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 rise of nationalism

All over Europe, East Asia and North America, Nationalism is growing. In Sweden, the third largest party amongst the youth are the xenophobic and formerly fascist Sweden Democrats. The Green Party and the Sweden Democrats are fighting on the national scale on who should be the third largest of Sweden’s 8 parties. While the Green Party commands a lead for the third place amongst those born in the 70’s, the Sweden Democrats are comfortably winning amongst those born in the 80’s and 90’s.

Why?viking_fan_medium

I would argue that the comparative failure for the Green Party to get on the drum in terms of youth politics is due to a failure to correspond how their policies could matter to the issues that are important to youths. In Sweden, unemployment lies around 7-8% persistently, and almost 25% of the youths are unemployed. If you are unemployed and low-educated, you will have a problem entering the labour market. Imagine that you and four-hundred other people are hunting the few low-qualified jobs that pop up then and then. It also affects your ability to get housing, especially as the population has increased with over one million since the 1990s (and most new building projects are middle class rather than working class-focused, meaning that youths moving out could stand in lines for years waiting for an affordable place to live in.

With a lack of pro-active initiatives to give people access to a working labour and housing environment, there is no surprise that those affected by the lack of policies or solutions in these areas would look for ways to reduce the population growth, even if it means tougher immigration laws.

Combine that with the stupid, self-defeating, alienating and bizarre policies undertaken by various local public officials regarding Swedish or western cultural heritage, and people become offended. This obsession with symbol issues which pervades through parts of the bureaucratic establishment for unclear reasons is slowly producing a backlash, a generation for which the most rebellious thing is to watch Astrid Lindgren films, eat Kalles Kaviar, hoisting the Swedish flag and listen to Sabaton and Raubtier. In the 1990s and early 2000s, that kind of patriotism was associated with the most backward countryside holdouts – but nowadays it seems to be mainstream, and pervade deeper into society.

The Greens do still have an edge in one area. The youths who are voting on the Greens tend to be more socially conscientous, have a higher degree of knowledge about poverty and sustainability issues and have a higher likelihood to engage in the Green Youth and later the actual Green Party. But Democracy is ultimately an exercise in numbers, not in the quality of the engagement. The recent scandals with the Sweden Democrats could actually even endear them more to the youths working for them.

I would say that the main problem why the Green Party fails to attract support is that they have been “too rational”. Triangulation is the most rational vote maximising strategy, and since 2002, the Greens have successfully employed that to move from the fringe to the mainstream. The mainstream, however, is not static, and future voters tend to identify themselves in opposition to the preceding generation. For example, the Baby Boomers identified themselves in opposition to the Greatest Generation, and brought the Civil Rights Era and Sexual Revolution. The yuppies of the 1980’s defined themselves in opposition to the hippies of the 1960’s, and the young adults of the 1990’s and 2000’s (gen x-ers) were generally more focused on social justice once again. In Sweden at least, it seems like the rebellious thing today is a form of “revolutionary conservative trolling”, marked by such communities as Flashback and news like Avpixlat. The Green Party is not considered hip, it is considered mainstream, and therefore not as “cool” for youths to identify themselves with it.

The Swedish cultural and political establishment is largely composed of Baby Boomers. Therefore, there have been a focus of rebellion against gender roles, patriarchy, christianity, hetero-normativity and traditional bourgeois national symbols such as the monarchy. What they have forgotten is that they are the establishment today, and the reaction is a weird situation where the rebellious thing is to become a christian conservative monarchist. I am certainly not saying that is any form of progressive development. I am just saying that it is the reality of the counter-identity that is formulated more and more. One of the reasons for being anti-establishment is to become something that “the adults” cannot approve of. If you draw a dick on the head of a photo of the Swedish Prime Minister, you can get an expo at a museum or arts gallery. If you draw a traditional national-romanticist painting, you evoke an uproar and become “the black sheep“. And one of the points with evoking controverse is to become the black sheep with the establishment.

To win support amongst the youths, the Green Party has to:

– Become more edgy and more hip. Youths generally mistrust establishment politicians.

And more importantly…

Access the issues of housing and employment in a believable manner.

– Communicate all of that in a “good” way.

Personally, I did actually expect that Gustaf Fridolin would help to increase the support of the Green Party above 10% and possibly up to 15%. The reason why the success of the Greens was stalled is probably that it isn’t 2002 any more and Gustaf Fridolin, who was an edgy rebel in the early 2000’s, nowadays is like any young politician. At last, he has not become Captain Obvious, like Annie Lööf. Of course, very few people care for politicians that doesn’t have any ideas on how to improve the things that matter.Lowenzahn_in_Mauerfuge

The Green Party has become a very blueish type of Green Party, which is sad. But yet, they have an orientation (internationalist, pro-sustainable) which is agreeable and should be supported. Their ideas are not bad, but they are not the best at advocating them and connecting them to the issues people feel for in everyday life. In contrast, nationalists like the Sweden Democrats have no solutions on any of the major problems today. They don’t even see those problems. That is not due to them having a bad programme, but rather a bad ideology. Nationalism, an ideology which is centred around the reveration of the nation, is probably the worst ideology you can have if you want to address global problems. Therefore, the loss of the youth to the far right – which is not only a Swedish phenomenon – represents a large and growing challenge for progressives.

Enrique Lescure,

Sequence of Relations Director,

the Earth Organisation for Sustainability