Towards multivalent currencies, bioregional monetary stewardship and a distributed global reserve currency
This 4-part blog series has been written to explore why money in its current form is a primary driver of the metacrisis¹ and what an alternative system could look like. We have divided our reflections into four sections to address the following questions:
- What are the issues that make money (and our dominant monetary systems) so problematic?
- Can we use design principles to help us imagine desirable future scenarios? (Blog 2)
- What could a desirable future scenario actually look like? (Blog 3)
- What can we start building and testing now to begin scaffolding a parallel system? (Blog 4)
Part 1 (of 4): what are the issues that make money (and our dominant monetary systems) so problematic?
The global monetary system sits at the centre of every crisis we face, yet it is often excluded from mainstream diagnostics and potential response strategies. In this blog we will trace a number of issues from the intrinsic qualities of money itself, through layers of the economy such as money issuance rights and the profit motive, to the brutal service level manifestations of monetary colonisation and transactional oppression.
1. Money as an intrinsically extractive technology
In economic textbooks and in the general public discourse, money is often framed as a neutral tool that enables the real economy to function. Perceptions have shifted somewhat following David Graeber’s work highlighting that its origins were bound to social relationships rather than to barter². Despite this, there is still a persistent idea that whilst money might represent underlying social contracts, it is not a powerful force in its own right. In contrast to this benign conception of money, Daniel Schmachtenberger has recently described it as a “unit of game theoretic optimality”³. He argues that it is a uniquely destructive technology for the following reasons:
- Money as a highly liquid and abstract value layer: when we exchange goods or services for fiat money (i.e. currency that is not backed by a physical resource such as gold) we are taking complex, entangled values and ruthlessly converting them into a single, indiscriminate and highly liquid token of opportunity. In doing so we are incentivised to consume, exploit and pollute the base layer value of everything.
- Singularly upside returns: in an exchange based situation there is a point after which having more of a tangible good or service leads to diminishing returns. In the case of money the opposite is true. Once a base resource is converted into money, it can then be leveraged to generate further monetary returns (e.g. interest, dividends, speculative trading). Thus the liquid token that was exchanged for an underlying resource can self-perpetuate, giving rise to greater claims on other resources and creating an ever increasing cycle of extraction.
As an example, imagine somebody who runs a rose farm and agrees to exchange roses for another commodity such as oil. Having arranged the trade there would be a limit to how many roses would be deemed useful by the supplier of the oil. At this point the roses would have a low liquidity value and there would be a diminishing return on harvesting them. Contrast this scenario with the reality of being able to exchange the roses immediately for money. If the current demand for roses is high, there is a strong incentive to force grow them and sell as many as possible, irrespective of the impact on the intrinsic health of the plants and soil. The money received in exchange for the physical plants can then be used to gain access to more oil (or anything else, including converting the rose farm into a car park if it is more profitable to do so).
2. Profit as an extractive force that harnesses the liquid optimality of money
Money can also be understood as the crystallised outcome of profitable activity. Whilst profit generation might be the surface level target, the fundamental goal is to secure the rights over future choices and resources. Profit is money and money is liquid optimality.
Profit itself is variously described as a distributed signal of value, an appropriate reward, a driver for innovation and the cause of the economic growth obligation. Under different circumstances each of these claims is both true and disputable. If we want to avoid unhelpful, binary reactions to the idea that in its current form profit (and indirectly money) is an extractive force, then these dual ‘truths’ are important to unpack. How would our behaviour change if we understood profit to be a shapeshifting force depending on the context?
As a signal of value, profit is an important way for people to indicate their preferences and thus collectively shape economic activity. Without such a mechanism we would be reliant on a type of authoritarian centralised planning. In terms of motivation and inspiring progress, it also provides a powerful incentive. However, if we consider how narrowly we define profit can we legitimately claim that it represents value creation? Can a genuine measure of value be bounded by time or geographical context? In an interconnected world, externalities are a delusion yet they are currently excluded from our calculations of profit.
The way that we define, measure and use profit determines its form. Thus, profit can continue to exist as an extractive claim over undefined future value flows, but it could also be reimagined as a generative tool for decentralised inclusion.
3. Commercial bank money issuance as a multiplier of future extraction and repression
The lion’s share of money issued in today’s economy is digitally created by commercial banks in the form of debt. The flexibility of this system has its benefits but its unregulated impact on living systems is profoundly destructive. When debt is issued in this way it creates a future claim on energy, materials and human labour. The right to use the credit (and its associated interest) in the present day creates a future obligation to convert biophysically linked reserves into decoupled monetary units of repayment.
