations suffer under an unprecedented degree of leverage, so that a large proportion of their revenue goes to banks and bondholders.
Even if you carry no debt, interest costs factor into the price of nearly everything you buy – a tax that goes to the owners of money. Those who have money can increase their wealth, and unless borrowers can increase their wealth just as fast – only possible in an expanding economy – wealth will concentrate in the hands of the lenders. You get richer faster by owning than by producing, because when economic growth speeds up interest rates are raised. Absent redistributive measures, the concentration of wealth intensifies through both good times and bad.
Without wealth redistribution, social chaos is unavoidable in an interest/debt-based money system, especially when growth slows. Most societies redistribute only enough to maintain social order. In ancient times, some practiced a periodic nullification of debts like the jubilee of the ancient Hebrews, in which debts were cancelled every seven years.
A person who declares personal bankruptcy in the U.S. today will be forced onto a payment plan that assigns a portion of her income to her creditors far into the future, a state of peonage. Debt repudiation – refusing to pay a debt or transfer collateral to the creditor – will only be possible when the legal system and the legitimacy of the state begin to fall apart, revealing money and property as the social conventions they are.
Countries with resilient domestic economies and resources to barter with neighbors can default on their debts, but in practice they rarely do. Rulers, democratic or otherwise, usually ally themselves with the global financial establishment, which rewards them handsomely for their cooperation. Those leaders who don’t cooperate are labeled “leftist” and might find themselves the target of a coup or invasion. The U.S. had Haiti’s democratically elected president, Jean-Bertrand Aristide, overthrown in 1991 and forcibly removed from the country in 2004 for resisting neoliberal economic policies. The same thing happened in Honduras in 2009; it’s happened all over the world hundreds of times.
Today even wealthy countries are being forced to adopt austerity programs (cut social services) because of their mounting, unpayable debt. This doesn’t benefit creditors in the long term, because it chokes off economic growth by reducing consumption, but money interests think only in the short term and want unserviceable debts to be serviced just a little while longer.
Efforts to shore up the world economy can’t work, because it has to keep growing to survive, and it can no longer grow. Yet the authorities keep trying to find a way for debts to be paid and for the debt pyramid to keep growing. The present crisis is the final stage of what began in the 1930s. The first effective solution was war, a state that’s been permanent since 1940. Others – globalization, plunder of national resources once off limits, and financial autocannibalism – have run their course.
The credit bubble blamed as the source of our current economic woes was a symptom of them, not a cause. When returns on capital investment began falling in the early 1970s, capital began a desperate search for other ways to maintain its expansion. When each bubble popped – commodities in the late ’70s, S&L real estate investments in the ’80s, the dotcom stocks in the 1990s, and real estate and financial derivatives in the 2000s – capital immediately moved on to the next, maintaining an illusion of economic expansion. But the real economy was stagnating. There weren’t enough needs to meet the overcapacity of production or enough natural and social capital left to convert into money.
To maintain the exponential growth of money, either the volume of goods and services must be able to keep pace with it, or imperialism and war must continue, or both. (Imperialism and war are unavoidable in an economic system that demands growth, because there’s a constant need for new sources of social and natural capital, as well as competition for resources and markets.)
Where there’s no money to facilitate transactions, gift economies reemerge, and new kinds of money are created, though people try to hang onto the old ways as long as possible. The best way to ensure your own security, is to create community. If you have wealth now, use it to enrich the people around you in lasting ways. In addition, anything you can do to protect some natural or social resource from conversion into money will both hasten the collapse and mitigate its severity. Add wealth to the public domain (with a zero or negative return on your money), withdraw from the mainstream economy as much as possible, teach (or learn) skills of self-sufficiency, and enter the spirit of the gift, which embodies the felt understanding of non-separation.
“From each according to his abilities, to each according to his needs” is a good description of a gift network – a human body, an ecosystem, a tribal gift culture, or any sacred economy. Its currency is cyclical rather than exponential, always returning to its source; it encourages the protection and enrichment of nature, it defines wealth as the ability to give, and it manifests abundance.
The desire of an assurance of return, a compensation for the risk of generosity, is the fundamental mindset of interest, an adolescent mindset that will be superseded by a more expansive adult self that has matured into full membership in the community of being.
