Why we are failing (Proposed article)

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Okay. Here is another proposed article for the updated EOS website. It is pretty much longer, and I know the articles should be short. But I have comprimed 500 years of human history in less than five pages. It was pretty difficult I must admit.

Introduction

 

We want to apologise for the length of this article beforehand.

Energy accounting is originally a concept from the US technocratic movement of the 1930’s, which EOS has developed as a conceptual template. To understand what Energy Accounting is and why we want to carefully examine it as a potential replacement to the current monetary system, we need to understand how the current monetary system is working.

 

Firstly, what is money? Money is a medium of exchange, in order to simplify transactions between various parties. Originating in the mists of the Bronze Age, monetary economies connected regions and allowed trade to perpetuate itself.

 

Yet, we must understand that early monetary regimes were often tenuous at best, most often local and requiring the protection of patrons with access to mines – most often the dukes, kings, sultans and emperors of the various states of the medieval world.

 

This could also help to explain our points, as to why our current system is failing in regards to our collective environmental obligations as a species.

 

Early Monetary Systems

 

The first monetary systems that arose either arose spontaneously from small communities, which used either a “key good” or a form of “semi-available rarity” as currency. When the first coins were made, in Asia Minor around 2700 years ago, they were made both to stimulate and facilitate trade between villages and towns, and to strengthen the legitimacy and strength of the early state (especially as money often trickled down into market places from the payment of soldiers and other public employees).

 

The rise of money is a thoroughly complex process, but the rise of the monetarised global system is a relatively recent occurrence. For much of the ancient and medieval world, money was inherently deflationary as its value rested on the control of copper, silver and gold. Thus, the system encouraged savings and hoarding, and retarded the development towards a full-scale monetary price system. In medieval markets, every licensed merchant often had with him his own scale, to judge the value of the money in terms of its weight.

 

Even in the advanced Roman Empire, only a small fraction of the taxes were collected in the form of money! Most taxes were collected in the shape of grain, minerals and other resources.

 

Most people in the pre-industrial world were self-sustaining farmers and rural labourers, who for most of the time directly worked to feed themselves from what they could produce out of nature.

 

The rise of Banking

 

Trade could be a perilous business during the middle ages. Highwaymen, barons, wars, storms, the Black Death and other occurrences could easily separate a merchant from his gold during the many dangerous voyages through lands and seas.

 

The wealthiest and most prosperous region of Europe was northern Italy, where the cities never had vanished during the dark centuries following the fall of the Western Roman Empire.

 

During the Renaissance, cities like Venice, Genoa, Milan, Pisa and Florence sent out merchants far and wide throughout the Mediterranean world, Europe and the Middle East, often exchanging gold for valuable luxury products from the Far East.

 

To facilitate this exchange, several of the great trading families began to engage in the insurance business. Gold chests were heavy, clumsy and hard to transport, not to speak of being magnets to thieves and pirates. Families like de Medici could specialise in offering securities by depositing the gold (for a fee) to other merchants, giving them a receipt which allowed them to gather the same amount of gold in for example Alexandria, Constantinople or Kaffa.

 

These firms soon started to lend money to various cities and kingdoms for interest fees. Thus, “banking” in the conventional sense was born.  

 

The rise of Fractional Reserve Banking (FRB)

 

Given that both the depositing and the lending were made with receipts, the gold would not under normal circumstances leave the confinements of the bank vault. It would be impractical for the client to withdraw it physically, and people who deposited gold in such a bank where often years away travelling. At the same time, borrowing money became increasingly popular, especially as the European monarchies and republics of that era became increasingly dependent on hiring mercenaries to fight their many destructive wars. Banking houses were offered lucrative contracts, without having the necessary deposits to be able to lend money to the states in question.

 

We don’t know exactly when banks started to lend money without having access to the necessary balance to do so, but it stands evidently clear that the temptation and the low risks associated with the scheme would soon or later have coalesced into the practice today known as Fractional Reserve Banking.

 

Shortly speaking, Fractional Reserve Banking is a mechanism that allows banks to lend more credits than are covered by their deposits. This is possible because of multiple clients depositing their fortunes at the same time, and that it is unlikely that all these clients would remove their deposits at the same time.

 

Moreover, the clients were thereby obliged to pay back gold which had never existed in the first place, plus interest.

