Strategist and educator Jem Bendell discusses The Money Myth at TEDxTransmedia2011 event (Transcript)
Jem Bendell – Professor of Sustainability Leadership
I’m here to rip apart your assumptions about money. I’m going to show you that behind the financial crisis and the environmental crisis, lies a hidden crisis, in our monetary system, the very way our money is created.
And I’m also going to show you that there is this community of people growing around the world that are using the latest technologies to create new currencies that will serve us and not the banks. And I’m going to call for media, old and new, to tell this new stories of money.
Now, although we use money everyday often many of us don’t really know the first thing about it in terms of how it’s created and how that affects us.
So what I would like to do is a little thought experiment with you. I’d like you to imagine that you are living in a village way back in time, let’s say 3,000 years ago. Some of you bake bread, some of you look after chickens, some of you fix clothes, so you all swap stuff amongst yourselves. It’s a barter economy.
But then one day, a knight comes to your village, and he looks at what you’re doing and he says: “Why don’t you use my tokens? It will be so much easier for you, you can swap them.”
So you decide to give it a go, and he lends each of you ten tokens. So you start using this and you find it’s great! You no longer have to swap your bread for eggs. You don’t have to remember who owes who what, you can just swap the tokens. So you find suddenly you have a lot more free time. It’s great for you.
So you ask the knight to keep the tokens and he agrees on one condition: that at the end of the year, when he returns, he can see that you’ve got 11 tokens; otherwise, you will forfeit your assets to him.
Now, because they become so useful to you, you agree and you’ll try this out. So time goes by and everything is fine, but then you realize the knight is returning soon. So you start to ask more for your bread, you start to ask more to fix people’s clothes, and you realize actually that your neighbors have done the same thing. So suddenly there is a lot less tokens circulating in your village.
The knight returns, and not everyone has 11 tokens, it’s impossible. And so some of you lose your homes, lose your farms.
In this situation, might this technology of tokens meant that you changed the way you relate, and what you value, and how you even feel? Do you think in this situation you might come to see the tokens as the wealth, and not yourself, your neighbors, your village or your environment?
Fast forward 3,000 years and our money system today is quite like that, just now is on cocaine. Literally, if some reports are to be believed. Now, this is not to be joked about, it is so important to whatever you are working on, we have to really address these issues.
I’ve worked for 16 years helping large companies, UN agencies and charities team up to address global challenges, like climate change, overfishing, forced labor, HIV/AIDS, and we’ve created some cool correlations that are changing business practices worldwide.
But some of us have come to realize that if we want to change business in really widespread and lasting ways, if we want to change the way business does business, we must now change the way money makes money. Unfortunately, there aren’t many people funding work in this area as I found out.
So to work on it more, I had to outsource myself to India, so I ended up working with an NGO called Community Forge and they create free open source software for communities to run their own currencies. And through working with them, I had my eyes open to this whole world of innovation and complementary currencies, where some of them are using units of hours work, some of them are even looking at using “kilowatt hours,” as a measurement, some pegged to a national currency.
And I also realized that advances in social networks and mobile payment systems means we are on the verge of a revolution in the scale and uptick in use of such currencies. Soon you will be up to walk into your local store, ask for the bill in a local currency and pay with your mobile phone through an SMS or near field communication.
Just yesterday in Brixton, in London, they launched just such a scheme. So I will return to this issue of innovation in this field later, but one of the most important things I got from beginning to work on this, is that I realize I, like many people, have so many completely unfounded assumptions about what money is.
Someone asked me the simplest of questions: “Where does money come from?”
Where does money come from?
Now, I am a Professor of Management, not Economics, but I like to think I know things, and it’s a very simple question, and I didn’t have a clue. I offered the idea that: “Wow, doesn’t Government create it?”
And then I found out that well, yes, 3% of all money is created by governments in the mint, so these are the coins and the notes we have. But the rest, in nearly all countries of the world, the rest 97%, is made by banks, private banks, it’s electronic. And they create this with interest, of course.
So when you go to a bank, did you think that the bank had the money to lend you, when you borrow it? I did. But no, they create it out of nothing. And of course, as I say, they create it with interest. But they don’t create the interest, so who creates the interest? It’s created with another loan, with more interest. So it means today, there is more debt in the world than money.
