Notes from Charles Eisenstein's Sacred Economics

My intent on reading this book is to learn about and gather a list of activities and purposes that will serve all of nature in the post-collapse epoch.

Eisenstein offers the following advice: Though many investment radicals encourage people to stockpile gold and food and fresh water, this merely reinforces the scarcity mentality that is fostered through our current economic system. To return to a time of humans as part of nature, it is more important to invest in community, which is the gratitude, connections, and support of the people around us.

Eisenstein writes:

“If you have wealth now, I recommend, as your investment adviser, that you use it to enrich the people around you in lasting ways.

Before the collapse of the current system, anything we do to protect some natural or social resource from conversion into money will both hasten the collapse and mitigate its severity. Any forest you save from development, any road you stop, any cooperative playgroup you establish; anyone you teach to heal themselves, or to build their own house, cook their own food, or make their own clothes; any wealth you create or add to the public domain; anything you render off-limits to the world-devouring Machine will help shorten the Machine’s life span. And when the money system collapses, if you already do not depend on money for some portion of life’s necessities and pleasures, then the collapse of money will pose much less of a harsh transition for you. The same applies on the social level. Any form of natural wealth, whether biodiversity, fertile soil, or clean water, and any community or social institution that is not a vehicle for the conversion of life into money, will sustain and enrich life after money.”

Eisenstein adds:

“Anything you learn to do for yourself or for other people, without paying for it; any utilization of recycled or discarded materials; anything you make instead of buy, give instead of sell; any new skill or new song or new art you teach yourself or another will reduce the dominion of money and grow a gift economy to sustain us through the coming transition.”

Some specifics about how Eisenstein envisions the new economy--

• No land ownership. All land is commons and use of land is subject to a fee depending on the specific use.
• No resource ownership. Costs of resource use and depletion will be internalized and returned to the public via use-rights payments.
• No income tax. You own what you earn freely.
• No sales tax. This encourages the free circulation of goods.
• No interest paid on currency that is not circulating. This discourages the accumulation of wealth that has resulted in the vast imbalance between rich and poor today.
• Currency is issued based on trade-, waste-, and emissions caps; as well as on the resources that are currently still in the ground. (I don't follow this exactly--Eisenstein writes that the value associated with the resource will be based on what remains unmined or unharvested or untapped. How does one determine how much gold/oil/water is in the ground given that the measurements in some cases would have to be based on estimates? I can see where he's coming from with regard to the idea that whatever you use to back the currency becomes something that people/companies tend to hoard and so this might encourage us to leave resources untapped. I'm just not sure how it would play out.)
• Currency would be issued within the regions where the resources or pollutants are taken/produced. For example, the state of California or a county would issue currency backed by ozone emissions allowances. Eisenstein writes “... where there is an overlap of local and global effects, polluters might have to pay for two different allowances for the same pollutant.”

Eisenstein goes on a bit about whether fractional-reserve banking or full-reserve banking is more appropriate and admits that there are merits to both. He writes that he is “more sympathetic to a system that includes private credit, first because it allows organic, endogenous money creation independent of a central authority; second because it more easily incorporates exciting new modes of economic cooperation such as commercial barter rings and mutual-credit systems; third because it allows for much more flexibility in financial intermediation and capital formation; and fourth because it simplifies interbank credit clearing.”

• Taxes are applied to any manufacturing process at the stage where it extracts goods from the commons and where it deposits wastes or toxins into the commons.

To reclaim the commons:

“Many gradual and gentle ways have been proposed to realize the reclamation of the land commons for the public; there is no need to confiscate existing real estate holdings, but only to enact the principle that the earth belongs to everyone. That means that no one should be allowed to benefit financially from owning the land.

The same goes for the electromagnetic spectrum, the minerals under the earth, the genome, and the accumulated fund of human knowledge. These should be available for rent, not ownership, and the rents should go to the public. Presumably, those who can put these assets to best use would be the most eager to rent them. There would still be room for entrepreneurship—even more so than today since access to resources would be based not on prior ownership but on most effective use.”

