One thing we have all learned again about economics is that the booms always come to an end, the wise and financially revered are revealed as idiots, and the best laid plans, etc etc. But there is one way that this economic crisis is unlike others in history.
This time, governments have so subsumed their agendas to those of the most powerful businesses that they will no longer allow them to fail. No matter what happens, the wealthy will not be hung out to dry – even if it means printing money.
That is hopeful in one sense at least. We will not, as we were in the 1930s, find ourselves sacrificed to a desperate inactivity in search of economic orthodoxy.
But it does mean that we have to get to grips with one enjoyably heretical idea: the government creating their own money, or quantitative easing, as they call it these days.
You might not want to go the whole way with the monetary reformers (that banks should be prevented from creating money) – and I don’t myself – but this is both potentially dangerous and exciting at the same time. It means, potentially at least, a flow of interest-free money into useful projects. It means an end to the fantasy that money was somehow real (the gold standard fantasy). But it throws up a series of questions which radicals really need to discuss. Here are some of them:
- Who is going to control the amount of money created? Historically, governments and monarchs have a disastrous track record, but some kind of objective democratic control is going to be needed, otherwise it will just be determined by the inflationary whims of Mr G Brown.
- What is it going to be used for? If we are not clear that government-created money has to be used to transform the economy – making it socially and environmentally sustainable – then we will end up having the status quo propped up by funny money, funnelled into subsidising the airline industry or nuclear energy.
- How can we use this to shift the nature of money more permanently? The unsustainability of the economy is undoubtedly fuelled by money based on compound interest. But there is another model, mainly used in the Islamic world, which lends money in return for equity and fees, and which does not so inexorably pile up the power and privilege with the creditors. We need to mainstream it quickly.
I must admit, I don’t really buy the idea that all money should be created by governments. That is a monarchist and centralising myth – it is doubtful whether monarchs ever actually had a monopoly on money, and when they did they generally made a hash of it. So I’m sceptical about the 100% money solution (I say this just for myself). The challenge is now to find other ways of creating it, and to widen rather than narrow those sources – and to regulate the banks at the same time.
We need more money in circulation than we have. That’s not in doubt. The question is how we can create more, democratically and sustainably – and to funnel it in ways that can genuinely enhance human survival – but without finding ourselves as supplicants to big government money-creators as we are now supplicants to big business ones.