Just like with the knight and his tokens, we can’t pay off the debts, there is just not enough money. Individually we might, but collectively, we are in debt forever. We are paying compound interest forever. Now this creates a lot of problems, but for time, I’ll mention just two.
The first is this system of money creation as debt, with interest, means that increasing economic inequality — differences between rich and poor — is a mathematical certainty. No wonder then the 2% of people in the world now control half, or more than half now of the world’s wealth.
The second problem is environmental. Because we need more and more landing to catch up because of all the interest, we must have more and more products and services traded, and therefore we must have more consumption of natural resources, otherwise the system will collapse, and we’ll have to fall through recession, and so on.
Now we don’t have an exponentially expanding planet, as far as I’m aware, and so, this money system means that, for all our ingenuity, all we are doing is delaying the ultimate crash that has been pre-programmed by this stupid money system. So that’s the theory.
But how does this really feel? Who’s got some money? I’ve brought along 20 euros. Let me see your money. Show me your money, I want to see some money.
Now we know this is just paper, don’t we? We know this is paper. As paper is not that useful to us, you can scribble on it maybe, or write a prayer and put it under your pillow and pray. But it’s just, just paper. We choose to make it worth something more that that because that’s helpful for us, but it would be a delusion to think it has value in itself. It’s just paper, it’s just money.
We are the wealth, us. Our ability and our desire to do things for each other. It would be a delusion to think this is wealth. And If we run our society as if this is wealth, haven’t we gone completely mad? You turn on the telly, as I think many of you do, and what do you see? You see everyone talking about growth, we need more growth to restore growth.
So I used to think anyone talking like this was a nutter, and maybe you can relate to that now. And I think it was my desire to be relevant and my fear of being ridiculed that helped me back from working on these critical issues. And I’ve realized that the mass media, many of you guys, help to define what’s considered relevant or ridiculous. So you have a key responsibility to encourage effective debate about the real causes of all these crises we are seeing.
So I looked on-line for a quick check and I found that there are about 42 million webpages mention financial crisis. So guess how many of those also mention monetary reform? Just over a hundred and so thousand, so about 0.3%; it’s almost as if there is a taboo about talking about the real causes for our current problems.
So what if media embraced this responsibility to challenge our assumptions, to dig a bit deeper, and what if journalists asked our top politicians the simplest of questions: “Where does money come from?” You might get some funny answers. It might make for some amusing Television program.
Fortunately, we do have the weld of new media — as we’ve been hearing about — and this is allowing independent voices to reach audiences of millions worldwide. So home-made films like Money as debt have been watched over a million times on YouTube. Social networks means that currency innovators and campaigners for monetary reform can share what they’re doing and learn from each other. There is one initiative I’m engaged in, it’s called: The Finance Innovation Lab, in the UK, and through that, we are learning about all these different initiatives and innovations.
Now clearly, we need to work out how to deal with this problem of banks creating money from nothing at interest. But I’m not holding my breath on that one, that we’re going to see much leadership on that. So what I’m doing is engaging with people who are creating new currencies. And I’ve realized that there are now hundreds of thousands of people worldwide, from slums of Rio and Nairobi to business hubs in Bristol and Brussels, people creating and using their own currencies. If you are interested, you can look online, for say: TimeBanks in the US, Lets in the UK, Regiogeld in Germany, The WIR in Switzerland. You can look UP Bitcoin, an entirely digital currency that has become huge in just a year. You can look at collaborative consumption websites which help neighbors share stuff — not such a new idea.
And then we’re now looking at creating currencies so people don’t have to pay, you have other ways, of just swapping things, and you don’t have to have money in order to be helpful to your community. But all this innovations mean we need a clearer idea about what kind of currencies would be good for us, not harmless. So, it doesn’t mean going back to scarce metal as our money, it doesn’t mean waiting for Facebook to come up with the new global private currency, as I’m sure they will one day.
We need to be clear about what kind of money is going to serve us and I think that must be money that is issued as a public utility and it’s not issued for private profit.
The current money system, as I’ve described, has been ripping apart our planet and is now even tearing apart our communities. Maybe, when you looked at the news in the last week, it’s even ripping itself to pieces. But it doesn’t have to be that way.
There are people now that I’m working with who are creating currencies that weave together communities, not tear them apart. So we don’t need to kneel to the banks. We can stand for what we really value in each other and we can start by losing our delusions about money, working for real reform, trying real alternatives, and telling a whole new story about money, and ourselves.