Eisenstein sees many benefits from his proposed economy:

• “When producers (and ultimately consumers) pay the full cost of embedded energy and raw materials and the fair rental price for the land and other commons, then much of the wealth that concentrates in few hands today will accrue instead to the stewards of the commons. The situation will be analogous to what happens when a nation such as Venezuela or Bolivia nationalizes its oil fields. Foreign producers can still operate the fields, but they profit only from the service of extracting the oil and not from ownership of the oil itself. That part of the profit goes to the nation. What happens to that money depends on politics—it could go to a coterie of corrupt officials, or it could go to public works projects, or it could be paid directly to the people as a kind of royalty.”

• “We would pay a lot more for many things that are cheap today because their prices would embody costs that we now pass on to other people or future generations. Goods would become more expensive in comparison to services, providing an economic incentive for repairing, reusing, and recycling. Gone would be the skewed economics that makes it cheaper to buy a new television set than repair an old one. Gone would be the present financial incentive for planned obsolescence. A new business model (emerging already in some industries) would blossom: extremely durable, easily repairable machines that are leased rather than sold to consumers.”

• There would be a “much different emphasis on government spending. The huge resources made available through reclaiming the commons for the public good can go toward healing the damage of past centuries of despoliation of that commons. Ecological disasters will relentlessly direct our attention to the urgent need to heal the forests, wetlands, oceans, atmosphere, and every other ecosystem from the devastation wrought in the industrial era.”

Something I just realized from what Eisenstein writes about a 'growth economy', that such an economy encourages overproduction of goods and yet wars increase the consumption of goods. I didn't see how at first. But now I get it--it's a way to find a new market for your surplus of goods. You have a surplus of product X. You can't find a bigger market for X in your country or any other country that you already control. You invade a country that isn't currently under your control (and likely grows or manufactures its own version of product X); you wipe out its ability to grow or make product X; and then sell your surplus of product X to that country.

Using money to encourage trade and equitable distribution of goods

Eisenstein cites the thinking of Silvio Gesell, who pioneeered a concept he called free money (Friegeld). From Gesell's writings:

“Commodities in general, straw, petrol, guano and the rest can be safely exchanged only when everyone is indifferent as to whether he possesses money or goods, and that is possible only if money is afflicted with all the defects inherent in our products. Only money that goes out of date like a newspaper, rots like potatoes, rusts like iron, evaporates like ether, is capable of standing the test as an instrument for the exchange of potatoes, newspapers, iron, and ether. For such money is not preferred to goods either by the purchaser or the seller. We then part with our goods for money only because we need the money as a means of exchange, not because we expect an advantage from possession of the money.”

Gesell's system was to charge a fee for a validation stamp on paper currency. This attached a maintenance cost to money. For example, if a dollar bill required a one-cent stamp every month to stay valid, it would depreciate at an annual rate of 12 percent.

Some might argue that it's easy to convert money into some other commodity that doesn't lose value. To prevent this, Eisenstein writes, “The physical commons of land, the genome, the ecosystem, and the electromagnetic spectrum, as well as the cultural commons of ideas, inventions, music, and stories, must be subject to the same carry costs as money.”

The mechanics of downsizing our dependency on interest-bearing money

Eisenstein describes the process of disintermediation (reducing the role of centralized intermediary institutions) and claims that it has already begun. Vast amounts of revenue have been 'lost' from the advertising industry thanks to the proliferation of social networking (craigslist, kijiji) and the creation of peer-to-peer services. One of these types of services is a direct lending service. Eisenstein lists two such companies: LendingClub and Prosper.com.

Other similar services include commercial credit-clearing rings, mutual factoring systems, and commercial barter networks.

I like this:

“... the business model that has worked for all human history (find something people do for themselves or each other in a gift economy, take it away from them, and then sell it back) is being reversed. The internet is allowing people once again to do things for themselves and each other without paying for it.”

Freeing the Purchasing Power of Workers from the Need for Full Employment

The rich don’t want their wealth to be redistributed. Their solution to the problem of overproduction and underemployment is to increase demand for new goods and services.

