Global Monetary Reform
FUTURE WORLD presents a range of proposals and models which reflect the twin goals of international social justice and sustainability and offer alternatives to those based on economic growth and globalisation.
The Foundation for the Economics of Sustainability (FEASTA) believes that the present world and monetary system is so gravely dysfunctional that it makes the achievement of sustainability impossible. We have three main reasons for this belief:
- The earth is finite, and as all economic growth requires some use of the Earth’s resources, perpetual growth is not compatible with sustainability.
Unfortunately, most of the money used around the world is created on the basis of debt and ceases to exist if that debt is repaid. This means that if the world economy is not to collapse because a lot of the money required to make trading possible has disappeared, it needs to grow continually by enough to ensure that investors can always find attractive opportunities and consequently always borrow more than they repay. In other words, as things stand, the money system is always in direct conflict with social and environmental limits and has to take precedence over them.
- National and multinational currencies created by some of the wealthiest countries in the world are used as if they were world currencies.
The countries issuing the pseudo-world currencies gain enormous power and advantages at the expense of the rest of the world.
- Individual governments cannot afford to take account of whether the growth required to stop the global system from collapsing is socially or environmentally sustainable because current account money flows are lumped together when the market determines their currencies’ exchange rates.
This gives the owners of mobile capital an excessive amount of power over exchange rates and hence over governments. It also creates instability by allowing speculative financial flows to destabilise the ‘real’ economies of the countries concerned.
The proposals for reforming the world’s financial architecture that we saw in the run up to the World Summit on Sustainable Development only dealt with the symptoms of these problems, rather than their root causes. Accordingly we present our proposals for changes at the Global, National and Sub-National levels in the hope that they will influence the debate. The proposals should be considered as a package. However, the three National and Sub-National level proposals could be adopted by countries in the absence of change at the international level.
Our seven proposals are:
1. A genuine world currency should be established.
2. This new world currency should be issued by being given into circulation rather than lent.
3. The initial distribution of the new currency should be on the basis of population rather than economic power.
4. Over the years, the supply of the new currency should be limited in a way which ensures that the overall volume of world trade is compatible with whatever is considered to be the most crucial area of global sustainability.
5. Each country or monetary union should operate two currencies, one for normal commercial exchanges, the other for savings and capital transfers. Each of these currencies would have its own floating exchange rate with the new international currency, and hence a variable exchange rate with the other.
6. The new national exchange currencies would be spent into circulation by their governments rather than being created through the banking system on the basis of debt.
7. The establishment of regional (i.e. sub-national) and local exchange currencies should be encouraged.
The detailed arguments in support of these proposals are not presented here. Brian Davey, author of “Credo – Economic beliefs in a world in crisis” presents a detailed critique of the dysfunctional nature of economics and present global system of wealth creation and distribution. He is also skeptical about the chances of influencing policy-makers to make any meaningful reforms to the present economic system, despite the urgency of the challenges presented by climate change:
“In regard to climate policy (or its absence) the situation has also changed dramatically for the worse because nothing remotely adequate has been done – so that to have a realistic chance of preventing dangerous climate change would now require spectacularly rapid rates of decarbonisation – so fast that I for one think they could occur only in conditions of involuntary economic collapse.
The problem that I have is trying to envisage a situation where a small band of thinkers like those in Feasta have the remotest chance of being heard and our ideas and designs for a better world taken seriously and acted upon. I do think we can do things that make a difference. We can perhaps influence students and young people setting out on their journey in life. In the long term projects that improve the lives of poor people especially can provide a model of a better world and citizens action – but designs for the international monetary order written up for politicians, officials and policy wonks get ignored I fear. The world keeps changing and moving on quickly – and often getting worse.
I see my role as preparing the next generations for the ideas about the limits to growth…and what can be done in small local projects, perhaps networked together”.