The Moneyless Man Read online

  MONEY AS DEBT

  In our modern financial system, most money is created as debt by private banks. Imagine there is only one bank. Mr Smith, who up to now has kept his money under the bed, decides to deposit his life savings, 100 shells, in this bank. Naturally, the bank wants to make a profit, so decides to lend out a proportion of Mr Smith’s shells, let’s say 90 of them, keeping ten in their coffers in case Mr Smith wants to make a small withdrawal. Another gentleman, Mr Jones, needs a loan. He goes to the bank and is delighted to be given Mr Smith’s 90 shells, which he’ll eventually have to pay back with interest. Mr Jones takes the shells and elects to spend them on bread, bought from Mrs Baker. At the close of the day, Mrs Baker takes her newly-acquired 90 shells to the bank. Do you see what’s happened? Originally, Mr Smith deposited 100 shells in the bank. Now, in addition to Mr Smith’s 100 shells, the bank has Mrs Baker’s 90 shells. One hundred shells has become 190. Money has been created. What’s more, the bank can now lend out a proportion of Mrs Baker’s deposit! The process can start again.

  Of course, the physical number of shells hasn’t changed. If both Mr Smith and Mrs Brown wanted their shells back at the same time, the bank would have a problem. However, this rarely happens and if it did, the bank would have shells from other depositors to use. The problems start when the bank lends out 90% of all their depositors’ shells. The result is that of all the shells in all the bank accounts of this fictional world, only 10% exist! If all the depositors wanted more than 10% of the total amount of shells at the same time, the bank would collapse (a bank run) and people would realize that the bank was creating imaginary money.

  This system may seem ridiculous but it is what happens today, every day, in every country of the world. Instead of one bank, there are thousands. Instead of shells, we have the world’s myriad currencies. But the principle is the same: most money is created by private banks’ lending. Our most precious commodity doesn’t represent anything of value and the figures in your bank account are mostly someone else’s debt, which itself is funded indirectly by another person’s debt, and so on. Neither are bank runs fictional. Recent bank crises, from Northern Rock in the UK to Fannie Mae in the US, show the inherent instability that comes from basing our financial system on an imaginary resource. The edifice is built on pretence and, as shown by 2009’s bank bail-outs across the world, tax payers inevitably have to subsidize with billions to keep the pretence alive when the system implodes.

  DEBT FORCING COMPETITION, NOT CO-OPERATION

  In the current financial system, if deposits stay in banks, the banks make no interest and therefore no money. Therefore, banks have a huge incentive to find borrowers by whatever means possible. Whether by advertising, offering artificially low interest rates, or encouraging rampant consumerism, banks share an interest in lending out almost all of their deposits. The credit this creates is, in my opinion, responsible for much of the environmental destruction of the planet, as it allows us to live well beyond our means. Every time a bank issues a human with a credit note, the Earth and its future generations receive a corresponding debit note.

  It seems we can’t get enough of it. According to the US Census Bureau, there are now almost 1.5 billion credit cards in the US; the US has more than four times as many ‘flexible friends’ as people. The average household debt (excluding mortgages) is $17,510 and to compound the situation, at the time of writing the US’s national debt is growing by an astonishing $4.5 billion every second. Payback time, in both economic and ecological terms, will inevitably come. While all this money creation is great for the economy, it is not so good for the people that the economy was originally intended to serve. An estimated 77 million Americans struggle to pay for their medical bills, with credit card debts averaging $5,000 per household. Every year, almost 1.5 million people are declared bankrupt or insolvent, and approximately one million houses are repossessed.

  In the end, the process of money creation inevitably means the rich get richer and the poor get poorer. Banks lend out money that, by any objective measure, they didn’t have in the first place and at every stage, accrue interest and keep the right to repossess real assets if loans are not repaid. Is there any wonder that huge inequality exists in the world?

  Let’s return to our little town. In the past, at times such as harvest, it was common practice for the people to often help each other out on an informal, non-exchange basis and the people there co-operated a lot more than they do today. This co-operation provided them with their primary sense of security; indeed, a culture of collaboration still exists in parts of the world where money is deemed less important. However, the pursuit of money and humans’ insatiable desire for it has encouraged us to compete against each other in a bid to get ever more. In our little town, competition replaced the co-operation that once prevailed. Nobody helped their neighbors bring in the harvest for free any more. This new competitive spirit was partly responsible for many of the town’s problems, from feelings of isolation to a rise in suicide, mental illness, and anti-social behavior. It has also contributed to environmental problems, such as the depletion of resources and the climate chaos that currently go hand-in-hand with relentless economic growth.

  MONEY REPLACING COMMUNITY AS SECURITY

  For most of us, money represents security. As long as we have money in the bank, we’ll be safe. This is a precarious position to adopt, as countries such as Argentina and Indonesia, which have recently suffered hyper-inflation, will attest. The boom period the world experienced at the start of the twenty-first century – a bubble inflated by highly-pressurized bank executives – has ended. Many politicians, economists and analysts are still not sure if there was only one reason.