The typical ways of doing this are

• Exports; obviously, this solution cannot work indefinitely because there are only so many places to export goods.

• Colonize the nonmonetary realm--make people buy what was once free.

• Destroy excess production through war and waste.

The above methods all address just one of the options that we have in a situation of overproduction. Instead of increasing demand for the surplus, we could simply work less.

Eisenstein describes this scenario with the result that working less means cutting salaries or jobs, eventually leading to more unemployment (and fewer people who can afford the goods and services). So, not a workable solution.

Eisenstein writes “we possess the means and face the necessity to grow less, to work less, and to turn our energies toward other things.”

He's already proposed some of the techniques (interest-free money or negative interest money; no income tax, no land ownership, and so forth). The techniques are workable, but Eisenstein asks why we don't just do the radical and direct thing: give everyone money.

There's been a big media backlash against any policy or proposal that hints at distributed wealth. Detractors are quick to call it socialism or communism and let our media-influenced associations do the job on closing our minds to such ideas. (I remind myself of those in whose interest it lies to propagate a fear of cooperation and equality.)

Then there's the popular retort: that people are inherently selfish and lazy and don't want to work unless they are forced to. But Eisenstein devoted a great deal of space to arguing that this belief is rooted in a mythology that has been drilled into our heads through church and school for centuries.

Social research is finding that even babies who have no verbal skills show preferences towards those who are fair and kind. There was an episode on The Nature of Things (a nature show on CBC in Canada) where researchers acted out 'plays' in front of babies. In these plays, toys (stuffed animals) either cooperated together in a game or one animal took something away from the other. The babies spent more time looking at the toy that shared and when offered both toys to play with, reached for the one that was 'nice' in the play. This suggests an innate appreciation and drive for cooperation.

Obstacles to Implementing Eisenstein's Techniques

The primary obstacle to a sacred economy is local currency. Local currencies are viable only to the extent that producers are making goods and services that are consumed locally by people who themselves produce locally consumed goods and services. Much of the infrastructure to support this has disappeared in the developed countries.

Means of overcoming this obstacle:

• Time banks

Eisenstein writes “We are always 'producers' of our time (by the mere act of living), and there are many ways to give this time for the benefit of others. Time-based currencies (often called 'time banks') offer great promise without needing huge changes in economic infrastructure.”

When someone performs a service through a time bank, it credits his or her account by one time dollar for each hour spent and debits the recipient’s account by the same.

• Mutual credit systems

Mutual-credit systems include commercial barter rings, credit-clearing cooperatives, and local exchange trading systems (LETS). When a transaction takes place in a mutual-credit system, the account of the buyer is debited and the account of the seller is credited by the agreed-upon sales price-whether or not the buyer has a positive account balance.

The problem with such systems is that a body must be designated to set limits on the negative balance of any participant's account. The limit would fluctuate depending on the participant's credit history.

There's a successful credit system known as WIR in Switzerland. "The Swiss WIR, in operation since 1934, boasts tens of thousands of members and trade volume of over a billion Swiss francs. As of 2005, its volume dwarfed that of all the rest of the world’s commercial barter rings combined. According to economist James Stodder, both the WIR and other commercial barter exchanges exert a contracyclical effect, showing greater exchange activity during economic downturns."

All mutual credit systems charge a fee to become a member. Some, like the WIR, go to the extreme that members can never cash out. This would force foreign investors to source components locally.

“The reclamation of the credit commons will take many forms: P2P lending, mutual-credit systems, credit unions and other cooperative banks, publicly owned banks, and innovative new kinds of banks such as Sweden’s J.A.K. Bank.”

Currency models to investigate:

• CES and the Metacurrency Initiative.

• GiFtegrity, a system of user ratings based on member donations and receipts of gifts.

• Gift Circle, a system developed by Alpha Lo

In a weekly gathering, participants state one or more things they would like to give and one or more things they would like to receive. Often, it seems, a magical synchronicity of wants and needs unfolds. Witnessing the generosity of others, over time participants feel more and more comfortable asking of and giving to others in the circle.

