C H A P T E R 5
Monetary Reform in the Context of Global Transformation:
An Example of How to Make the Change
THE FACT THAT this book concentrates on the issue of
monetary reform as one important aspect of the total
global transformation which we are about to witness
does not mean that it is more important than other
aspects. From organizational to individual
transformation, from technological to spiritual
transformation, we need change.
Money, how it works and what it does to society, has
been notoriously overlooked although it seems to be a
fairly central piece of the puzzle. Neither experts nor
those who occupy themselves with alternatives to the
present econornic system seem to worry much about
this issue. It may not be more important but it certainly
is not less important than others. It simply affects
everybody.
REPLACING REVOLUTION WITH EVOLUTION
While the three reforms - in money, land and tax
systems - proposed in this book constitute only a small
part of the overall changes that are necessary for survival
on this planet, they may fit readily into many attempts to
create a new relationship between human beings and
nature - and human beings and their fellow human beings.
Social justice, ecological survival and freedom are
threatened where we allow the proliferation of societal
structures which in themselves tend to work against these
gouls.
The proposed reforms clearly combine the
advantages of both capitalism and communism. They
avoid their respective shortcomings and provide a "third
type of solution." They would allow individual freedom
and growth together with a free market system, and with
a far greater degree of social equity. At the same time,
they would stop the exploitation of the large majority by
a small minority - without introducing the heavy
regulations of a planned economy and an almighty
bureaucracy.
The communist attempt to create freedom from
exploitation failed because, in order to secure a
minimum existence for everybody, communism
eliminated personal freedom. The capitalist tendency, on
the other hand, by letting land and capital be exploited in
an unrestricted practice of personal freedom has
endangered the minimum existence of the majority of
people. Both systems have gone too far in their
respective directions. One has set the priority of
freedom from hunger above freedom to choose one's
own life style. The other has set the top priority on
personal freedom which, in the present monetary
system, can only be achieved by very few people. Both are
partially right, but both have failed to create the
preconditions for a genuinely human existence including
genuine freedom.
The reforms proposed here could reduce
governmental intervention and create an ecological
economy in which goods and services could be produced
at an optimum size and level of complexity because that
is where they would be the cheapest, i.e., most
competitive in a free system.
While the full extent to which wealth is redistributed
through the monetary and land systems is less obvious in
highly industrialized countries, because of the
exploitation of developing countries, the working people
in the latter really pay the price for the monetary
systems of the industrialized world. Although they
suffer most, there is little hope that these ideas will be
used first in the Third World where small elite groups
dominate in terms of money, land and political power.
However, there may be a possibility for change in the
smaller democratic nations of Europe. Scandinavia, for
instance, with a majority of wealthy and well educated
people, might prove comparatively well open to social
change. And this is what monetary reform is all about.
At the U.N. World Commissions Public Hearing in
Moscow on December 11, 1986, A. S. Timoschenko of
the Institute of State and Law, U.S.S.R. Academy of
Sciences, proposed that:
"Today we cannot secure security for one state at the ex-
pense of the other. Security can only be universal, but secu-
rity cannot only be political or military, it must be as well
ecological, economical and social. It must ensure the
fulfillment of the aspirations of humanity as a whole." (32)
The struggle of humankind for social and economic
justice has been long and fierce. It has created sharp
divisions in political orientations and religious beliefs. It
has cost many lives. It is indeed urgent that we come to
the understanding that nobody can obtain security for
oneself at the expense of another, or at the expense of
the environment on which we depend. In order to make
this feasible we need some deep and practical changes in
the structures of our social framework. Hopefully the
changes proposed in this book will contribute to the
creation of security and justice for people and our global
environment, and finally begin to replace revolution with
evolution.
A POSSIBLE SOLUTION FOR THE NEAR FUTURE
Before the money system could be reformed, a large
section of the population must realize that we have to
limit money to its functions as an exchange medium, as
a scale for prices and as a constant standard of value. If
this recognition is transformed into political action,
then the central bank, as directed by the government,
would employ a parking fee rather than interest to keep
money in circulation.
Figure 18
THE PARKING FEE CREATES A NEUTRAL MONEY SYSTEM
As a method to secure circulation, the parking fee
would make possible all necessary transactions. If there
is enough money available to accomplish all necessary
transactions, then it is not necessary to put more into
circulation. Hereby, the growth of the amount of money
available follows the growth of the economy and this
follows, once again, the natural growth curve (curve in
Figure 1).
If somebody has more cash than they need, at any
time, they pay it into their bank. Depending on the length
of time the money is deposited, the parking fee will be
either diminished or waived. Figure 18 shows how
today's interest scale would be replaced by a parking fee
scale. In the case of long term deposits there would be
no fee; cash would have the highest fee.
The hoarding of cash in the new system could be
avoided much more easily than by gluing a stamp on the
back of a banknote as was done in Wörgl. Several
suggestions have been made: One is a lottery system. It
would ensure the circulation of cash by the withdrawal
of one specific note denomination, in the same way as a
lottery draw.
Based on today's eight denominations (in the case of
the German Mark DM 5/10/50/100/200/500/1000),
e.g., the eight coloured balls representing different bank
note denominations would be mixed with white balls
representing no conversion in such a way that on
statistical average - a conversion of one denomination
would occur once or twice per year.
Draws could take place, for example, on the first Saturday
of each month. Once a denomination is drawn, the conversion
period could go on until the end of the month. The drawn notes
would remain legal tender and could be used for payment in all
shops. However, the respective fee would have to be deducted
these bank notes.
Another option is to exchange the invalid notes against
payment of the exchange fee at a bank or post office. Because
no one likes to pay fees, everyone would limit their use of cash
to the necessary amount, and surplus money would be paid into
bank accounts.
The exchange would be facilitated by giving the new note
denominations a new colour and size. New DM 100 yellow
notes replace the old blue notes which go out of circulation. The
concealment of overdue notes can be avoided by making the
new notes slightly longer or wider so that every false note would
jut out of a bundle, no matter how thick.
Unlike stickers, or stamp money, the drawing of
denominations has the advantage that there is no need to print
new money. We could keep the same money we have today
and the actual cost of the system would be no higher than the
replacement of worn out notes today.
In this new neutral money system, banks are under the same
obligation as everybody else to pass the money on to those
who need it. If they have interest free deposits
on their books, and don't lend the money out or transfer it to the
central or regional bank, they would also have to pay the
parking fee. People receiving a credit would
pay no interest but banking charges and risk premiums,
comparable to those included in every bank loan. The
two amount to about 2.5% (1991 in Germany) of the
average credit costs (see Figure 18). In Switzerland, they
only amounted to about 1.5% of the average credit costs.
In industrially developing countries, they were even two
to three times as high.