Part 2: The Economics of Reunion
The money of the future will be backed by the things we want to create, nurture, and preserve: undeveloped land, clean air and water, great works of art and architecture, biodiversity and the genetic commons, unused development rights and carbon credits, uncollected patent royalties, relationships not converted into services, and natural resources not converted into goods. A sacred economy will:
- restore the mentality of the gift to our vocations and economic life;
- reverse the money-induced homogenization and depersonalization of society;
- be an extension of the ecosystem, not a violation of it;
- promote local economies and grassroots politics, and revive community;
- encourage initiative and reward entrepreneurship;
- be consistent with zero-growth, yet foster the development of our gifts;
- promote an equal distribution of wealth;
- promote a new materialism that treats the world as sacred; and
- restore lost realms of natural, social, cultural, and spiritual capital.
The Law of Return
The linear conversion of resources into waste is unsustainable on a finite planet. More unsustainable still is exponential growth, whether of resource use, money, or population. Not only is it unsustainable, it’s also unnatural. No species in an ecology creates waste that other species can’t use or large amounts of toxic substances. According to the law of return, every substance produced by human activities must either be used in another human activity or, ultimately, returned to the ecology in a form and at a rate that other beings can process. There can be no such thing as industrial waste.
Obeying the law of return is honoring the spirit of what we’ve received and passing it on in some form. To squander a gift, or use it poorly, is to devalue it and insult the giver.
A zero-waste economy is the economic realization of the interconnectedness of all beings, embodying the truth that as I do unto another, I do unto myself. On a practical level, this vision of a sacred economy requires eliminating what economists call “externalities” – costs of production that someone else pays. Many of today’s industries can only operate because their costs are externalized. Statutory caps on liability for oil spills and nuclear meltdowns, for example, make offshore drilling and nuclear power profitable for their operators, even as the net effect on society is negative. Thus is wealth transferred from the public to corporate higher-ups and investors. Similarly, in the financial “industry” large operators take huge risks, knowing that they’ll be bailed out if they fail.
In the circle of the gift, your good fortune is my good fortune and your loss my loss, because you’ll have correspondingly more or less to give. From that point of view, it’s a matter of common sense to include damage to nature or society on the balance sheet.
Currencies of the Commons
Property is a social agreement that a person or group has the right to use something in prescribed ways. It’s not an objective feature of reality, and to reify it and make it into something elemental, as both capitalist and communist theory do, is unconsciously to enslave ourselves to a story we may not believe in. Sacred economics can’t start with ownership as an elemental property in Eisenstein’s view, because that concept buys into a worldview, a story of self and world, that isn’t true – the discrete and separate self in an objective universe. Instead of saying, as a Marxist might, that the bequests of nature and culture should be collectively owned, Eisenstein suggests that we stop applying the concept of property to these things altogether and think instead about how to “justly, creatively, and beautifully embody their value in an economic system.
Today, access to money, via credit, goes to those likely to expand the realm of goods and services. In a sacred economy it will go to those who contribute to a more beautiful world.” We may not agree on what that world would look like, but many “important common values” are beginning to emerge, including a near-universal reverence for community, nature, and the beautiful products of human culture. Around these common values, which political language tends to obfuscate by superimposing divisions on our common humanity, the currency of the sacred economy will emerge.
Eisenstein asks us to keep in mind that, like all of our institutions, government is going to change dramatically in the coming years. He says he envisions decentralized, self-organizing, fluid, peer-to-peer expressions of political will. He also imagines an economic system with many complementary modes of currency, circulation, and exchange, among them “new extensions of the gift,” freeing work from compulsion, and guaranteeing the necessities of life to all.
Eisenstein says that, for him, government “embodies our collective stewardship” of the earth “on behalf of earth,” including humanity. Earth’s resources can “back” currencies, and the profit motive can be harnessed positively by rewarding those who use less of the commons to make their product – creating less pollution, using recycled materials, etc. Products will be more or less expensive in proportion to the amount of the natural commons consumed in their production, and taxes will be shifted away from what you earn onto what you take.
Many, if not most, of the commons are best administered locally or bioregionally, which is why political and financial authority will have to devolve to the local level, with bioregional and global bodies dealing with issues affecting larger areas. Local governments will have the power to issue money backed by the wealth of their area. Eisenstein also favors including private credit, because it allows more freedom and flexibility, incorporating new modes of economic cooperation, such as barter rings and mutual-credit systems. So, you could increase the money supply by giving an IOU to a friend, who might give it to a friend of hers in lieu of cash.