Eisenstein says that systems such as Freecycle and Craigslist are limited in that there is no means of witnessing the 'gifting' and so participants have no way of associating a history with each other. He writes, “Newer systems such as Giftflow, Neighborgoods, Shareable, GIFTegrity, and many others recognize and remedy this flaw.”

“The world is changing, and ourselves with it. We not only must create the economic structures of the connected self living in cocreative partnership with earth; we can also, right now, learn how to think and live in them.”

Summary - the Key Macroeconomic Elements

1. Negative-interest currency

2. a) Elimination of economic rents
   b) Compensation for depletion of the commons

3. Internalization of social and environmental costs

4. Economic and monetary localization

5. Social dividend

6. Economic degrowth

7. Gift culture and peer-to-peer economics

No single element can stand on its own. Eisenstein writes,

“Negative-interest currency won’t work if other sources of economic rent are still available to invest in. Localization depends on the removal of hidden subsidies that make global trade economic. Gift economies allow the quality of life to improve even as the economy shrinks.”

These elements will lead to and result from a metamorphological shift in perception, from human as master over nature to human as one with nature.

Regarding the perception of gifts, Eisenstein writes:

“Gifts circulate so that the good fortune of another is also your good fortune.”

“Sacred economy is egalitarian, inclusive, personal, bond-creating, sustainable, and nonaccumulative.”

Investment

So far, investing is what people do to preserve their wealth. It says “I have more than I can use, so I will let someone else use it but only if that person gives me back more than I gave.” In a sacred economy, investing is what we do to share our wealth. It says “I have more than I can use, so I will let someone else use it until I need it again and then I will get it back.”

Eisenstein proposes a radical (contemporary economists might call it insane) model of investing, far beyond 'socially conscious' investing or 'ethical' investing. Instead of contributing to the growth of money and gaining a part of it as a reward, the new investment seeks to restore the natural and social commons. And there is no money to be 'made' in this type of investment.

Eisenstein explains: any socially conscious investment that promises any rate of return harbors a lie. As he argues many times in his book, the underlying premise of 'making money' is that more money than was loaned in the first place must be found to repay it and to get that 'more' means converting something else that previously held no monetary value into something that does. It continues the plunder that converts natural or social commons into 'goods for sale or trade'. That cannot work to restore the commons.

Eisenstein references the common example of socially conscious investing called the micro-loan. A wealthy person from a developed nation lends money to a poor person from a developing nation. The poor person can only repay the loan by finding something from the local community that isn't yet monetized and monetize it. It's as if the person who invests is saying “Oh, here's a poor village where wealth hasn't been converted to money yet. I am going to take some of it for myself and make those villagers my debt slaves.”

Living in the Gift

Some examples where a gift economy is being used or tested

• Karma Clinic, Berkeley California

• Gifting Tree, Ashland, Oregon

• Victoria Attunement Center (founded by Will Wilkinson)

• One World restaurant, Salt lake City

• SAME (So All May Eat) Cafe, Denver

• A Better World Cafe, New Jersey

• Panera Bread, pay-what-you-want, Lt. Louis, Missouri

• OpenOffice software

• linux

• In Rainbows album by Radiohead

• Valorem Law Group, Chicago

A Gifting Business Model

 

• Charge money only to cover your own direct costs.

• Time, labour, and expertise are 'gifts'.

• Payment options can include pay-what-you-think-it's-worth, pay-it-forward, or anything else (Valorem provided a 'value adjustment' box on their invoice, where clients wrote in a number--positive or negative--and adjusted the payment accordingly)

• Charge nothing but delineate various line items such as cost of materials, apportioned cost of business expenses, hours of labor, market price for this service, and so on. The client then bases the decision to pay and the method of payment on an evaluation of the 'story of the gift'.

Sacred Economics offers many ideas for a new way of living and working together to share in the abundance of earth's resources. It will always hold a place of prominence in my library.