Money As Motivator
By John Taylor; 2009 Oct 28, Ilm 13, 166 BE
This series asks what monetary policy might be like under a decentralized world government. We often forget that the extreme centralization of power that is the norm today is not inevitable. Rather, it is a symptom of the corruption and slow death of the sovereign nation, which jealously guards every jot and tittle of its own prerogatives.
A democratic world government would immediately shift the balance away from the sovereign middle. Without the need to maintain large armies or pay for weapons, there would be a great shift of wealth towards the world center. However, with Comenian organization the lion's share of the wealth would flow out to the periphery, towards localities, neighbourhoods and families. This is because the power to collect taxes, print money and, as a result, the power to manipulate monetary policy would be delegated to local levels of governance. The present fractional reserve system is designed to concentrate monetary policy in the hands of central banks, which then permit banks to create money through lending. Why cannot other, local institutions, including the trades and professions, do this too? They could create their own money by providing credit and taking out loans for activities that they know about best, enterprises promoting their own trade, such as training apprentices, funding research and promoting related charities.
In our present financial system money is the be all and end all, the overweening reward for all economic activity. The sole motive rewarded and reinforced by money is lust for naked profit. Worse, this profit is gained not necessarily by invention or productive activity but simply from growth. It has been calculated that high finance has gone from five to fifteen percent of GNP in only ten years. Lately these financial wizards have devised derivatives based on debt risk. This means that even our future growth is being systematically plundered. Since risk is by definition, well, risky, this model is inherently ephemeral and unstable, a house built not on sand but on financial bubbles. Responding to the current economic crisis, governments are even raising their stimulus funds by borrowing from private lenders. This was not how the miracle of the New Deal was performed. While this is highly profitable for a moneyed few, its cost to society is so great that at least one European banker, hardly a socialist, has suggested that the entire financial industry be officially nationalized and that these offending institutions be run as not-for-profit public utilities.
Meanwhile, the greatest factor of social as well as economic stability, income equality, continues to spin out of control. An often mentioned example is the stratospheric pay given to professional athletes. It has been calculated that an ordinary professional worker who makes the average starting salary of a university graduate, fifty-thousand dollars a year, would have to work for seventy years to make what the average professional hockey player gets in a single season -- and hockey is on the lower end of the pay scale among elite athletes. Meanwhile, those who do tremendous good to society, such as inventors, innovators and discoverers, must scrounge for funding.
An economy that allowed local institutions and trades and professions to manufacture money would see to it that those who work in fields that benefit society the most would merit the highest pay-rates. Those who innovate and discover new knowledge in these areas would stand to gain the most of all. What is more, their pay would be in a currency (the terra, a three pronged currency) that is best suited to their expertise, managed by a local and world public utility of high finance.
The great benefit of this localization would be an increase in administrative efficiency. One of the most brilliant advocates of local governance was Jane Jacobs. She deplored the present funding squeeze on the local level, especially for cities and towns, saying that, "standardization is the parent of stagnation." (Dark Age, 119) Large cities are sinking into decrepitude because the lion's share of the wealth and tax revenue they produce is "standardized," that is, pre-allocated by having strings attached to them by more "senior" levels of government.
"Healthy municipalities do not march in lockstep. At a given time, each has its needs and may also have its own particular opportunities for innovative solutions. These opportunities can be very valuable. Central planning, whether by leftists or conservatives, draws too little on local knowledge and creativity, stifles innovations, and is inefficient and costly because it is circuitous. It bypasses intimate and varied knowledge directly fed back into the system." (Dark Age Ahead, 116-117)
The worst effects of over-centralization are witnessed on the lowliest but most important level of all, that of the individual. Over past decades the relative share of wealth in the hands of the majority has diminished while the riches of the few concentrated beyond measure. Here, centralization is at its most extreme.
Advocates of the status quo argue that our economic stagnation would be worsened by giving everyone a standard, livable income as a human right. We need the threat of homelessness and starvation to keep the wheels of society turning. How else could bosses light a fire under their lazy employees? If the threat of destitution ever went away, workers would not want to work.
Next time I will argue that this fear is fallacious. It is born of ignorance of how to manage the most powerful human motivator, money. If local institutions and trades controlled the money supply, workers would be more motivated to work, not less. They would be concerned with something that really matters, progressive social change, not crass profiteering.