I’ve given up on fixing the economy. The economy is not broken. It’s simply unjust. There’s a difference.
We have to stop looking at our economy as a broken system, but one that is working absolutely true to its original design. It’s time to be progressive — and this means initiating systemic changes.
For example, Bernie Sanders’ well-meaning calls to rein in the banking industry by restoring the Federal Reserve’s function as a “regulatory agency” reveals the Left’s inability to grasp the true causes for today’s financial woes. We are not witnessing capitalism gone wrong — an otherwise egalitarian currency system has not been corrupted by greedy bankers — but, rather, capitalism doing exactly what it was programmed to do from the beginning. To fix it, we would have to dig down to its most fundamental code, and rewrite it to serve people instead of power.
First off, the role of the Federal Reserve was never to serve as an “agency.” It’s not like the Environmental Protection Agency, which is charged with regulating corporate destruction of the natural world — however woefully it may be carrying out that purpose. Rather, the Fed is a private corporation — a banker’s bank owned by the banks — created to guarantee the value of currency. It was built to serve the dollar and maintain its value by fighting inflation. When the Fed is feeling magnanimous, it can also lend extra money into existence, in the hope that it will be invested in enterprises that employee people.
The actions of the Fed, however, are limited by the way our money, central currency, was designed to work. It was developed back before the Industrial Age, as a waning European aristocracy sought to stem the rise of the merchant middle class. Small merchants were getting rich for the first time since feudalism began, thanks to the spread of the peer-to-peer marketplace and its ingenious new currency system of grain receipts and market money.
At the beginning of the market day, a baker could put receipts for bread into circulation by purchasing his weekly supplies. Those receipts could be spent on other items until a receipt holder actually needed bread, and cashed it in. Other moneys were based on stored grain or hay. They were created not for savings or accumulation, but to promote transactions.
One by one, European monarchs outlawed these local currencies and implemented central currencies that could only be lent into existence, at interest. If a business wanted to use money, it would have to borrow it from the central bank, at interest. This new system helped the rich maintain their exclusivity over wealth. They could get richer simply by being rich.
The monetary system was designed not to help people create and exchange value, but rather to extract value from anyone hoping to transact. It was not designed to promote circulation, but to serve as a drag on circulation.
Making matters worse, central currency requires an economy to grow — and to do so faster and faster. If, for every $100,000 lent into circulation, $200,000 has to eventually be paid back, then where does the other $100,000 come from? Someone has to borrow or earn it.
Now this scheme works fine as long as the economy is growing — as the colonial powers were through their conquest of the world, and even America managed to do through corporate expansion in the decades following WWII. But our ability to grow has reached its limits. There are no more regions to conquer or developing nations to exploit. Efforts to escape into outer space notwithstanding, our planet has been stretched beyond its carrying capacity for additional extraction and growth.
We are moving toward an economic plateau; but, while a steady state economy of slow or no growth is good for people and planet, it is utterly incompatible with the money system on which our economy is still based.
Making matters worse, in the digital age, we have accelerated our stock markets with high frequency trading and our business landscape with steroidal startups and ruthless platform monopolies from Amazon to Uber. These companies are valued less for their ability to turn a profit than to get acquired or reach IPO — and pay up to the institutions who lent them their original capital.
No, charging the Fed with fixing the problems of capitalism is like asking an oil company to help get us off fossil fuels. That’s selling the wrong tool for the job.
As I’ve argued in my upcoming book, Throwing Rocks at the Google Bus, we are running a 21st Century digital economy on a 13th Century printing press-era operating system. The opportunity of a digital age and the sensibilities it brings is to reprogram money to favor transaction over accumulation — flow over growth.
This means experimenting with new, frictionless forms of exchange — from local currencies that increase circulation 10-fold over bank-issued money to Bitcoin, which verifies transactions without the need for an expensive central authority. Already, we see successful implementations of alternative monetary systems not only in progressive coastal cities, but also former industrial cities of the steel belt. Online “favor banks” energize the exchange of goods and services in communities from austerity-paralyzed Greece to recession-devastated Lansing, Michigan. New, investor-proof co-ops — from window manufacturers in Chicago to software developers in New Zealand — consciously optimize for the flow of value through a network, rather than the extraction of value from it.
Platform cooperatives — such the driver-owned, ride-sharing platform Lazooz — utilize the blockchain to assess ownership based on the number of miles driven. Even if the company follows Uber toward driverless vehicles, at least its workers will share in the future earnings their labor has created.
What distinguishes these experiments from traditional Leftism is that they are not attempting to compensate for the inequities of our economic system after the fact. They are not redistributing the spoils of corporate capitalism, as top-down enacted policies would do. Rather, they mean to distribute the means of production and the tools for exchange more widely. From Benefit Corporations to local crowdfunding, the best efforts at forging more equitable financial instruments are characterized by a willingness to reprogram business, currency, and exchange from the inside out.
That’s why, as we embark on another election year, we must stop looking toward candidates to tweak one knob or the other on our existing economy or monetary system. Replacing the members of the Fed won’t change the basic nature of the Fed any more than an incrementally more progressive tax code will change the extractive nature of central currency.
What those who hope to rein in the banking industry must do instead is break its monopoly over value creation and exchange by fostering competitive currencies, alternative corporate structures, worker-ownership, and restored respect for land and labor instead of just capital. If we can’t join ’em, then let’s beat ’em at their own game. We can make our own economy and money, too.
After all, it is a free market.
For an explanation of how we can reprogram the economy from the inside-out, check out Rushkoff’s upcoming book, Throwing Rocks at the Google Bus: How Growth Became the Enemy of Prosperity, coming March 1 and available for pre-order today. He will also be speaking at SXSW, the 92nd St Y, and SF Commonwealth Club.
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