About the Book

As Dennis Meadows says in his Foreword:

“I used not to… think about the money system at all. I took it for granted as a neutral and inevitable aspect of human society. But since beginning to read Bernard’s analyses I have a very different view….

I now understand, as proven clearly in this text, that the prevailing financial system is incompatible with sustainability in five ways:

  • it causes boom and bust cycles in the economy 
  • it produces short-term thinking 
  • it requires unending growth 
  • it concentrates wealth 
  • it destroys social capital. 

Any one of these is probably enough to derail the most carefully considered plan for a transition to sustainability. Together they are a prescription for disaster, which is precisely what they are giving us…

This text is a rich source of information. It has…

  • a devastating critique of traditional economic thinking 
  • an excellent discussion of the mechanisms through which money is created in modern society 
  • a description of the many problems we may expect from climate change and future collapses of the financial system 
  • proposals for nine different pragmatic monetary complements to the current financial system.” 

Money and Sustainability: The Missing Link 

Complementing the present monetary system with a monetary ecosystem 

20 years on from the Rio Conference and 40 years after the publication in 1972 of The Limits to Growth (the first report for The Club of Rome), climate change, species extinctions, an ageing population, high levels of unemployment and unsustainable energy consumption all demand urgent attention. And the threat of synchronous failure is greater than ever.

It’s now also clear that the ‘operating system’ that we use to address these problems (our money system) is fundamentally unfit for purpose. Recent efforts to prop it up have simply led to sharp increases in government debt. Many governments are being forced to cut pensions, unemployment benefits and other social safety nets – as well as ‘green’ investments – precisely when they are most needed.

In fact, as this new Report from The Club of Rome shows beyond all doubt, there is a structural flaw in the way we create money that is causing many of our current problems. To face the challenges of the 21st century, we need to rethink our entire money system.

a devastating critique of traditional economic thinking…
Hidden Assumptions
The Report starts by explaining the series of remarkable (and wrong!) assumptions that underpin our existing money system. We suffer from a three-layered collective ‘blind spot’. We are taught that we must have a single, central currency, that it must be issued through bank debt and be enforced by a central bank. This institutional framework explains why there is such powerful and determined resistance to reconsidering the paradigm of a single, monopolistically produced currency.
Autopsy of a Crisis
Money and Sustainability unpicks the problem, showing that the daily volume of foreign exchange transactions is now eight times the entire world’s annual GDP. The collapse of 2007/8 drove government debt so high that the ‘privatisation of everything’ is the inevitable outcome. (Chicago has sold its parking meters, Italy is selling its beaches, rivers and lakes, Greece is selling ports and public buildings). But what then? Why would governments be more credit-worthy once they have to pay rent for their offices and tolls for their employees to drive to work on roads that were once publicly owned?

a description of the many problems we may expect from climate change and future collapses of the financial system…
The physics…
Drawing on the physics of complex flow networks, the Report presents the first scientific explanation for the frequent monetary and financial instabilities that we face and proves that our money system can only be sustainable if it can balance efficiency and resilience. This means healthy large-scale organisations and healthy small-scale networks operating side-by-side. Current efforts are entirely devoted to increasing monetary efficiency and shoring up the organisations and mechanisms at the upper levels. Over time, this process always results in sudden collapse. The way to give sustainability a chance is to encourage more and different types of currency. To complement the existing monetary system, we need a monetary ecosystem.

…and the economics
Five shortcomings characterise the current system and directly affect the future of humanity:
  • Amplification of boom and bust cycles: Banks provide or withhold funding to the same sectors or countries at the same time. This promotes boom and bust cycles. 
  • Short-term thinking: Because bank-debt money carries interest, all future costs and incomes are discounted. This inevitably tends to lead to short-term thinking. 
  • Compulsory growth: The process of compound interest imposes exponential growth on the economy. Yet exponential growth is, by definition, unsustainable in a finite world. 
  • Concentration of wealth: Wealth is flowing to the top with increasing rates of poverty at the bottom. Such inequalities generate widespread social problems and threaten democracy. 
  • Devaluation of social capital: mutual trust and collaborative action are eroded. 

an excellent discussion of the mechanisms through which money is created in modern society…

The ‘official story’ is that the relationship between the banking system and governments has been as it is for centuries. But take France as an example. Since 1973, the French government has been forced to borrow exclusively from the private sector and to pay interest on new debt. Without this change, French government debt would now be at 8.6% of GDP instead of the current 78%. The Maastricht and Lisbon Treaties generalised this same process to all signatory countries.

The ‘official story’ is that governments must raise money through taxation or debt (issuing bonds). In this story, banks act as simple intermediaries collecting deposits and lending parts of that money to creditworthy individuals, institutions and governments. But, since the USA came off the gold standard in 1971 and fiat currency (money created out of nothing) became universal, this ‘official story’ has been a complete fiction.

The ‘official story’ is that governments are powerless in the face of an anonymous and all-powerful ‘financial market’. In fact, governments could choose to give value to other currencies in parallel to bank-debt money. The Report says they must.

proposals for nine different pragmatic monetary complements to the current financial system…

The Report presents nine examples of innovative motivation systems that can all work in parallel with conventional bank-debt money. The first five can be started privately, either by NGOs or businesses. The next four are governmental initiatives started at a city, regional or country level. Versions of two are already running in South America and Europe.

Any community, city, region or country can pick and choose which kinds of system it implements. Together with a dozen other designs already in operation around the world, each combination of new exchange media will give an appropriate monetary ecosystem a chance to emerge. The most successful will spontaneously spread.

It would be naïve to think of complementary currencies as a magic bullet to solve all our current and future problems. But rethinking our money is a necessary part of any effective solution. We can no longer afford to overlook complementary currencies – they are the missing link which can deliver a money ecosystem that promotes sustainability rather than undermining it at every turn.

Go to the Triarchy Press website to buy a copy of the book.