  While I’ve no doubt that we’ll make it through this downturn and maybe even a few more, future economic crises will not be so easy to manipulate and stimulating recovery will be harder, as these challenges will be affected by real-world problems. The banking industry is inherently unstable and two of the pillars of our economy, the insurance and oil industries, will eventually take a huge hit from two massive and evolving problems: climate change and ‘peak oil’.

  CLIMATE CHANGE

  Whatever your beliefs about why the climate is changing, it’s undeniable that it is. It’s also certain that the damage it will cause is going to cost someone an incredible amount of money. In 2006, Rolf Tolle, a senior executive of Lloyd’s of London, warned that insurance companies could become extinct unless they seriously addressed the threats climate change poses to their business. Ultimately, there are two scenarios: either the insurance companies continue to cover ‘acts of God’ (or, more accurately, ‘acts of humanity’) and drastically increase our premiums to protect themselves – yet still risk extinction; or they stop covering them and the people whose homes and possessions are wiped out pick up the tab, ruining local economies and creating one humanitarian crisis after another.

  PEAK OIL

  ‘Peak oil’ – a huge subject – boils down to one simple fact: our entire civilization is based on oil. If you don’t believe me, take a look around wherever you are now and try to find one thing that either isn’t made from oil (remember plastics are oil based) or wasn’t transported using it. Oil is a finite resource: when it will run out is up for discussion, but the fact that it will run out is not. What’s more, even before the wells run dry, speculation will push up prices, so that oil will increasingly become unaffordable for more and more people. According to Rob Hopkins, founder of the Transition Network, we are using four barrels of oil for every one we discover, meaning that we are already moving rapidly towards this scenario. To highlight how critical oil is in our lives, Hopkins adds that the oil we use today is the equivalent of having 22 billion slaves hard at work – or each person on the planet having just over three. Oil is the sole reason that we in the West can live the lives we do; lives which are unsustainable in every sense of the word.

  Governments may be able to bail out banks during times such as the 2008 credit cr
unch; unfortunately, we are also approaching what George Monbiot calls the ‘Nature Crunch’. As he correctly points out, nature doesn’t do bail-outs. Pavan Sukhdev, a Deutsche Bank economist who led a study of ecosystems, reported that we are ‘losing natural capital worth somewhere between $2 trillion and $5 trillion every year as a result of deforestation alone’. The credit crunch losses incurred by the financial sector amount to between $1 trillion and $1.5 trillion; these pale in comparison to the total amount we lose in natural capital every year. As we lurch towards environmental disaster and the economy contracts, will money continue to be seen as security? Or will living in a closely-knit community that has re-learned its ability to work together and share for the common good take its place?

  This became apparent to me when I went back to Ireland, to visit my parents, in 2008. In the six years I’d been away from my homeland, working in the UK, the country had changed beyond recognition. The growth that Irish people experienced during the ‘Celtic Tiger’ economic period had radically affected their culture. Twenty years earlier, when I was growing up at the end of the eighties, it had seemed very different. My memories were symbolized by the street where my parents still live. When I lived there, everyone knew each other; it could take fifteen minutes to get to the bottom of the road on your way to town. Then, out of the eighty houses, only one had a phone. When you wanted to make a phone call, you went to that house (which, like every other house, always had an open door), stuck a couple of small coins on the table and made what was usually a pretty important call. I can remember no more than five cars on the street; if you saw a Mercedes, you knew someone had relatives visiting from abroad.

  Now, most people are only interested in getting on their individual property and career ladders. It doesn’t really matter what wall the ladder is propped up against, just so long as they are climbing. The street I remember is no longer there; its once-open doors are all shut.

  PLANET EARTH LTD

  Money allows us to store our wealth very easily and for a long time. If this easy storage were taken away, would we still have an incentive to exploit the planet and all the species that inhabit it? With no way of easily ‘storing’ the long-term profit that results from taking more than we need, we would be much more likely only to consume resources as we needed them. A person would no longer be able to turn trees in a rainforest into numbers in a bank account, so would have no real reason to cut down a hectare of rainforest every single second. It would make more sense to keep the trees in the earth until we needed them.

  Consider the planet as a retail business, whose store managers are our world leaders. These managers of Earth Ltd are on short, four-year contracts, so they elect to make as much profit as quickly as they can, to give them a better chance of their contracts being renewed. They decide to sell some of the cash registers and shelving, to add a bit extra to the year’s bottom line and make the profit and loss account look healthier. It works: the shareholders – us – don’t bother to look at the balance sheet and the managers get their contracts extended. The following year, their ability to make money is diminished due to their reduction of important fixtures and fittings and so they have to do the same again, until they have used up every asset they have. In the mean-time, the shareholders have voted to re-invest very little of the profit, choosing instead to buy goods with a very short life and of little practical use.