Public management of natural resources will make “enormous amounts of money” available to various levels of government, especially the local and bioregional, replacing current forms of taxation. Governments can then afford to start repairing and restoring the commons. Goods will become more expensive than services, incentivizing repair, reuse, recycling, reverence for our material items, and doing without what we don’t really care about.
Negative Interest Economics
We’ve seen that interest represents the ongoing robbery of the commons and causes scarcity and competition. Negative interest, however, can replenish the commons and create cooperation, community, and abundance. With negative interest, money becomes less valuable over time. This has been done in various places by requiring a stamp costing a small fraction of a bill’s value to be affixed to it periodically. In the early 20th century, German-Argentinian businessman Silvio Gesell advocated this kind of currency “decay” to decouple money as a store-of-value from money as a medium of exchange. In this way, money would no longer be preferred to physical capital (which also decays over time), and it would be forced to circulate, thus preventing artificial scarcity and economic depression.
In 1933, an unemployment relief bill was introduced in both the U.S. House of Representatives and the U.S. Senate that would have issued a billion dollars of stamp scrip with a demurrage (negative interest) rate of 2% a week that would have made the currency self-liquidating in a year. The bill never came to a vote, however, and a month later President Roosevelt banned all “emergency currencies” by executive decree, fearing that local and state currencies would impinge on the power of the federal government.
As noted above, Western economies have been in a state of zero growth for at least 20 years. Whatever growth there has been has come largely from such things as real estate bubbles, the prison industry, health care and education costs, insurance and financial services, and the weapons industry. The more expensive these are, the more the economy is assumed to have grown. Meanwhile, the global economy is being kept afloat by manufacturing countries with comparatively low labor costs, like China, a situation that can’t last much longer.
Recently, several prominent mainstream economists have proposed modern alternatives to fixing stamps on currency. Since most money is electronic, the key measure would be either some kind of liquidity tax or a negative interest rate on deposits in the Federal Reserve. Physical currency would need to be subject to the same depreciation rate as reserves, which could be accomplished by having expiration dates on it. Other currencies – paper or electronic – could also thrive alongside the official, negative-interest currency and be outside the purview of the central government. The bottom line, Eisenstein says, is that any use of money or aspects of the commons must at all times be socially productive.
Decaying currency proposals offer more than a temporary fix for a stagnant economy; they promise a sustainable, long-term foundation for a permanently non-growing one. Historically, economic contraction or stagnant growth has meant human misery and an increase in the divide between the haves and the have-nots. Negative interest prevents this from happening by providing a way for money to circulate without needing to be driven by growth-dependent lending. Welcome to a world without greed, scarcity, the quantification and commoditization, the discounting of the future for the sake of the present, equating security with accumulation, and a fundamental opposition between financial interest and the common good.
Eisenstein says the “debt bomb” that nearly brought down the global economy in 2008 – and that’s only being put off now – presents us with a golden opportunity to transition to negative-interest money. These debts – whether sovereign or individual – will never be repaid, because the borrowers can’t increase their income without economic growth. At some point, default, or mass debt forgiveness, is inevitable. The problem with this is that investments and savings are the “other side” of debt, so savers and investors would be instantly wiped out, collapsing the entire financial system and leading to widespread social unrest, war, revolution, and starvation.
We need to start reducing debt gradually. When the federal government bought bad debts in the 2009 bailout to keep the system afloat, all the money went to creditors. Debtors didn’t become any more able to pay, and creditors weren’t more willing to lend. Predatory financial institutions were given cold hard cash in exchange for the junk investments they’d irresponsibly created and traded, receiving face value for them – way more than they were worth. They used this money to buy risk-free bonds, pay executive bonuses, or buy up smaller institutions, none of which did anything for the economy or debtors. If instead, the debt had been “monetized” into negative-interest money, debtors could have paid whatever portion of their debts the political process deemed fair. Student loans, for example, could have been made no-interest, mortgage principals cut to pre-bubble levels, and third-world sovereign debt forgiven entirely. The increased money supply, subject to demurrage, would shrink over time.
The bondholders don’t want to take a loss, however: they want to continue to receive more and more for themselves, a situation that can only be sustained as long as the rest if society is willing to accept more “austerity” (slashed social services), more poverty, and more income devoted to servicing debt.
