Byttebier towards a new international money order (2017)

Economic and Financial Law & Policy – Shifting Insights & Values Koen Byttebier Towards a New International Monetary Order Economic and Financial Law & Policy – Shifting Insights & Values Volume Series editors Koen Byttebier Brussels, Belgium Kim van der Borght Brussels, Belgium This book series focuses on presenting critical legal and interdisciplinary research regarding the tools and instruments of free-market-driven societies and their economies For the last few decades, the world markets have been in turmoil, to a large extent a result of value and policy choices which have been made since the late middle ages As a result, on a global scale, economies and the legal systems giving form to them, have mainly if not exclusively become based on selfishness and greed, a reality which is moreover explicitly propagated by the theories of economic neo-liberalism It has nevertheless become clear in the recent past that said free market tools and mechanisms – such as private money creation by banks, next to the way huge corporations in general function and determine the outcome of economic processes – result in disastrous consequences, especially when remaining uncorrected by law and when not being submitted to clear public policy intervention measures Despite the evidence and growing understanding of the causes and consequences of neoliberal policy, few alternatives for the capitalist model as currently implemented, have so far been proposed In order to meet these concerns, this book series aims at offering an outlet for various forms of scientific research output, both monographs and edited collections The objective of every book of the series will hereby be to look critically at the legal methods and mechanisms shaping the free markets, and even to suggest alternatives for these Although the book series is initiated by legal scholars, it nevertheless aims to be truly multi- and interdisciplinary The books series therefor welcomes and will incorporate all relevant disciplines, including law, economics, philosophy, ethics, religion, psychology, sociology, anthropology etc More information about this series at http://www.springer.com/series/15643 Koen Byttebier Towards a New International Monetary Order Koen Byttebier Center for Economic Law and Governance Free University of Brussels Brussels, Belgium Economic and Financial Law & Policy – Shifting Insights & Values ISBN 978-3-319-52517-4 ISBN 978-3-319-52518-1 (eBook) DOI 10.1007/978-3-319-52518-1 Library of Congress Control Number: 2017939564 © Springer International Publishing AG 2017 This work is subject to copyright All rights are reserved by the Publisher, whether the whole or part of the material is concerned, specifically the rights of translation, reprinting, reuse of illustrations, recitation, broadcasting, reproduction on microfilms or in any other physical way, and transmission or information storage and retrieval, electronic adaptation, computer software, or by similar or dissimilar methodology now known or hereafter developed The use of general descriptive names, registered names, trademarks, service marks, etc in this publication does not imply, even in the absence of a specific statement, that such names are exempt from the relevant protective laws and regulations and therefore free for general use The publisher, the authors and the editors are safe to assume that the advice and information in this book are believed to be true and accurate at the date of publication Neither the publisher nor the authors or the editors give a warranty, express or implied, with respect to the material contained herein or for any errors or omissions that may have been made The publisher remains neutral with regard to jurisdictional claims in published maps and institutional affiliations Cover illustration, by Beatriz Acevedo: The bark of the White Mulberry (Morus alba) was historically one of the first sources for the creation of paper money Ever since, money and it’s role in monetary systems world wide have both facilitated and complicated human lives all over the world The time is more than ripe to embark on a journey of re-exploring this role and its impact on socioeconomic relations and developments This journey is symbolized by an illustration representing the White Mulberry, the ‘tree where it all began’ Printed on acid-free paper This Springer imprint is published by Springer Nature The registered company is Springer International Publishing AG The registered company address is: Gewerbestrasse 11, 6330 Cham, Switzerland “Because someone has made up the word ‘wave’, I have to distinguish it from ‘water’?” – KABIR (1398–1448 or 1440–1518) – Preface Since the eruption of the 2008 financial crisis, I have focused my research to finding out why the monetary and financial system, so periodically, entails serious financial crises, going back as far as the Middle Ages during which the currently prevailing financial and monetary system took form One of the conclusions of my research has been that many of the monetary and financial problems still gripping the world economy up to the present date can to a large extent be blamed on the basic choice