A second observation is that entrusting the money supply to a niche group of profit incentivised bankers, skews the distribution of who receives funding and thus perpetuates structural inequalities.
4. Transactional oppression
In 2010 Wikileaks was permanently blocked from accessing its Paypal account. More recently, a number of journalists and activists have reported having their accounts blocked or removed. A less publicised but equally debilitating phenomenon is that millions of people worldwide are denied the right to a bank account at all. In the UK alone, 1.3 million adults are described as being ‘debanked’ with no access to an account⁴. For some people, this may be a personal choice, but for many others it results from failing to meet KYC (know your client) requirements.
It is hardly a coincidence that many of the countries with the highest cryptocurrency usage are also amongst the most financially exclusive. For example, Thailand, Nigeria, the Philippines and South Africa all have an uptake of between 19–20% on a per capita basis and an unbanked population higher than 30%⁵⁶.
If money is a social contract, then the ability to transact could be embedded as a fundamental human right, yet our current system ensures that for many this is far from the case. Whilst existing cryptocurrencies offer some reprieve, the dominance of centrally issued and controlled money still forces many communities and even countries into the margins.
5. Monetary colonisation as a brutal expression of capitalist self-preservation
Colonialism may be over, but the system that it created — a system designed to siphon wealth from South to North — remains very much in place — Jason Hickel
The statues of colonists, slave traders and racists are being torn down across the US and UK. These protests reject past actions and condemn the suffering, extraction and violence on which the wealth of such nations was built. What they perhaps fail to acknowledge is that the colonisation is not something that happened in the past. Instead, it is still actively being deployed as a tactic to ensure the comfort and stability of the countries who hold the greatest monetary power.
One shocking example of this can be seen in the Franc de la Communauté Financière Africaine (CFA Franc) which was introduced to Western Africa by the French in 1945. The fourteen countries that use it today are still required to trade internationally in Euros via the French Treasury. They also continually rank amongst the poorest countries in the world. On a wider scale, the US dollar as the global reserve currency creates multiple advantages for its issuing country. With that privilege comes a responsibility that is rarely acknowledged. MMT (Modern Monetary Theory) has a large following in the US, because for a country that mints the most prevalent global currency, the ability to print money is in fact a viable option to stimulate economic activity. Firstly, they can use it to buy goods and services from foreign countries who have a constant requirement for dollars. Secondly, their exchange rate is extremely resistant to devaluation. For the vast majority of countries that do not have a widely desired sovereign currency, this is simply not an option. On the flip side, when the US, UK or Eurozone raise their interest rates to maintain local financial stability, they are also outsourcing their inflation and often accompanying austerity to countries that hold debt in those currencies.
In our view, the five drivers outlined above are insidiously powerful forces. Left unaddressed they will render a just transition or even a survivable future impossible. This opens up some difficult questions. If we don’t make the self-sovereignty of money a priority, are inclusivity initiatives such as redistributing philanthropic funds futile? Whilst money exists as a singular, abstractive and indiscriminate medium of exchange, do we have any chance of first repairing and then regenerating our planetary home? As the spread of AI and web3 intensifies, how will this extraordinary technological power be wielded?
Whether such tools are deployed towards further speculation, extraction and exploitation or in service of our collective vitality is the fundamental question of our time.
As always, we are sharing these thoughts to provoke discussion and to invite feedback. Some initial ideas for alternative monetary futures are the subject of our next blog.
This blog was written by Emily Harris (emily@darkmatterlabs.org) under Dark Matter’s Next Economics LAB. In 2024, the NE Lab will partner with Radicle Civics to start working on some tangible proofs of possibility for bioregional currencies.
References:
- We are using the term metacrisis to describe the underlying crisis driving a multitude of crises. It can be understood as a dangerous and unsettled period of transition as we shift between our existing global civilization and what comes next.
- https://davidgraeber.org/books/debt-the-first-5000-years/
- GITA Master Series https://youtu.be/nvAbKE8-jYA?si=sfc_y0q0i_fGJlJV
- https://publications.parliament.uk/pa/cm201719/cmselect/cmtreasy/1642/164205.htm
- https://worldcoin.org/articles/which-country-trades-the-most-cryptocurrency
- https://www.gfmag.com/global-data/economic-data/worlds-most-unbanked-countries#:~:text=On%20a%20global%20level%2C%20the,republics%20at%2033%25%2C%20Asia%20 Pacific’s