In a negative-interest economy, banks will be happy to lend money to businesses that will earn and repay less than the original loan, because, unlent, their money would depreciate at an even higher rate. In this type of economy, activities that will bring benefits in 30, 50, or 100 years become economically feasible. For example, now you can make twice as much money selling a forest to be clearcut as you can keeping it and logging it sustainably. With negative interest rates, the math would be reversed.
Eisenstein says making money both a medium of exchange and a store of value “begs trouble,” because a medium of exchange needs to circulate to be useful. Our present system creates a tension between the wealth of the individual and the wealth of society. In hunter-gatherer societies, which were generally nomadic, possessions were a literal burden – the “carry cost” that everything except money bears today was quite real. Even in sedentary agricultural societies, possessions such as cattle and stores of grain didn’t give the same degree of security as being embedded in a rich web of social relationships of giving and receiving.
Negative-interest money reintroduces the mindset of a hunter-gatherer. Since money decays with time, I’m happy to lend it to you, the same way I’d share bread with you if I had more than I could eat. If I need money (or bread) in the future, I’ll call in my obligations or create new ones with anyone in my network who has more than he or she needs for the immediate future. As in hunter-gatherer times, it’s better to have lots of people “owe you one” than to have a big pile of rotting meat, or even of dried jerky if it has to be transported or secured. And why would you want to try in a generous community? True security comes from sharing.
Degrowth and Steady-state Economics
As already pointed out, economic and ecological limits will soon stop exponential growth. Does that mean we’re facing the peak and collapse that thinkers in the anti-civilization and Peak Oil movements predict, followed by (they hope) a lower-tech, communal society connected to nature, spirit, and the old ways? Eisenstein thinks there’s another alternative: reuniting with nature not by going “backward,” but as “a mature species.” He’s hoping the economy will either level off to steady-state, or peak and gradually decline there. He’s predicting that “on a healing planet,” GDP and population will peak within the next three decades, level off, then contract by a few percent a decade till they reach a sustainable level. The only problem with this is that everything he’s said thus far – and everything written by Richard Heinberg, especially in his latest book, The End of Growth – indicates that GDP is peaking now.
Interestingly, our chance for an effortless transition was during the 1960s, the “real zenith,” Eisenstein says, of the “Age of Separation.” The hippies saw it “and lived it for a few shining moments,” but “the old stories were too strong. The longer the Age of Separation persists, the more traumatic the transition will be, and the farther and more abrupt the drop to a sustainable baseline.” It’s critically important to protect whatever we can of the remainder of the commons, to limit growth, and preserve real wealth to “hasten the crash and mitigate its severity.”
Eisenstein points out the growth of P2P (peer-to-peer) activities, noting, for example, that many of the traditional functions of advertising and marketing, once paid services, are now being met for free through social networking. Similarly, the blogosphere has taken over many of the functions of traditional news distribution, travel agencies, and stock brokerage. Corporations bypass banks by obtaining financing directly from money markets, while new P2P lending websites such as LendingClub and Prosper.com allow individuals to borrow from each other. Paid intermediaries in many fields are becoming unnecessary, thanks to the internet, a participatory gift economy and P2P network in which “there’s no consistent distinction between producers and consumers.”
Eisenstein says he foresees a “degrowth rate” of around 2%, so that our use of raw materials, our pollution of the air and water, and our time spent working for money falls by half with each generation. Eventually, he says, the pace of degrowth will slow as the economy approaches an equilibrium relationship with the planet “a couple hundred years from now.”
The Social Dividend
Under the current system, growth in leisure is impossible without some kind of wealth redistribution, unless you call unemployment leisure. Instead, we could take money away from the employed and give it to the unemployed, pay firms to keep superfluous employees, or pay everyone a “social wage” whether they work or not. These redistributive policies diminish the relative wealth and power of the holders of money.
Eisenstein believes “jobs” are obsolescent, and notes that there’s a vast amount of important – heretofore low- or non-paid – work to be done that’s consistent with degrowth. With more (supported) leisure time, people will be able to do “good and necessary” work. Their free choices will identify what work is sacred to the society better than a WPA-style public works program initiated by the central government, though Eisenstein thinks both will have a place. Eventually, he says, as political processes become more inclusive, grass-roots, and self-organizing, the two will merge into one.
