Inspired by conversations with, and the ideas of, Dr Martin Hay.
The ideas here are a response to environmental destruction, ecological collapse and rapid climate change.
Pursuit of economic growth in a system fundamentally dependent on the accelerating extraction and utilisation of limited resources, whose use is known to destabilise the conditions and life-support systems upon which we all depend, is a mathematically unsustainable and existentially dangerous model.
Perhaps most worrying of all is the extent to which we understand the threat that we face, and the resilient self-perpetuation of our system in spite of our understanding.
The following is not meant to be a perfect solution; rather I’ve written it down in that hope that it might inspire better ideas…
A Missing Piece
I’m not an economist, and so whilst I’ve always taken a great deal of interest in monetary theory, my thinking here is mostly coming from my understanding of science and maths.
I think that our monetary system is lacking symmetry.
Imagine a system in which every transaction goes in two directions, with perfect symmetry.
In such a system, the currency would have two forms.
Right handed money (€R) would be money used to buy.
Left handed money (€L) would be money used to sell.
For example, when you buy a loaf of bread, rather than spending € 1 and receiving the bread, you would spend €R 1, and the shop keeper would give you the loaf of bread and €L 1 in return.
Every time you give €R 1, you receive €1 L, and vice-versa.
Not unlike our current system, you can’t buy the bread if you don’t have €R 1.
However, unlike our current system, the shopkeeper wouldn’t be able to sell the bread unless she had €L 1.
This system would by no means be intended to prevent the shopkeeper from selling bread, as, besides fringe circumstances, the shopkeeper should always have sufficient €L to sell plenty of bread.
When the shopkeeper pays her assistant at the end of the day, she hands over €R 50, and the assistant, thanking her, hands back €L 50.
Later the assistant decides to give €R 2 to his son as pocket money. His son gives him €L 2 back, and goes to spend the €R on some delicious raspberries.
Born With €L
Within this system, everyone would begin their lives with a fixed amount of €L.
In effect, this would create a ceiling of how much €R anyone could hold at any given time. If anyone reached the ceiling, they’d have to spend €R back into the system to replenish their €L.
How much €L each person starts with would need to be modelled and optimised. Of course, it wouldn’t make sense to have a ceiling so low that it reduced the incentive for people to work, innovate, enterprise etc.
Aside: whilst competition in a system is vital, to interpret “survival of the fittest” as exclusively “fittest” (singular), rather that “fittest” (plural) is to misunderstand biology.
However, a ceiling could also have the advantage of capping excessive levels of liquid inequality. It’s well understood that excessive inequality suppresses innovation and social mobility. Surely a futuristic system wants its most talented to easily rise to the top.
For the sake of simplicity, let’s say that everyone begins their life with a billion €L each. For most people on Earth, this ceiling would be irrelevant in its unreachability.
In a world of limited resources, and damaging production processes, it doesn’t make sense that everything can be sold at the whims of jurisdictions whose interests are often short-term.
The nature of a debt-based system is that people will always be incentivised to harvest and profit from the dwindling natural riches that surround us.
I therefore propose that €L be split into two…
1) Circular left-handed money = €L
Used to sell most goods and services, on the basis that they are provisionally deemed to exist within a circular economy.
2) Limited left-handed money = €L (crude oil barrel), €L (lithium gram) etc.
Used to sell limited resources and damaging services.
So, for example, if you were to pay for a cinema ticket, you would get circular €L in return for your €R.
However, if you wanted to sell a barrel of crude oil, then you’d have to use at least €L (crude oil barrel) 1 to do so. Selling two barrels of oil, would require at least €L (crude oil barrel) 2.
This doesn’t mean that the price of the barrel of oil is fixed. You could charge more for it, by using circular money.
For example, you could sell your barrel for €R 50, and you would have to give the buyer €L 49 and €L (crude oil barrel) 1.
Once the limited €L is used to sell its relevant resource or service, it would automatically become circular €L, to avoid limited €L being used more than once.
