This is a long blog, but I urge you to read the whole thing. – Steve

My vision of MANAGEMENT BY HAPPINESS continues to develop. While theoretically the concept of valuing a business by the well-being it brings into the world feels right, there are still some execution obstacles including the realities of financial statements. Accounting practices are well defined and generally accepted, but little exists in terms of standardized measurements and reporting structures for sustainability and well-being. As a consultant, my activities seem to always come back to a dollar discussion. I’ve had an instinct of late that our culture is unnaturally focused on money. My friend Dick Wagner says, “money is the most powerful and pervasive secular force on the planet.” Lynne Twist asks us to notice that while we once identified ourselves as citizens of this great nation, we now call each other “consumers.” What’s going on with this? How did money come to have such a powerful influence on our culture and selves? Recently I stumbled upon a possible answer from Bernard Lietaer that led to one of the biggest ‘ah ha’ moments in my life.

I’ve heard Bernard lecture a few times at Naropa and I am reading a pre-publication copy of his new book: Of Human Wealth. (Bernard Lietaer & Stephen Belgin. 2006. Of Human Wealth: New Money for a New World. Pre-publication Edition Version 4.1. Citerra Press. Boulder, CO, USA.) In this new book, his previous book(The Future of Money), and in interviews, Professor Lietaer outlines how he believes that our money system shapes our behaviors. He states in an interview:

“While economic textbooks claim that people and corporations are competing for markets and resources, I claim that in reality they are competing for money – using markets and resources to do so.”

Or as he states elsewhere in this article:

“The monetary system is programmed — albeit not deliberately — to cause certain behavior. It promotes competition and short-term thinking; it forces economic growth; and it undervalues care, education and tasks crucial to maintaining a society. Economics theory teaches us that people compete for markets and raw materials; I think, in reality, people compete for money.”

We must then ask ourselves why people and businesses compete for money. The root cause seems to be the interest component of our money system. The dollar is designed in such a way that there just isn’t enough to go around. In another article Lietaer says:

“Interest on money constitutes one of the most systematic causes of our destruction of the global environment. Consider as metaphor, for example, the life of a tree (or any other living resource): Because of interest, the net present value of any income far away in the future is negligible. So, it literally pays to cut down a tree and put the proceeds in a savings account instead of letting it grow for another decade or century.”

While my undergraduate degree is in Economics and Finance, I didn’t really understand until just recently how interest causes scarcity. Consider this simplistic example: when the Fed puts $1000 into the money system. Those dollars can be put on deposit at Bank A. Bank A is then allowed to loan out $900 (assuming a 10% reserve rate) that end up on deposit at Bank B, which can then loan out $810, and so on and so on. Most of us have been taught that the expansion of the money supply comes from the fact that banks can make loans. In this example the original $1000 the Fed put into the system results in approximately $10,000 in the money supply, all of which is based on loans that are charged interest. The total to be paid back across the system is in excess of $10,000, so in total there literally isn’t enough to pay back all the loans and thus money becomes a scare resource. We are all competing for money because of the way it is designed. This competition causes people and corporations to constantly be inventing new ways to lure money away from others and to hoard it.

Could it be that our collective unconscious is keenly aware that we have created an economic system that pits us against each other every day? What maladies might be attributed to this constant pressure to compete? Over-consumption, over-eating, the unequal distribution of wealth, and maybe even mental illness? The good news is that it doesn’t have to be this way, which I’ll be posting on in the near future.

For now let’s close with another quote from Bernard Lietaer:

“My conclusion is that greed and the competitive drive are not inherent human qualities. They are continuously stimulated by the kind of money we use. There is more than enough food and work for everyone. There is merely a scarcity of money.”

This entry was posted on Tuesday, June 26th, 2007 at 3:04 pm and is filed under banks, bernard lietaer, conscious capitalism, dick wagner, fear, interest, lynne twist, money supply, profit, rich. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.