 

In the terms of laypersons, Fractional Reserve Banking means that you lend out money that you don’t have, while those borrowing the non-existent money are forced to pay back in the form of real money, with a little bit more.

 

Where the alchemists of the dark crypts and poisonous laboratories failed, the perfumed bankers living in the luxurious Venetian and Florentine palaces succeeded.

 

Sustained capital accumulation and western supremacy

 

Even though Northern Italy was eventually destroyed, through the violence of the mercenary armies funded by the Italian bankers, Fractional Reserve Banking is a part of the explanation why the western world from the late 15th century and onward managed to create sustained economic, technological and colonial expansion.

 

The banks of Italy, and later of the Netherlands and Britain, were funding colonial ventures, the development of new weapons and technologies, scientific breakthroughs, commercial enterprises, the booming slave trade and the establishment of the first factories.

 

The reason why is simple. With a full deposit cover, the bankers who lend money would lend out gold that actually is entrusted them by clients, and thus would be unwilling to support projects that hold high risks for failure, or which are new and untested. Thus, the employment of FRB systems can accumulate and utilise capital more aggressively than the crude agricultural economies previously were able of.

 

During the 19th century, the gradual gains of trade, colonialism, technical and scientific innovations and capital expansion culminated in a sustained industrial boom that transformed the entire civilization. The modern world was born.

 

As innovations and growth rushed, however, so did the many bankruptcies and failures. The world grew faster, and with the telegraph and railways, information spread quickly throughout the now very much smaller world. Rumours, true or false, stock rushes, companies and ventures falling apart and the increased competition for more and more scarce resources fuelled an increasing number of bank runs – events when the deposits were retrieved by the clients as a result of a loss in trust. Such events usually led to liquidation of the bank itself, and the destruction of capital – both real and imaginary. It says itself that unregulated capitalism from the 1870s and onward experienced more and more shocks following the collapse of one commercial bank after another.

 

To counter this development and to restore stability, most developed nations turned towards establishing central banks in order to guarantee the deposits of the commercial banks and their clients – if necessary by sacrificing the interests of the weakest citizens. In the USA for example, the US Congress of 1913, at the behest of the big commercial banks and the US mega-corporations, established the Federal Reserve during the first Wilson administration.

 

Usually, central banks are a pillar stone in regards to the regulation of interest. This practice is referred to as interventionist monetary policy. After the Second World War, it has usually been coordinated with interventionist financial policies, which are carried out by governments. These policies exist in order to smoothen the business cycles and prevent either overheating or sudden crashes.

 

Nowadays, the signs are everywhere that the system is crumbling. The dominant power in this system, the United States, is suffering massive de-industrialization and an enormous debt on both the federal and state level. The European economy is stagnating. China is experiencing declining growth rates and increasing environmental pollution and class conflicts.

 

The system has accumulated a mountain of debt, and we are on the verge of what can spiral out of control and become World War Three.

 

So, why are we failing?

 

The addiction to growth

 

The global monetary system is not dependent on growth because it has the wrong priorities, or because it is in the knees of multi-national corporations and consumerism. It is not dependent on growth because of “human nature” or because of greed, even if greed plays well into the mechanisms it is built on.

 

It is dependent on growth because it must grow, otherwise it will start to crumble and eventually collapse.

 

Think of it for a moment.

 

Only 10-15% of the loans of modern commercial banks have to be covered by the deposits of the customers. Thus, the banks are really lending money from the future. This means that FRB has not only realised alchemy, but also for all purpose invented time-travelling!

 

Some critics claim that FRB is a system which is creating money from thin air. That is however not entirely true. The money is created in the figurative world by the banks, but then created a second time – this time in the real world – through investments, labour and the production of goods and services. In short, the economic activities of all the corporations and individuals who have been compelled by need or by their dreams and ambitions to ever accept a loan from a bank.

 

This process allows the capital to multiply itself, and make credits accessible for the future development of the economy.

 

The hidden danger in this pyramid scheme lies in the fact that it requires permanent economic growth, or at least the belief in permanent economic growth. A growth which can turn the debts in the balance sheets into actual financial assets.

 

For this to be permeated however, it requires one thing:

 

The continued destruction of the Earth’s biosphere.

 

What really matters

 

For hundreds of millions of years, the Earth has had a complex system for the acquisition and renewal of resources. This system has been characterised by complex relationships unified within an emergent dynamic equilibrium. This system is called “the biosphere”.