Furthermore, the limited €L would only be required for the first sale: derivative products and services would either be sellable using circular €L or may require a different limited €L, should their further production cause further environmental damage.
Planning Limited €L
By default, all resources, services etc. could initially be deemed suitable to sell using €L. The economy could then be under ongoing review, to add more types of limited €L, as the impact of different products, industries etc. are assessed.
The numeracy of each limited €L would need to be centrally determined based on the predicted quantity of each resource remaining, or the damage that the world can sustain whilst remaining able to regenerate faster than it’s damaged. There would also need to be the ability to inflate/deflate the supply of limited €L as more understanding of availability and impact grows.
Each form of limited €L could then be distributed evenly across the population of the system, leaving the choice to sell the limited €L to the individuals. That is to say that each individual could choose to sell their €L (crude oil barrel) to an oil company, or not.
The aim would be for this to have a few key effects…
1) To create a democratic system of control over the ability to sell limited resources and run damaging industries.
2) To create a mechanism by which the wealth of the natural world could be more widely distributed.
3) To create a marketplace that would incentivise individuals delaying sale of their limited €L.
As for how the distribution of limited €L shifts as people are born and others die, it remains to be determined whether each limited €L ought to proportionally re-distribute in real-time, to remain in a steady-state even distribution (accounting for the fact that some people may have already sold their limited €L, and therefore would not have it replenished), or if this could have the unwanted effect of incentivising faster sale of limited €L as the population grows.
Selling Limited €L
Whilst it would be necessary to use limited €L to sell a limited resource, the limited €L could also be used in place of circular €L without losing its special limited status, provided that the transaction didn’t involve the limited resource.
That is to say that in selling €L (crude oil barrel) to an oil company, it would still remain as €L (crude oil barrel). It would only become circular €L when the oil company eventually used it to sell a barrel of crude oil.
Markets would then evolve for the sale of limited €L.
For example, some oil companies might offer to buy €L (crude oil barrel) 1 in exchange for giving you €R 5 and also receiving circular €L 4 from you too.
As limited resources depleted, and so too did their associated limited €L, individuals might expect to be able to earn more from their limited €L, creating a mechanism that may further incentivise individuals withholding the sale of their limited €L.
By equipping the population with knowledge, many might choose to never sell their limited €L, and some may choose to buy up limited €L purely to avoid it ever being used to sell the related resource or service.
Not only would this system intrinsically discourage a linear economy, but it would stimulate a more circular economy, since no limitations would exist on circular trading.
Integration With The Current System
Much of our current system would be able to carry on as normal. It would still be a fundamentally capitalist system. Capitalism has many faults, but it does have the advantage of being able to generate change and innovation very rapidly. We really need rapid change.
New businesses could still be set up, as each individual’s supply of €L would be sufficiently large as to allow for significant loans to be received/money to be earned.
My initial thoughts are that businesses could be proportionally formed by pooling the €L of those with equity in the business.
The largest businesses will be required to take on more people should they wish to hold more liquid €R, or spend more into the circular economy.
Interest could still be charged and owed. On the repayment of a loan, the reverse transaction would just be larger.
For example, if you borrowed €R 1000, then you’d have handed over €L 1000 in order to do so. If you’re charged 10% interest, then you’ll later pay back €R 1100, and be given €L 1100 in exchange.
A Final Thought
The current process through which money is created puts an inherently inflationary pressure on both individuals and countries, disproportionately incentivising nations to operate in the interests of big businesses, rather than the people and their futures that they represent.
The notion that nations can’t independently manage the issuance of their own currency without debasing it is a notion that often plays into the favour of a select few, and against the planet.
Furthermore, it’s hubristic to assume that we will be able to research our way out of the rising danger of a changing planet further down the line. To do so is to gamble on averting unforeseen problems using technology that either doesn’t yet exist, or extant technology that may be insufficient as changes accelerate and activate further positive feedback mechanisms.
The irony here is that sufficient technology to avert disaster exists now, if only it’s used now. We need a system that inherently incentivises industries that don’t damage the planet, and disincentives those that do.