Written by Himangshu Saikia on 4 March 2013
This article is split into multiple sections for ease of understanding, if one is aware beforehand, of the reasons mentioned underneath a header, s/he may safely skip it. Please reach out to in case of questions and doubts, and I would be more than happy in elaborating to any extent on a certain topic, as I believe that the future is something which we are all responsible for.
2021 update : Some of my views on competition and the economy have evolved over time since this article was first written, but I am mostly still in line with what I wrote then.
All Money is Debt.
Have you ever wondered where your money came from? Or why almost the entire world is in debt? And who do we actually owe these humongous sums to, if everyone is in debt? Why do markets crash and we end up in a financial crisis, like the Great Depression of the 1930s or the Great Recession few years back, and people end up in abject poverty while all major industries, factories and farms still stand? These issues raise serious questions about the workings of our current economic system, free market capitalism and how banks “create money out of thin air”.
To depress you a bit more. All money is created out of debt. Most of the debt we see around ourselves does not exist in the first place. Banks create money out of debt. This is why we have people (and nations) going into huge debts which are logically infeasible to pay off. This is the prime reason behind the top 1% of the world’s population owning 40% of the world’s resources (read : money). And people working in financial institutions and all the major stock exchanges make money by buying and selling debt! To understand a bit more clearly let us go back a couple of centuries when money first came into being. This story is commonly referred to as the ‘Goldsmith’s Tale’. Initially as the barter trade became cumbersome, people started to use ‘coins’ of some rare metal, usually silver or gold which facilitated ease of trade. Soon coins became unwieldy as well, and along came a ‘goldsmith’ who offered to safeguard the coins in his huge protected vault, meant to keep his own coins safe, and in turn offer lightweight paper money — some sort of agreement in exchange of which one could get back the gold — which was much easier to use and carry around. He also charged a small rent to his depositors in lieu of safeguarding their coins. Time passed and more and more people started to deposit their gold in exchange for paper money. Also people who formerly asked for loans from the goldsmith, began to ask for paper money instead, owing to its ease of use. The goldsmith thus discovered a clever idea. He could lend his depositors’ gold alongwith his own to his lenders and profit from a larger interest, and since all depositors would never come in all at once to ask their gold back, this would work out well. Soon the goldsmith enjoyed a great income and began to flaunt his wealth, of which the townsfolk — the actual depositors — became suspicious. They all barged in on the goldsmith together one day, to see if he was lending their gold, but to their surprise, all their gold was still in the vault! Nonetheless, they demanded a small interest for their deposits, which the goldsmith easily agreed to. He could afford to pay this from the interest he charged to his lenders, still maintaining a small profit. Matters subsided and the goldsmith became dissatisfied with the measly amounts of profits he was making. Trade was increasing, and so were the demands for increased credits, but our goldsmith, or rather banker now, had only a limited amount of gold to lend. He then came across an even better idea — he would let out more paper money than he had actual gold. In this way he could profit from an even larger interest sum, from gold that did not even exist. And since no-one knew how much gold was in his vault but himself, this sounded like a foolproof plan. Once again, the goldsmiths ostentatious wealth triggered suspicions, and people began to claim their gold back. More and more people flocked to the goldsmith as these suspicions grew large. And then there came a time when the goldsmith did not have enough gold to pay back. The ‘bank’ was run on and people lost faith in this system. Even so, since increase of trade was so important, governments began legalizing this process of creating money out of debt, and imposed restrictions on the ratio of real to fake money, also known as the ‘Fractional Reserve System’. In case of run ons, a so called Central Bank provided emergency access to gold. Naturally, if there were too many run ons, the system could thus crash.
Cut to the modern world, this is no longer the case. The enormous amounts of debts prevalent today has shrunk the gold to money ratio to almost zero. So now instead of representing value, money represents debt. Also the previously existing bank checks, or paper money were a pledge for actual gold. But now a paper banknote can only be exchanged for another paper banknote and no such obligation exists. As more debt means X times more money for the bank to lend, banks encourage credit spending. The interests paid by the poor who cannot afford the required amenities for life, and thus rely on loans from banks, go to the rich depositors making them richer. Thus the ever widening gap in our social strata. But if this was not enough, the evils of the monetary system are far more pronounced and are becoming more rampant by the day.
Technological Unemployment
Nearly all major social changes in society can be attributed to technological advancements. With the technology that we have today it is possible to feed, clothe and provide shelter to all of people in the planet. And not just that, we can in fact thrive with a high standard of living for all of us. How is this possible? By fixing the problems of distribution. It is not hard to see that machines are able to produce more than what is needed in all spheres, and are consistently improving performance. The only problem is the distribution which is really really screwed up because of our current system. Technological progress has made the use of human labor obsolete. Machines are better, faster and more precise as opposed to human labor. Moreover, they do not need to be paid salaries, or provided vacations. Hence, they are but the only meaningful way for an industry to survive and be competitive. The bottom-line is technology cannot be neglected. But what is the impact of this? More and more human jobs are being replaced by machines. The coming up of new jobs is only an illusion, the number of jobs being entirely replaced is always far greater. This is resulting in increased unemployment, and even so, when the supply is potentially infinite, the common people have no purchasing power, as there is no income!