  For our planet, it is exactly the same. At the moment, we are liquidizing our assets and spending the profits on products with built-in obsolescence. This is a long-term business strategy no responsible businessperson would recommend. In 2009, Kalle Lasn, founder of the influential magazine Adbusters, said:

  … we got rich by violating one of the central tenets of economics: thou shall not sell off your capital and call it income. And yet over the past 40 years we have clear-cut the forests, fished rivers and oceans to the brink of extinction and siphoned oil from the Earth as if it possessed an infinite supply. We’ve sold off our planet’s natural capital and called it income. And now the Earth, like the economy, is stripped.

  THE DIFFERENCE BETWEEN SELLING AND GIVING

  I don’t see myself as a hugely spiritual person in the traditional sense. I try to practice what I call ‘applied spirituality’, in which I apply my beliefs in the physical world, rather than them being something abstract I talk about but rarely practice. The less discrepancy there is between the head, the heart, and the hands, the closer you are, I believe, to living honestly. To me, the spiritual and physical are two sides of the same coin.

  I do see a non-physical benefit to living without money. When we work for people, beyond what we do for family and friends, it’s almost always an exchange: we do something because we get something in return. I believe that prostitution is to sex what buying and selling is to giving and receiving: the spirit in which the act is done is significantly different. When you give freely, for no other reason than the fact that you can make someone’s life more enjoyable, it builds bonds, friendships and, eventually, resilient communities. When something is done merely to get something in return, that bond isn’t created.

  Another major motivation is much simpler and more emotional – I’m tired. I’m tired of witnessing the environmental destruction that takes place every day and playing a part, however small, in it. I’m tired of giving my money to a bank, which, however ethical it claims to be, nonetheless pursues infinite economic growth on a finite planet. I’m tired of seeing families and lands destroyed in the Middle East so that we in the West can fuel our lives on cheap energy. And I want to do something about it. I want community, not conflict; I want friendship, not fighting. I want to see people make peace with the planet, and with ourselves and all the other species that inhabit it.

  HOW TO BECOME MONEYLESS

  It’s one thing to intellectualize the reasons why we should give up money, but it’s quite a challenge to try and do it. In 2007, I decided to give it a shot. I sold my beloved houseboat, moored in Bristol Harbour, and used the cash to set up a project called the ‘Freeconomy Community’. Some might, understandably, call me a hypocrite for using money in an attempt to accelerate its demise. However, I see money in the same way as I see oil: we should be using what we have to build sustainable infrastructures for the future.

  I had experience of local trading schemes, such as LETS and Timebanks, in which people exchanged skills and time rather than money. Although I thought these schemes were a really positive alternative to the global monetary system, they still focused on exchange, rather than unconditional giving. My theory was that if you were part of a big enough community, with a diverse enough range of skills, you could help somebody without worrying about what that person could do for you in return. Security would lie in the fact that the community would be there to help any member whenever they needed it. The person whom you help may never help you, and a different person may help you though you have never helped them. The difference between this and the normal monetary system is that one uses figures on a computer screen to calculate our level of security, while the other sees security as the bonds we inevitably build with people when we do something just for the love of it. One system builds stronger communities, the other builds higher fences.

  I used the profits from the sale of the boat to pay a web developer to work with me on building an online infrastructure through which people could help each other, not for profit but simply for the love of it. The over-riding aim was for the website to act as a facilitator in enabling people to help each other for free, but how best to do this was up for some debate. In the end, I decided that sharing was at its heart; not only did sharing mean that fewer of the world’s resources would be used but it would also be a very devious way of bringing people together. Have you ever liked anyone less for sharing something with you? Exactly. Sharing builds bonds, reduces fear, and makes people feel better about the world they live in. Peace will only come when all the little interactions that occur around the world every day become more harm
onious. The whole is made up of the detail.

  The Freeconomy Community became a skill, tool, and space-sharing website, designed to bring people together and allow them to teach each other new skills, pool resources, and eventually be enabled to live a life in which money wasn’t the primary factor in everything they did. I called the site ‘justfortheloveofit.org’, which I felt summed up the spirit of the project. The early success of the website astounded me. The concept behind it was as old as the hills, but I suppose its presence on the internet gave it another dimension. Within a year, journalists were using the term ‘Freeconomy’ to describe the entire moneyless movement.

  ‘BE THE CHANGE’

  By early 2008, I felt I was getting closer to understanding what change I actually wanted to be. Having set up a project that successfully enabled people to start making the transition to sharing rather than selling their skills, I decided that if I wanted the world to place less emphasis on money, a decent way to start would be for me to try to live without it, to see whether it were even possible.

  In June 2008, I decided that I was going to give up money for at least a year and resolved to start at the end of November, on International ‘Buy Nothing’ Day. When I told my friends, they thought I’d gone crazy. Why, they asked, was I doing something so extreme (a word that often gets used about my way of living)? But what is ‘extreme’? To me, buying a plasma screen television for a couple of thousand pounds seems extreme. And given that some of the problems we will face in the future, such as climate change and ‘peak oil’, are, according to many leading scientists, likely to be extreme, how can we possibly expect the solutions to be moderate?