of values on which Western socioeconomic policies have been based since the late Middle Ages It is generally known that the decline of the Western Roman Empire in the fifth century all but stopped trade in the Western European territories and that its resuscitation in the Middle Ages has gone hand in hand with an historical choice for “egoism” and “greed” as driving forces for human behavior, in particular in the socioeconomic context Initially more a practical than a theoretical choice, the choice for greed and egoism as central socioeconomic values would gradually evolve into an elaborated economic doctrine, the so-called economic liberalism, which itself, during the past decades, has reappeared under its modern-day form of “economic neoliberalism.” Especially in the twentieth century, several attempts have been made to offer “alternatives” or “correctional methods” to the capitalist society shaped by economic liberalism, which since then, in the 1980s and 1990s, have been heavily opposed by the doctrine of economic neoliberalism The latter would especially and more fiercely than ever in history put forward the idea that all theoretical and practical socioeconomic policies should be based on egoism and greed One of the conclusions of my research has been that said basically ethical choice may very well be one of the main causes of the numerous financial and economic problems that have poignantly manifested in the recent past This insight inevitably prompts the question what might be a possible alternative to the domination of economic neoliberalism and the unjust society it entails, especially within the scope of the monetary and financial system vii viii Preface Furthermore, also on a more personal level, I have been able to witness the effects of the doctrine of economic neoliberalism myself Having grown up in the 1970s and 1980s in a relatively poor laborer’s family in “West Flanders,” a rural part of Belgium, I personally experienced many of the detrimental consequences of the capitalist economy as reshaped by the philosophy of economic neoliberalism, not the least the striking contrast between the opportunities available to the middle and upper classes and those available to the poor classes of society Regretfully, I have to observe that society has in this regard rather retrogressed than progressed, an observation which, for instance, has been corroborated by relatively recent OECD findings (2014) on the access to higher education in Belgium It may hence be very clear that the theoretical models of economic neoliberalism which try to justify the several injustices characterizing the socioeconomic dynamics of the capitalist system by means of artificial doctrines, such as the theory of voluntary association, are irrelevant to those facing the severe oppression of capitalism It is therefore with an incomprehensibly cold cynicism that fervent “neoliberal” authors such as Ayn Rand dare to state that the numerous social injustices caused by capitalism, such as child slavery which still is present in many countries up to this very date, are not due to the forces of capitalism or the free market but to personal choices of parents who force their children to perform child labor (see further at marg 123 of Chap of this book) Also the doctrine of the survival of the fittest (in its neoliberal interpretation, not in the meaning Charles Darwin gave to the concept) does not make any sense in a society riddled with unequal opportunities as those prevailing in the present-day world being shaped by the ideas of economic neoliberalism It may furthermore be as appropriate to ban the idea of the invisible hand equally resolutely to the realm of mythology where it belongs (for instance, according to Joseph Stiglitz who rightfully has suggested that Adam Smith’s doctrine is based on a mythical worldview) Those who thoroughly study the ideas of economic neoliberalism and their practical consequences in daily life can but reach the conclusion that these ideas are diametrically opposed to the civilization model aspired to by law, religion, philosophy, and ethics ever since the Age of Enlightenment, especially the aim for more justice and equality in “interhuman” relations In my opinion, it is therefore mainly the unrestricted egoism promoted by neoliberal thinking itself that has resulted in the prevailing manifestly unjust world, which, above all and especially in a socioeconomic context, functions according to “the law of the jungle” and increasingly manifests itself as “a war of all against all.” An extremely worrying example of how economic neoliberalism, a.o., through techniques of liberalization and deregulation, is reshaping societies is the recent erosion of the systems formerly established in some Western countries to establish more justice and equality, such as social security and public services, as a result of Preface ix which the modern welfare state model is being abandoned by more and more Western countries As worrisome are the findings by several researches that, in the prevailing neoliberal world order, the gaps between the poor and the rich are getting wider and deeper worldwide The injustice this implies even adheres to the most