Like scarcity, the laziness we believe to be part of human nature is an artifact of our money system – a valid response, Eisenstein says, to the kind of work the system engenders. In a sacred economy, people will work hard because they want to, because they’re inspired and enjoy sharing their energy and talents. As Eisenstein says, “a social dividend frees gifts to flow toward needs and aligns our labor with our passion, our generosity, and our art.” Many will work at paying jobs to supplement the social dividend and/or because they like the work, but they won’t have to. In the absence of the coercive mechanism of “making a living,” there will be little market for degrading or tedious jobs. To attract workers, employers will have to provide jobs that are meaningful and work conditions that respect human dignity. Many such jobs will exist because much of the work financed by a commons-based money system will be by nature meaningful.
People already do enormous amounts of unpaid work. The entire internet is built mostly by volunteer labor, from open-source software to free content, and entire organizations are staffed by volunteers. We don’t need financial incentives to work, and actually do our best work when money isn’t an issue.
Local and Complementary Currency
A sacred economy will be in large part a local economy in which we have multidimensional, personal relationships with the land and people that meet our needs, and whose needs we meet. Much global trade is only economic because of hidden social and ecological subsidies, which would be eliminated by the internalization of costs. A commons-backed currency will relocalize economic power, since many of the commons are local or bioregional in nature. Finally, negative-interest money removes the pressure to maintain growth by converting unique, local relationships and natural wealth into commodities.
There are many realms of collective human endeavor that require global coordination, and economics doctrines of efficiency of scale and comparative advantage still ring true to some extent. But in general economic localization is best. It entails less energy consumption, and makes the social and ecological consequences of economic decisions harder to ignore. It also helps recreate community.
Local currency encourages people to shop at the local businesses that accept and use it; increases the local money supply, stimulating local production and employment; keeps money within the community; offers an alternative source of capital for which the interest (if any) will circulate back to the community; and facilitates the circulation of goods and services among people without sufficient access to national currency. Local currencies are most viable in a localized economy.
Thus far, local currencies have been effective either because they’ve received government support or because they emerged in war zones or other extreme circumstances. In the U.S. and Europe during the Depression and in Argentina in 2001-2002, local governments issued currency in situations where there was still a lot of local production and distribution, subsistence farming, and general social capital. Unsurprisingly, these currencies provoked the hostility of the central authorities – in Argentina, the IMF demanded their abolition as a prerequisite for aid. Nonetheless, local currency activists have created many models to be applied when the next crisis erupts and the unthinkable becomes common sense.
Time-based currencies (often called “time banks”) offer great promise without needing huge changes in economic infrastructure. When someone performs a service through a time bank, her account is credited one time dollar for each hour spent, and the recipient’s account is debited by the same amount. Using online bulletin boards, time banks can connect individuals with needs and gifts (all of us), in the process restoring community. The fundamental idea behind time banks is deeply egalitarian, because everyone’s time is valued equally and everyone has the same amount of it. Time banks will partake more of the gift culture when ways of connecting gifts and needs are less quantified.
Communities can also use mutual-credit systems, including barter rings, credit-clearing coops, and local exchange trading systems (LETS). When a transaction takes place in a mutual-credit system, the account of the buyer is debited and the account of the seller credited by the agreed-upon price whether or not the buyer has a positive account balance. In this way, participating businesses or individuals can create their own credit instead of seeking bank loans. Instead of paying money to use money, as in an interest-based credit system, credit is a free social good in these systems, available to anyone who’s earned the trust of the community.
Mutual-credit systems foster and protect their members’ internal economy, insulating it from external shocks and financial predation in the same way that local currencies do. Indeed, local currencies will never be able to expand beyond marginal status unless they have a credit mechanism that protects them from the speculative runs that numerous national currencies have suffered in the last 20 years. Local and regional credit-clearing organizations can exercise capital control functions similar to those that wiser nations imposed when developing their economies through import substitution. The most famous mutual-credit system, Switzerland’s WIR, provides an extreme model for this principle: once you buy into it, you’re not permitted to cash out. On a local level, this would force foreign investors to source components locally. Less extreme but similar measures were applied by Taiwan, Japan, Singapore, and South Korea in the 1950s and ’60s, when they restricted foreign companies’ repatriation of profits. These countries also kept foreign banks out of their banking industries, thus refusing to import credit. On the same principle, there’s now a movement in the U.S. to found state-owned banks, following the example of the Bank of North Dakota, which has kept that state out of default mode. Publicly owned banks needn’t be driven by profit, and any profit they do make can be returned to the public, advantages that pertain even in the present money system.