 

It can more simply be referred to as Life.

 

The human civilization is ultimately resting on the fact that we are based on a planet characterised by a wide variety of ecosystems of living beings. The current way in which we are heading is the equivalent to raising a palace while removing the ground and foundation of to gather more materials. It is foolish, and not the least sustainable.

 

It stands clear to every aware individual that our civilization at the present point is on the route towards causing a new mass extinction amongst the species, bringing the entire Eocene Biosphere to an end.

 

Climate change is but the most well-known of the challenges ahead. The swift increase of the global average temperature is upsetting weather and drought patterns, affecting the natural cycles of storms, contributing to an accelerating rise of the sea levels, and affecting multiple species of animal and plant life negatively.

 

There have been several major conferences on this issue, and all of them have either produced semi-failures or complete breakdowns. While the leaders and decision makers have been aware of this issue for the better part of 20 years, they have been unable to turn the development around or even slow down the increasing usage of energy that produces CO2 emissions.

 

There are many reasons for this monumental human failure. You can blame the oil lobby, the United States, China, the consumers, the politicians, yourself or human nature in general for this failure.

 

The fact, however, is that it is extremely difficult to enact any kind of meaningful change in the energy sector as long as we have  a monetary system that automatically seeks to expand as much as possible, since a contraction will mean that it will be crushed underneath a mountain of debts piling up before it.

 

At the same time, we are silently allowing a real deficit to constantly grow, by using more resources for every year than the Earth can possibly renew. The continuation of that practice will eventually produce an ecological disaster of hitherto unseen proportions, at least for the last 65 million years.

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The Third Millennium Ideology – Life, Love and Light

The ancient Mayans did believe that the 13th Baktun would end today, when the Earth, the Moon and the Sun would stand in conjunction with the Milky Way Galaxy, forming a cross on the night sky. According to the ancient Meso-American civilization, we would enter a new era today.

Sadly, we will probably not see any change be imposed on us from above. The dominant ideological, social, economic-financial and political systems will still stand entrenched, despite more and more evidence for every passing day that the current system is leading us towards an ecological and social planetary meltdown. There is a profound need for humanity to answer this challenge. The fundamental flaw is to believe that we can keep the current values unevolved, keep the current growth-based system but take away all the “bad sides” without fundamentally altering our values and our global systems.

Epcot_Mexico_29_by_Disney_Stock

The dominant ideology of our age, which has largely emerged victorious against its various rivals, is Liberalism. As the name is implying, Liberalism is about stressing personal liberty. That is achieved through the rule of law, constitutionalism, human rights, electoral democracy, personal integrity and property rights and freedom of speech and conscience. The fundamental idea of Liberalism is that the individual is completely free to make her own decisions affecting her own life. To a large extent, political science and economics are largely influenced by the outlook and values of liberalism.

I would argue that most aspects of Liberalism are positive and have brought very much to the progressive development of humanity. The secularization and separation between church and state, the end of feudal power relations, legalistic equality (in theory largely), electoral democracy, independent courts, a postive attitude to science, the civil rights movement, the sexual revolution and the foundation for the greatest increase of material wealth and prosperity in the history of humanity.

Yet, Liberalism today is inherently unable to answer the new challenge, largely caused by the success of that world-view. Instead of feudal monarchies, we have seen the gradual establishment of a global corporate system with an increasingly unaccountable elite. We are still, despite that we produce more than enough food to sustain the entire world population, seeing poverty and famines spread across the planet. At the same time, the waste of food is staggering. Planned obsolence, an association of consumption with status, the spread of urban sprawls, overusage of water and arable soil, dependency on fossil fuels and an inability to stop the very behaviour we have entrenched ourselves in.

To a very large extent, an apathetic and lost citizenry is turning towards a leadership unable to address the current crisis, because they have an ideological and economic blind spot making them unable to connect the various problems we are experiencing.

What I very strongly have come to believe, is that we – the human race – is in need for a new ideology to address the global social and ecological issues of the 3d Millennium. It needs to protect the gains that Liberalism have made since the 18th century and to move farther than Liberalism in the issues of human rights, human dignity and human liberty. Yet, it also has to address the responsibility we human beings have – as a species – towards ourselves and our surroundings. Liberalism, which is mostly an individualistic ideology, is ill-suited to take a look at the wholity of the human existence.