Infinite Growth Paradigm and Planned Obsolescence
Our current economy is based on an infinite growth paradigm while we all live in a finite planet with finite resources. This is another potentially harmful characteristic in an economy, whose primary motive should be to economize. Because we need to keep up with the increasing supply, there is a need for a false demand. Hence we see companies sometimes spending more than 50% of their product cost on advertising (more than on the product itself!) — creating a false sense of need for something which might be otherwise, completely useless.
Also another repercussion of this current system is that the goods which are procured from the market are inherently inferior in quality, to keep up with the false costs of advertising, marketing and the like, and also to maintain a significant profit margin. This gives rise to a completely absurd phenomenon — Planned Obsolescence — whereby goods are produced in such a way that they intrinsically break down after a certain period of use, to keep up with the infinite growth aspect. Thus leading to increasing waste of rare minerals, pollution and depletion of natural resources as seen in so many places in the world today.
Increase in competition leads to greater social evils
Coming from a hugely competitive background, I can see why competition can be so evil. The increase in the competitive nature of society in all spheres has led to a series of hugely deteriorating subcultures. Education now has become a means to earn money via a well paying job, rather than actual study and research on the subject matter itself. The values attributed to success and wealth are so large in today’s times that they have almost entirely replaced the good old value systems of humanity, trust and goodness. The quest for hoarding enormous amounts of wealth and the increasing need for ‘ownership’, has led to rampant corruption in many major nations. This results in an increase in inequality within people and nations, leading to several money related crimes like theft, extortions and kidnappings. War has become an industry with billions of dollars worth of resources spent on defense every year in nearly all of the major nations, while a a seventh of the world’s population lives in poverty and starvation. Also the nature of competition makes most people end up in jobs they do not wish to do, but do just for the sake of ‘earning a living’, thus leading to diseases like stress, anxiety and depression — affecting entire cultures. And due to the nature of epigenetic effects these harmful psychosocial phenomenon make their way into the next generations.
Alternative strategies for the future
Futurists like Buckminster Fuller and Jacque Fresco have surmised that the world is now capable of forming a sustainable economy for the entire planet as a whole. There are enough untapped power possibilities like solar, wind, geothermal, tidal and wave — which are held from being utilized, by the ‘influential industries’ responsible for hydrocarbon power generation today (Leading to the string of Oil wars in history). Technologies like 3D printing can be used to print anything from machines to clothes and in the near future could very well replace the entire manual construction process in housing. Soil-less farming techniques like Hydroponics and Aquaponics using vertical clusters can more than eliminate the world’s need for food. The number of advanced technologies useful for such a sustainable society are plenty and growing. But for such a system, the entire world must come together, erase all borders and create a one world economy where all of the earth’s people own all of the earth’s resources. This may sound far-fetched. But is really necessary. And perhaps might be the only solution to the current crisis grappling the world today. ‘The Venus Project’ put forward by Jacque Fresco is one such idea where the government is formed by intelligent computer systems which trigger actions based on the availability of earthly resources, unlike opinionated judgements in today’s governments. This sort of technological anarchy is not biased by any culture, religion or race and instead treats the entire earth as one home. Technology is embraced in this system, and only the best possible goods are produced and made available via ‘access points’ — sort of like libraries as they exist today. State of the art housing and food, is provided using sustainable energy sources. Thus with all goods and services made available, there is no need for money in this system. This will signal an end to mundane jobs, which will be replaced by machines. Also to jobs which serve no useful purpose for the progress of humanity (Unfortunately, a majority of us are employed in such jobs today — like banking, finance, advertising, marketing, sales, law etc.) Only work which require original human thought would exist. While a small fraction of the total population is needed to volunteer for this, the rest can actively participate in work that they like to do, resulting in an increased productivity and far superior output in all spheres. All research would be open sourced and shared for everyone to enjoy a high quality of living, putting an end to inequality and all the plethora of crimes which result from it. Such an economy which operates based on the available earthly resources, with sustainability and preservation at its core, taking care of the entire human population at a high standard of living is termed by Jacque Fresco, aptly, as a Resource Based Economy (or RBE in short). The RBE unlike any economic system in the past, has never been realized before, hence it is hard to grasp at first, the feasibility of it. But owing to the technological age that we live in today, such a system is very possible.