Ultimately, a new banking system might arise from the ground up, starting with small mutual-credit coops that make exchange agreements with each other. The U.S. could also bypass the Federal Reserve, a private institution, set up its own bank and lend money to itself, printing it at zero or negative interest. It could issue money directly, too, as authorized by the Constitution and done during the Civil War.
Transitioning to a Gift Economy
Eisenstein advocates for a mixed system in which money takes on more of the properties of the gift and mediatory structures of gifting arise to take over at least some of the role of money. Whether or not money is involved, the fundamental issues of economy – what people make and do for each other – are these: (1) how to connect the provider of a gift with the person who needs it, (2) how to acknowledge and honor generous givers, and (3) how to coordinate the gifts of many people across space and time to create things transcending individual needs and gifts. These goals correspond roughly to the three functions of money: medium of exchange, unit of account, and store of value. (Note: the anonymous giving we praise as the most generous today had a minor role in gift cultures – communities were generally aware of the needs, gifts, and generosity of their members.)
One example of reconstructing the gift economy from the ground up is the Gift Circle, developed by Alpha Lo and now replicating itself around the country. In weekly gatherings, participants describe one or more things they’d like to give and one or more things they’d like to receive. Often, a magical synchronicity of wants and needs unfolds. Gifts given during the week can be reported at the next meeting, since without witnesses gifts are less potent in creating community – the flaw in the Freecycle or Craigslist websites. Newer systems such as Giftflow, Neighborhoods, Shareable, GIFTegrity, and others do better, though the ratings points on GIFTegrity are a lot like money. Eventually, there could be a nested circles gift economy.
Eisenstein hopes for an evolutionary transition – not tearing down present institutions, but transforming them, a process he thinks is already under way. All of the changes he’s recommending – negative interest, the social dividend, and the reclamation of the commons – gradually redistribute wealth, with one exception: the elimination of the income tax.
Negative interest on reserves and a physical currency that loses value with time enable prosperity without growth, encourage the equitable distribution of wealth, and stop the destruction of the environment. They also embody the truth about the world, in which all things decay and return to their source – no longer is money an illusory exception to nature’s law. There will no longer be a way to grow money risk-free, to “make money work for you,” since even government bonds will pay zero interest or less. To prevent currency wars, Eisenstein says, these changes should be a coordinated policy of all nations or be built into a global currency.
Anything that comes from or hurts the commons should be subject to fees or taxes. With this shift of taxation onto property and resources, sales and income taxes can be reduced or eliminated. Intellectual property can be returned to the commons by shortening the terms of copyrights and patents, thereby acknowledging the cultural matrix from which ideas arise.
Huge new industries will be devoted to conservation, pollution control, and toxic waste remediation, and zero-waste manufacturing of durable, repairable goods will become the norm. Large, resource-intensive goods such as cars, machines, and certain tools and appliances will be shared, and residential areas will become more dense. Homes will be either shared or smaller. Most products will be manufactured and most food grown locally. A social dividend will cover life’s necessities, and education, health care, and other social services will be free. We’ll work less for money, consume less, and give, share, and borrow more.
All of these changes are synergistic and must occur together, Eisenstein says. Negative-interest currency won’t have positive effects, for example, if other sources of economic rent are still available to invest in. Localization also depends in large part on the removal of hidden subsidies that make global trade economic.
Part 3: Living the New Economy
Relearning Gift Culture
Jacques Derrida has described the ideal of the free gift as follows: “For there to be a gift, there must be no reciprocity, return, exchange, countergift, or debt.” In other words, a true giver shouldn’t expect to get anything in return, such as social status, praise, gratitude, or the feeling of having done something virtuous. The closest example of this in real life, Eisenstein says, would be anonymous charity, or perhaps the alms given to Jain ascetics, who are instructed to offer neither thanks nor praise for what’s given. The reason for this is that they’re seeking through asceticism to burn away karma and purify themselves while creating no new ties with the world. Thus, they take care never to visit the same house twice and never to respond to invitations, striving toward the ideal of an unexpected guest receiving pure charity untainted by any worldly bond.
Similarly, Christians, Muslims, and Jews are urged to give charity in secret, and the Buddhist bodhisattva ideal is to dedicate your life to the liberation of others. Ironically, Eisenstein notes, monetary transactions also generate no obligation or tie, unlike the kind of gift-giving he’s recommending. Unlike the idealized “true gifts” described above, Eisenstein says, if you give me something, I’ll feel grateful and want to give in turn, either to you or someone else. An obligation has been created, an assurance of continued economic circulation within the community. In the Age of Separation, we’ve become afraid to give so personally, and even more afraid to receive – because we don’t want to be obligated to anyone or depend on anyone’s gifts or charity.