In short, we need a holistic ideology.

Liberalism is an ideology largely connected to the idea of separation, of compartmentalising reality into various different areas. Nobody denies that everything is interconnected, but everything is divided. The labour market is treated as something independent from the financial system, which is treated as something independent from politics which is treated as something independent from ecology. What we would get from such a world-view is ultimately a situation where we can treat two mutually exclusive things as theoretically achievable (the chief example being exponential growth and ecological sustainability).

A holistic ideology would see everything as a part of a greater whole.

That does not imply that the specific, the local and the regional would be subservient to the global goal. Rather, it implies that everything is embedded in a greater context.

A single cell in your body can be studied as an entity in its own right. Yet, it is connected to your organs, which together are making up your body. You are ultimately a member of a society, which is a part of a civilization which is existing on this blue oasis in the Arm of Orion in the Milky Way Galaxy. You and everyone you love and care for are dependent – no matter what you strive for in your own lives – of the health of the larger system you are a part of.

holistic worldview

That brings the context.

It is time to discuss the values.

All values are ultimately subjective. Science is not an example of a value system, because it does not imply what is desirable. What is desirable for society to achieve is ultimately dependent on the culture and values of said society. And those values are a creation of the human mind and culture. I am not a relativist and I would claim that having for example an independent judiciary is superior to building a civilization based on human sacrifice to the Angry Volcano God. Nevertheless, values are something which we have to approach with an open discussion.

What has made Liberalism into an ideology which has survived is that it has universal values, which can be applied independent from variations in culture, religion and local/regional norms, thus transcending cultural, ethnic and religious borders. To some extent, it fails, for example in relation to tribal collectivist social systems. Yet, it has been successful because rather than discussing the long-term specific goals for the culture, it provides frames that the culture might not transcend.

The new ideology must also be broad enough to be able to transcend cultural and regional variations.

Thus, I would argue that the values of the new ideology – the Ideology of the Third Millennium – should be based around our role as the dominant species of this planet, and the responsibilities entailed in that role.

In short, the foundational value of what we should be doing should be Life.

Life is not a negation of liberty. Not a repudiation of equality. Not an attack on order.

Life is both a condition and a continuous flow of experiences.

What our future civilization should aim to achieve, is to protect, honour and uphold life on planet Earth. That should be the primary objective. From that follows two goals – to prevent the destruction of the Biosphere and to give all human beings such a high quality of life as possible. These two goals need to be balanced. As many of the liberal freedoms as possible need to be preserved within the new value system. Both positive and negative rights need to be upheld. No human being should go hungry to bed, be homeless, without access to education, healthcare or recreation. No human being should be the subject of political or religious persecution. All human beings should be given access to the means where they can thrive.

What would need to change would be our relationship to possessions, our patterns of production and our acquisition of resources. We need a new system to moderate these relationships, and that system would need to work in a circular rather than linear way, giving back what we take gradually, thus upholding a dynamic equilibrium.

The next value foundational for the new ideology, should be regulating our civilization’s way of dealing with Life, from the individual human life to the Biosphere. Ultimately, we should view life as the most valuable existence in the Universe. Life allows us to create meanings, to experience a variety of emotions and to learn and discover. Everything that is alive wants to live, that’s the foundation of life. Our civilization should love life, and treat it with reverence, respect, care and creativity. Even when we have to make hard decisions, we need to reflect the fact that we are a product of 1,5 billion years of evolution, that life is rare and that life can flourish where the conditions are the right.

Thus, Love should be our next foundational value.

The third and last value should regulate the way we access knowledge and base our decisions regarding our future civilization. It would entail the manner in which we pursue knowledge and solutions. That manner is by the scientific method, which provides information through peer review verificiation, experimentation and a non-dogmatic, open and transparent process to find available policies. New discoveries should be encouraged and science and research should flourish, but be directed towards the upholding of the values. Enlightenment.

Light.life

A short summary of the Ideology of the Third Millennium:

Everything is a part of a whole

Life is a gift

We should form our civilization

So life can thrive

Discover new paths

In diversity

In liberty

In equality

We are all

A part of the web of life

Whatever you believe

We are all co-dependent

We are all interconnected

We are all fractals

Life

Love

Light

All are one

Happy new era!

Enrique Lescure

Director of the Sequence of Relations

/The Earth Organisation for Sustainability