10. The Anthropology of money

The Eleventh Round - Bernard Lietaer - p50

Lietaer argues that "interest indirectly encourages systematic competition among the participants in the system."

"Once upon a time, in a small village in the Outback, people used barter for all their transactions. One every market day, people walked around with chickens, eggs, hams and breads, and engaged in prolonged negotiations among themselves to exchange what they needed. At key periods of the year, like harvests or whenever someone's barn needed big repairs after a storm, people recalled the tradition of helping each other out that they had brought from the old country. They knew that if they had a problem some day, others would aid them in return.

One market day, a stranger with shiny black shoes and en elegant white hat came by and observed the whole process with a sardonic smile. When he saw one farmer running around to corral the six chickens he wanted to exchange for a big ham, he could not refrain from laughing. 'Poor people,' he said. 'So primitive.' ...

He took a cowhide, and cut perfect leather rounds in it, and put an elaborate and graceful little stamp on each round. Then he gave to each family ten rounds, and explained that each represented the value of one chicken. ...

"In a year's time, I will come back and.... I want ou to each bring me back 11 rounds. That 11th round is a token of appreciation for the technological improvement I just made possible in your lives.' 'But where will the 11th round come from?' asked a man. 'You'll see', said the man with a reassuring smile."

"Assuming that the population and its annual production remain exactly the same during that next year, what do you think had to happen? Remember, that 11th round was never created. Therefore, bottom line, one of each 11 families will have to lose all its rounds, even if everyboyd managed their affairs well, in order to provide the 11th round to ten others.

So when a storm threatened the crop of one of the families, people became less generous with their time to help bring it in before disaster struck. While it was much more convenient to exchange the rounds instead of the chickens on market days, the new game also had the unintended side effect of actively discouraging the cooperation that was traditional in the village. Instead, the new money game was generating a systemic undertow of competition among all the participants."

Same thing with the bank. They create the £100,000 principle when they lend you a mortgage, but they expect you to pay £200,000 back over the next 20 years to pay the interest. "Because all the other banks do exactly the same thing, the system requires that some participants go bankrupt in order to provide you with this £100,000... In other words, the device used to create the scarcity indespensible for a bank-debt system to function involves having people compete for the money that has not been created, and penalises them with bankrupcy whenever they do not succeed."

So if there are ten of us borrowing £100,000, £1m has been created. but £2m needs to be repaid. It doesn't work.

Interest is prohibited in Islam, and was prohibited in Judaism and Christianity. Henry VIII legalised interest for the first time in the western world in 1545 (p48).

So, if bank debt and interest are key design features, how did money work when interest was banned? (And how did communities work?)