In traditional cultures, to refuse a gift is to spurn relationship. As Marcel Mauss put it in The Gift, “To refuse to give, to fail to invite, just as to refuse to accept, is tantamount to declaring war; it is to reject the bond of alliance and commonality.” In many situations, a kind of negotiation takes place in which the two parties trade excuses and rebuttals of them until they agree on a gift that appropriately reflects the degree of bond to be created. “Oh, I couldn’t; I just ate (lie). Maybe just a cup of tea.” The tea is served with another treat, which is partaken of sparingly. The host gives her guest some food to take with him. And so on in a subtle dance of giving and receiving that’s absent from a commodity economy like ours.
But even in America, alienated as we are from gift culture, we still feel its logic. You may have had the experience of receiving a favor from someone, offering to pay for it, and feeling the letdown and distancing that ensue. To pay for a gift makes it no longer a gift, and the bond that it might have created or reinforced is broken.
In a gift economy, if someone asks for help, you can’t really say no, because of the assistance the community has – and will – give you. Because it creates gratitude or obligation, to willingly receive a gift is itself a form of generosity. It says, “I’m willing to owe you (or the community) one.” I’m bound to you. When gratitude inspires a return gift, we mustn’t give it too quickly, or it becomes a mere transaction, canceling out the obligation rather than tying the giver and receiver more closely.
Reluctance to receive is actually reluctance to give. The generous person gives and receives with an equally open hand. We may imagine ourselves to be selfless and virtuous for being more willing to give than to receive, but this state is just as miserly as the reverse, for without receiving, the wellspring of our own gifts dries up. It’s also arrogant: What do we imagine to be the source of what we give? Ourselves? No. Life itself is a gift, life and all that nurtures it.
Of course, when you don’t want to create the kind of tie a gift implies, it’s appropriate to refuse to give or receive it. All gifts have “strings attached.” But often our reluctance to give and receive comes not from aversion to a specific tie, but to ties, or connection, in general.
To give and to receive, to owe and be owed, to depend on others and be depended on is to be fully alive. To neither give nor receive, but to pay for everything; to never depend on anyone; to not be bound to a community or place…such is the illusory “freedom” and/or privacy of the supposedly separate self – illusory because we’ve always has been, and always will be completely dependent on each other and on nature. The only alternative to depending, receiving, loving, and losing is not to be alive.
The non-attachment of not holding on too tightly to our things and recognizing impermanence can exist within a general context of attachment and connection. Indeed, gifts aid in the release of ego attachments, expanding the self beyond the ego and aligning self-interest with the welfare of a larger, interconnected being.
Detached from the world, one can do little good or harm in it. Immersed in the world, we’re challenged to use our wealth wisely. The path of the ascetic is only appropriate if it comes from the realization that “I’m not ready to use wealth (in all its forms) well, so I’ll abstain from it for now.”
Reminding us that he’s articulated a conception of wealth as shared flow rather than unshared accumulation, Eisenstein says, “This isn’t a new idea: wealth only became an accumulation with the rise of agricultural civilization.” He adds that, “generally speaking, natural systems are characterized by resource flow and trust in the ongoing supply of the universe.”
Having explained the monetary equivalent of nonaccumulation (decaying currency), of non-ownership (elimination of economic rents), and of underproduction (leisure and degrowth), Eisenstein expands on that, saying, “nonaccumulation is a conscious intention not to accumulate more than a modest amount of assets. It’s born not of a desire to be virtuous, but of the understanding that it feels much better to give than to keep, that the seeming security of accumulation is an illusion, and that excessive money and possessions burden our lives. It’s deeply aligned with the spirit of the gift.” In other words, if you need it, use it. If not, pass it on. If you need it – or something like it – later, someone will give you what you need.
“Ultimately,” Eisenstein says, “the essence of nonaccumulation lies in the intention with which money is given, lent, invested, or saved. In the spirit of the gift, we focus on the purpose and let the return to ourselves be secondary. In the spirit of accumulation, we seek only or primarily to ensure and maximize the return. The former is a state of freedom, abundance, and trust; the latter a state of anxiety, scarcity, and control. Whoever lives in the former is rich. Whoever lives in the latter is poor, no matter how much wealth she possesses.”
