What is Money? Consequences of current money system and an overview of the discussion around alternatives

Another Financial system & Money for Finland

Discussion series

Report of the first Discussion: What is money? Consequences of current money system and an overview of the discussion around alternatives

Around 40 people gathered together at Le Space in Helsinki Pasila on 10.11.2015 to discuss about the monetary system in Finland.

The event started with Ruby van der Wekken welcoming everyone to this first event of the discussion series and the Alternative Financial system & Money for Finland process at large. She gave a short introduction explaining the want to build up a process comprehensively looking at the whole of the discussion around the need for another financial system and money, from alternative proposals around institutional money, complementary currencies to the discussion of demonetization.  Ruby told that the motivation for the initiation of this process initially came forth out of the development process of community currency Helsinki timebank, and noted that community currencies can work as pedagogical tools, building up new economies having other values than profit making upfront.   

This first event then served as a kind of intro to the different levels of the debate, which each would be worked out in more depth during upcoming events. Five presentations followed, each of which were followed by a Q&A.


1. How did we end up where we are? The financial system structure and creation of money

A hierarchical system of debt relations
Ville Iivarinen

The first short presentation was held by Ville Iivarinen who is the author of the newly published book ”Raha – Mitä se todella on ja mitä sen tulisi olla?” and also the president of Economic Democracy Finland association. Ville’s presentation was about the core of the issue; what is money and how is it created. He explained how money is created through agreements between central banks and regular banks and between consumers and banks. In the system individuals borrow money from the private bank and banks borrow money from the central bank. When a consumer loans money from a bank the private bank credits the consumers account and the consumer promises to pay back the money (plus interest) to the bank. The bank doesn’t take the loaned money from other customers bank account, rather it types in the agreed amount of loan to the lender’s account and that is how brand new money is created. Livarinen says that, despite how the monetary system works, money would not need to be debt based. This approach is global with minor differences among Arab Nations.

Ville’s presentation slides

A source pointed out by the audience concerning the monetary system in Islamic countries

2. Social and ecological consequences of monetary system.

Current monetary system is a hindrance to sustainable welfare
Lauri Väisänen

Lauri Väisänen started his presentation by claiming that the current monetary system is the biggest hindrance to a socially and environmentally sustainable economy. However, the connections of many current social problems to the monetary system are well hidden so one doesn’t easily notice them. The biggest social problem caused by the monetary system is the artificial lack of money. This man made scarcity of money causes structural unemployment and poverty. Another crucial social disadvantage of this system is that it leads to significant economic inequality caused by the payments of interests to bankers. This leads that money exits the economy causing instability in the society.  The state has also to loan money from the banks. This leads to the fact that a fundamental part of public sector money goes to interest payments. The money paid to the banks is not correlated with social and environmental responsibility Väisänen concluded. The politics today is mostly adapting itself to the current economic system instead of solving actual social and environmental problems.

Lauri’s presentation

Read also Lauri’s master’s thesis ”Rahajärjestelmän ekologinen uudistaminen. Stadin Aikapankin jäsenien näkemyksiä nykyisen rahajärjestelmän ja sen uudistamisen ympäristövaikutuksista

3. Overview of the discussion around alternatives
– Redesigning Role of Money, the different alternative proposals regarding institutional money

From austerity to autonomy

Antti Ronkainen

Antti Ronkainen, a PhD student in political science, gave a presentation about the need to exit the European Monetary Union (EMU), which in his view is essential for the member countries to avoid the austerity practiced by the European Central bank. Ronkainen criticized sharply the EMU rules that demand the EURO countries to restrict their public debt by 60 % of yearly gross domestic product and the public deficit to under 3%. Ronkainen finds it problematic that European Central Bank is the only autonomous actor in the EMU and member states cannot control their own monetary policy. Because EURO countries don’t have a lender of last resort the states are financially dependent of private banks. Because of lack of independence in monetary policy of the EMU countries the member states can’t solve the problem of e.g unemployment and they are instead forced to cut wages and taxes. This leads to cuts in public spending and harms the welfare state crucially. Ronkainen thinks that this feeds feelings of for instance nationalism and xenophobia. He believes that exiting EURO and initiating a national money system where states can control monetary policy would be essential to break down the vicious cycle since governments would be only then able to create money. Ronkainen has published a report together with Joel Kaitila where they represent three actions which would be steps toward a more democratic and better functioning monetary system than the EMU has been able to offer to the public.

Antti’s presentation

Read also the Report written by Antti and Joel Kaitila, ”Talouskurista autonomiaan”.

-Currency as a Commons

Matthew Slater

Matthew Slater, software networker and community currency developer, said that in an era of global deleveraging and permanent recession, money is used to pay off debt or to hoard, and is much less available for circulation. At the grass roots this means there is less money for investment and employment. So the solidarity economy is facing a situation where people have lots of time and lots of needs, there are even many unused economic resources around, but no money to marry them together. Thus an appropriate monetary system would be one that allows us to create money from nothing to facilitate exchange rather than accumulating wealth, and to do so within a community. This is what LETS and timebanks and business barter systems do, and we would do well to develop those models.

These mutual credit system further embody solidarity because they are explicit about who is taking the credit risk, and allow that risk to be managed in a much more decentralised and voluntary way than the national economy. Any group of people who agree to honour each other’s debts can issue credit, and anyone who trusts them can accept it. Most of money in most of history and today works like this, except today all the responsibility and all the rewards lie with banks who have a special monopoly privilege to issue the national currency.

The drawback of these free currencies is that they don’t travel very far, thus they can only be used to purchase locally created value. To make these systems more useful, we need to learn how to join them together with common protocols for payments, but while retaining the circles of trust and self-determination. Matthew Slater says he is currently working on this idea under the name of #creditcommons.

-Demonetization, commonisation

Tamas Matekovitz

The discussion about the alternatives for our current socially and ecologically destructive form of money should not be limited to ideas on alternative forms of money and currencies. If we understand money as an alienated social relation, a mediator which replaces the real human communities with atomized individuals and as something which will always tie us down to the diabolic logic of exchange and commodity value production, we understand the need for finding an alternative for money in all its forms.

The total critique of exchange and commodity value production and its practical form – demonetization – only takes us halfway through though. As the reproduction of human beings is a social affair – unless we want to change only the form of our isolated being and continue the bourgeoisie logic of every person for himself in this world – it is not enough to withdraw from money relations. It is a question of replacing money relations with communities of different kind which are able to take part and control in common the reproduction of the material and cultural dimensions of the life of human beings without money.

Communisation – a theoretical discussion field about the possibilities of revolution and also a practical commu/onist method – has been addressing this problematic for some time now. The concept builds on the tradition of the most radical, and always marginalized, currents of the working class movement but its roots go way deeper in the history of humankind than capitalism and its opponents and it has already outgrown the obvious limits of the classical workers movement and its historical failure.

Troploin collective puts communisation in a nutshell: “The idea is fairly simple, but simplicity is often one of the most difficult goals to achieve. It means that a revolution is only communist if it changes all social relationships into communist relationships, and this can only be done if the process starts in the very early days of the revolutionary upheaval. Money, wage-labour, the enterprise as a separate unit and a value-accumulating pole, work-time as cut off from the rest of our life, production for value, private property, State agencies as mediators of social life and conflicts, the separation between learning and doing, the quest for maximum and fastest circulation of everything, all of these have to be done away with, and not just be run by collectives or turned over to public ownership: they have to be replaced by communal, moneyless, profitless, stateless, forms of life. The process will take time to be completed, but it will start at the beginning of the revolution, which will not create the preconditions of communism: it will create communism.



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