Many a question has been raised as to how such a world can be brought about. It doesn’t seem humanly possible at present. With rampant corruption and cut throat competition everywhere, it seems hardly likely that people would protest all together at the same time to overthrow entire governments. Some semblance of an uprising could be seen in the Occupy Wall Street protests in the US, and the ‘No Capitalism’ protests in Europe. But the majority of the people are still ignorant as to how the system works, most have lost hope in it, and continue being victims of its workings, trying their very best to somehow rise above the rest and survive. If only they knew, that the world has reached a stage that there is no longer any need to fight amongst oneselves and that there’s enough for everyone!
The transition
So we arrive at action. What shall we do now? Even if we know what is wrong, how can we go about changing it? To quote Buckminster Fuller : “You never change things by fighting the existing reality. To change something, build a new model that makes the existing model obsolete.” Hence we must ourselves move in the direction of sharing and sustainability. And if we look closely, the world is somehow already going in that direction. Car pooling services (mitfahrgelegenheit.de is one example in Germany) where the person driving a car, most often takes along 2–3 complete strangers along for the ride, whenever s/he is driving long distances. The fare is not intended to make profit but is just enough to pay for the fuel required during the trip. But is certainly less than what one would normally be charged in a train. This is a win-win situation for all, not to mention, a possibly great conversation and the cultural awareness that it lends. This feature is yet to be seen in developing countries (rather, countries with great inequality amongst masses), owing to a lack of trust more than anything else. In such countries, monetary related crimes contribute the most to this lack of trust. Another example seen in more equal countries is the concept of free room sharing (couchsurfing.org is an example which is used by people across the world), where one person provides his/her place for visitors to occupy for free whenever they are visiting the town/city they live in. The host can in turn, if they want, do the same when they travel to the visitors’ city/country. This is also something based completely on trust and humane principles, again owing to and resulting from, a rich cultural awareness. And once again, monetary related crimes and lack of trust resulting from them, acts as a deterrent to such intercultural exchanges. Another great example of how sharing resources can lead to things unimaginable otherwise — Coursera.org is an online education portal which enables anyone in the world to enrol for courses they want to study, taught by professors from some of the best universities in the world. Unlike other online courses, these courses are completely free and have a slated start and end time period like in a normal university. The responses to this initiative have been astounding as was presented in founder Daphne Koller’s TED talk : “What we’re learning from online education”. From what it seems this is only the beginning.
From a very inspired talk by Oscar Gonzalez of ‘The Zeitgeist Movement’ (another world organisation which aims to educate people and thus bring about a sustainable economy like the RBE) titled : Transition to a Resource Based Economy, I learnt how the transition process would look like. Imagine the old video cassette players which we used before the CD players came out. The video cassettes were bulky and hard to deal with. Video quality was also, often poor. And then after the advent of the CD player (again thanks to Science) people began to have both CDs and cassettes at homes, some old movies for which CDs were not usually available had to be watched using cassettes. And slowly CDs entirely replaced the cassettes. To draw an analogy, we all presently do have a small resource based economy of our own. This small circle perhaps include our parents, spouses, kids, relatives and close friends. Within this circle, for some small help, within our available resources (knowledge, money, time) we do not usually charge a fee. For example I do not charge a service fee to my mother when she asks me to get the groceries. While this small circle exists in harmony, the entire outer world becomes the real world economy, where nearly all relationships run on monetary ties. Like, for example, to order a beetroot in a Chilean village, I would hand over the slated price of the beetroot and have the beetroot in return. The way the transition has to move forward, is for our small resource based circle to expand and the large monetary based circle to contract. This can be achieved via many ways, by forming small sustainable groups for example, like in a village or small town, who have the same ideals and promise to work together. Education is a must in this regard, and that more and more people know what the problem is, and identify possible solutions to it.
Marcin Jakubowski’s project ‘Open Source Ecology’ aims to do something similar. Bringing together a network of farmers, engineers and supporters, Open Source Ecology, or OSE aims to eventually build the ‘Global Village Construction Set’ (GVCS) — a set of 50 machines which would enable a small group to build a sustainable village/town with modern comforts. The idea is to make the blueprint for these machines ‘Open Source’ — a term used in the software world as openly available source code for anyone to read, use or replicate — for free. Thus with the advent of such groups, and machines, people from all over the world can make use of freely available technology to equip themselves to survive in a sustainable way, without the help of any outside help or support. These communities can only be expected to grow when more and more people see the benefits of living in such societies. And soon we would be able to witness the first futuristic city as proposed in The Venus Project.
Perhaps this is still very distant, but with increased awareness, this time could come sooner than one can expect. Just that with issues like the ‘Global Economic Collapse’ looming large, let’s just hope that the world transitions into something better in a peaceful way rather than killings and wars which would, very certainly, render it unsuitable for living. Or worse, even destroy itself.
Originally published at http://milspeak.wordpress.com.