Eisenstein believes that as the mentality of abundance becomes prevalent, the distinction between a loan, a gift, and an investment will blur.
The possession of wealth beyond what you can share in the ordinary flow of life is a call to service in Eisenstein’s opinion. “To squander it on baubles, to give it away senselessly, or to devote oneself to its increase are all ways of refusing that call. Giving excess wealth beautifully could take years, involve long-term planning and the creation of entire organizations, or it might happen through a single generous act.”
While ‘socially conscious’ or ‘ethical’ investing are steps in the right direction, they still seek a positive financial return, thus “perpetuating the conversion of the world into money.” We need to restore, not more efficiently exploit the natural and social commons – and we need them to be commons. “Since there’s no money to be made for the investors in such restoration, any ‘socially conscious investment’ scheme that promises a normal rate of return harbors a lie. So, don’t try to give and take at the same time. If you want to take (and you might have good reasons for doing so), then take, but don’t pretend you’re giving.”
Eisenstein also notes that microlending at interest further commodifies and monetizes village life, militating against existing or returning gift economies. “The money circulates, but it can’t stay in the community forever, because the debt must be repaid. If you want to help a village, give one of its women a cow, or lend her money at zero interest.
Eisenstein recommends that if you’re concerned about peak oil or some other ‘collapse scenario,’ you ensconce yourself in a gift network. Sounds like good advice for anyone.
Eisenstein concludes that “right investing uses money as a gift to support the creation of a more beautiful world, and right livelihood accepts that gift as it does that work.” Buying fair-trade products at several times the cost of an equivalent sweatshop product is a gift, and building shelters for the homeless is right livelihood. Traditional social service jobs like social work or teaching partake in the energy of the gift as long as they don’t contribute to the more efficient operation of the earth-devouring current system by helping or training people to be efficient producers and mindless consumers.
Eisenstein advises us to trust in ourselves and be guided by our intuition and feelings as we make these choices, suggesting that we pay attention to our “inner yearnings. Look at the world with the eyes of ‘What opportunity is there to give?’ and ‘How may I best give of my gifts?’ If ‘what feels good and right’ is merely feeding your family, that’s OK. The key is the attitude of service. If you try to guilt yourself into right livelihood, you’ll likely end up with its counterfeit. The concept should feel liberating, not like a moral burden.”
An enormous gift economy thrives on the internet, where versions of all types of software are available at no charge, though donations and volunteer work are encouraged. Lots of bands offer their music for free online as well, in addition to selling it elsewhere.
A business can inform customers of its various costs to help them decide how much to pay for products and/or services, just as traditionally gifts were often accompanied by stories that helped the receiver appreciate their value. As a business owner or operator, you may choose not to accept as long-term clients people who show their lack of gratitude by paying little or nothing above your costs. Hopefully, non-monetary expressions of gratitude will also come into play.
Community and the Unquantifiable
Poor people develop stronger communities than rich people because they need each other more. Perhaps one benefit of the hard economic times encroaching on our illusion of normalcy is that they’ll reawaken in more and more of us the primal gratitude borne of the necessity of receiving gifts in the absence of payment. Besides, intimacy and connection are among the greatest of our unmet needs today, part of our larger need for the sacred, for meaning. This spiritual nourishment can only come to us as a gift, via participation in of a web of gifts in which we act as both giver and receiver. Our spiritual needs aren’t fulfilled by “continuing to crank out cheap, generic, planet-killing stuff while we meditate, pray, and prattle about angels, spirits, and God,” but by treating relationship, circulation, and material life itself as sacred (because they are).
The sacred – anything that embodies something of the infinite – is wild, living, messy, unique, and in relation to its environment. Sacred economics is part of the healing of the spirit-matter divide, the human-nature divide, and the art-work divide that has increasingly defined our civilization.
The old regime may be able to maintain a semblance of normality for a few more years, but the end of the Age of Usury and Separation is near. The birthing of a new era, the coming-of-age ordeal of the human race, may be a bit messy, Eisenstein says. “It will probably involve the usual accompaniments to economic collapse – fascism, civil unrest, and war, but this dark age will be far shorter and more mild that one might expect,” because the knowledge of what’s possible lives on inside each of us. Eisenstein urges us to “trust this knowing, hold each other in it, and organize our lives around it,” not settling for “anything less than a sacred world.”