classic Aristotelean meaning of a world where one group has monopolized “much too much” of what is good, leaving “way too little” of what is good for others (and one group of people has to experience too much of what is bad, while others hardly experience anything of what is bad) (See further under Sect 3.6.2.2 of Chap of this book.) More than ever, it is time for some serious reflection on the principles shaping our socioeconomic life to which the present book wants to add its own contribution An earlier Dutch version of this book was finished at the end of 2014 and was published under the title Nu het gouden kalf verdronken is Van hebzucht naar altruăsme als hoeksteen voor een Nieuwe Monetaire Wereldorde1, after which the book has been translated during the course of 2015 and the first half of 2016 Based upon this Dutch version, the here introduced English version of the book has been prepared thanks to the efforts of Koen Vanbrabant (who prepared the translation of Chaps and of the book) and Jan Willems (who prepared the translation of the next Chaps 3–6 of the book); be it that, in light of further own insights and evolutions on a socioeconomic level, the text has at the same time further been adapted and deepened out The material has been updated until April 15, 2016 Finally, I want to express my gratitude to the following people for their material and/or moral support: Armondo Linus Acosta, Francine Bernard, Julie Borgerhoff, Anne Claeys, Eduardo Fialho, Saurav Ghimire, Serge Gutwirth, Kristina Loguinova, Ann Maertens, Wilfried Rauws, Kim Van der Borght, Anne Marie Van der Eecken, and Tom Wera, next to my mother and sisters Ghent, Belgium December 2014 and April 2016 Koen Byttebier Reference Byttebier K (2015) Nu het gouden kalf verdronken is Van hebzucht naar altruăsme als hoeksteen voor een Nieuwe Monetaire Wereldorde Maklu, Antwerp See Byttebier (2015) Contents Introduction References 11 On the Conventional Nature of Money 2.1 Background 2.2 The Essentially Conventional Nature of (the) Money (System) 2.2.1 Money as a Conventional Instrument Since Its Very Creation 2.2.2 Origins of Coin-Based Monetary Systems 2.2.3 Money Within Modern States 2.3 Evolution of the Conventional Nature of the Monetary System in the Middle Ages 2.3.1 The Early Medieval Banking System 2.3.2 The Medieval Evolution Towards Privately Issued Paper Money 2.3.3 Medieval Private Paper Money Creation Based on Lending 2.3.4 Synthesis: Status of the Monetary System at the End of the Middle Ages 2.3.5 Evaluation of the (Late) Medieval Money Creation 2.4 Genesis of the Central Banking System as a Reaction to Financial Crises 2.4.1 Banking Crises as Triggers for Government Intervention 2.4.2 Genesis of (an Early) Central Banking System 2.4.3 Genesis of a Central Bank Policy 2.4.4 Impact of the Aforementioned Evolutions on the Monetary System 2.4.5 Further Crystallization of the Monetary System in the Nineteenth Century 13 13 16 16 18 20 21 21 26 29 31 32 37 37 38 39 41 43 xi 486 Some Further Institutional and Other Practical Aspects of the Organization References Beaud M (1994) Geschiedenis van het kapitalisme van 1500 tot heden Het Spectrum (Aula), Utrecht Brustein J (2014) How Apple Can Make Mobile Wallets Actually Work http://www.businessweek com/articles/2014-09-05/how-apples-iphone-6-can-finally-make-mobile-payments-happen Last consulted 29 Oct 2014 Byttebier K (2001) Handboek financieel recht Kluwer Rechtswetenschappen, Antwerp Chomsky N (1999) Profit over People Neoliberalism and global order Seven Stories Press, New York De Rynck F, Verschuere B, Wayenberg E (eds) (2009) Re-thinking the state – critical perspectives on the citizen, politics and government in the 21st century Wolters Kluwer Belgium, Mechelen Devos A, Bouteca N, Van Lieferinge H, Lannoo S (2009) Democracy, parties and representation: a complex and dynamic triangle In: De Rynck F, Verschuere B, Wayenberg E (eds) Re-thinking the state – critical perspectives on the citizen, politics and government in the 21st century Wolters Kluwer Belgium, Mechelen, pp 15–40 Dohmen J (1999) Europese idealisten – Vraag niet hoe het kan, profiteer ervan Sun, Nijmegen http:// m.hln.be/hln/m/nl/957/Binnenland/article/detail/2088210/2014/10/13/EU-parlementairenkrijgen-samen-tot-18-miljoen-euro-bovenop-loon.dhtml?originatingNavigationItemId¼1 Last consulted 13 Oct 2014 Friedman M (1993) Why government is the problem Hoover institution on war, revolution and peace Stanford University, Stanford Galbraith JK (1992) The culture of contentment Houghton Mifflin Company, Boston Galbraith JK (1996) The good society – the Humane Agenda Houghton Mifflin Company, Boston Graeber C (2014) Ten Days in Kenya With No Cash, Only a Phone http://www.businessweek com/articles/2014-06-05/safaricoms-m-pesa-turns-kenya-into-a-mobile-payment-paradise Last consulted 29 Oct 2014 Higgins T, Dexheimer E (2014) American Express and Visa Love Apple Pay Will Consumers? http://www.businessweek.com/articles/2014-10-23/apple-pay-partners-with-americanexpress-visa-card-networks Last consulted 29 Oct 2014 Kasser T (2002) The high price of materialism A Bradford Book – The MIT Press, Cambridge Krugman P (2012) End this depression now! W.W Norton & Company, New York Oxfam (2014) Even it up – time to end extreme inequality Oxfam GB, Oxford Pettifor A (2014) The power to ‘create money out of thin air’ https://www.opendemocracy.net/ ourkingdom/ann-pettifor/power-to-create-money-out-of-thin-air Last consulted 18 Nov 2014 Pontifical Council for Justice and Peace (2005) Compendium of the Social Doctrine of the Church (to His Holiness Pope John Paul II Master of Social Doctrine and Evangelical Witness to Justice and Peace) Bloomsbury, London, New Dehli, New York and Sydney http://www vatican.va/roman_curia/pontifical_councils/justpeace/documents/rc_pc_justpeace_doc_ 20060526_compendio-dott-soc_en.html Quid J (2014) Tom Staal trekt rioolput EU open: Straatsburg http://www.geenstijl.nl/mt/ archieven/2013/06/tom_staal_trekt_de_rioolput_eu.html Last consulted 18 Dec 2014 Rand A (2008) Capitalism: the unknown ideal New American Library (a division of Penguin Group), New York Sachs J (2011) The price of civilization: reawakening American virtue and prosperity Random House, New York van der Slikke P (2013) Ontmaskerd Hoe de financieăle wereld echt werkt Einstein Books, Den Haag Smithers A (2013) The road to recovery Wiley, Chichester Stiglitz J (2012) The price of inequality Allen Lane (an imprint of Penguin Books), London Sury C, Racquet E (2014) Stop een portemonnee in uw mobieltje De Tijd, 29 November 2014 References 487 Umbach AG, Wessels W (2008) The changing European context of economic and Monetary Union: ‘Deepening’, ‘Widening’ and ‘Stability’ In: Dyson K (ed) The Euro at 10 – Europeanization, power, and convergence Oxford University Press, Oxford, pp 54–68 Van Houtte JA (a.o.) (eds) (1953) Algemene geschiedenis der Nederlanden t.VI Standaard Boekhandel, Utrecht and Antwerp Veldman H, Parlevliet P (2003) Spierballentaal en cowboylaarzen Reagan, Bush I en Bush II in de context van het Amerikaanse conservatisme Uitgeverij Aspekt, Soesterberg Wolman D (2014) An ABBA Star’s Campaign for a 100% Cash-Free Sweden http://www businessweek.com/articles/2014-10-28/abbas-bj-rn-ulvaeus-does-his-part-to-make-swedencashless?hootPostID¼d5834153339802aa0e1fb8005cb3c01d Last consulted 29 Oct 2014 Zilioli C, Selmayr M (2001) The law of the European Central Bank Portland Oregon, Oxford Chapter Concluding Reflections The research undertaken in the previous Chaps and as to how a new (global) monetary system based on (more) altruistic principles might look is basically, albeit limited to the monetary and financial domain,1 also the result of a search for a better balance between the public and the private sphere Money, as the generally accepted means of payment within the global economy, should hereby be considered to be in everyone’s interest, hence a true “public good” Although this insight is far from new as, throughout history, many prominent thinkers and statesmen have expressed similar ideas, there has in recent history been no true attempt to make the necessary changes to the financial and monetary system in order to develop a money (creation) system in which money would truly function as such a “public good”, hence serving the general wellbeing, instead of solely the interests of a small financial elite within the economy Indeed, mainly as a result of some historical developments (described in more detail in Chap of this book), the financial and monetary system has during the past centuries (and especially since the introduction of the “modern” banking system in the Middle Ages, and of the central banking system later on in history) evolved in such a way that the money creation processes, and therefore also the main technique of steering the (global) economy, to a great extent, have come under the influence of a limited number of private market players who have mainly used this money creation power for their own selfish purposes, especially the pursuit of personal gain by the capital providers and managers of the private banks, without much regard for the general wellbeing of mankind and the planet it inhabits In combination with the fiscal (and parafiscal) systems prevailing all over the planet, as well as the unequal playing field of social and labor protection, one could Needless to say that also in other domains of societal, political and economic life, there will be a need for similar reflection and (real) change (See in this regard already the concluding remarks at the end of Chap of this book.) © Springer International Publishing AG 2017 K Byttebier, Towards a New International Monetary Order, Economic and Financial Law & Policy – Shifting Insights & Values 1, DOI 10.1007/978-3-319-52518-1_6 489 490 Concluding Reflections even consider that the current monetary and financial system, as embedded in the philosophy of economic (neo)liberalism that the free markets should rule everything and all, is one of the most important mechanisms that have led to the contemporary socioeconomic order, above all characterized by layers upon layers of injustice (of which the recent highly commented upon unequal distribution of the world’s wealth is but a symptom, albeit a very disturbing one) One of the man conclusions of the research which led to the present book is therefore that the prevailing monetary mechanism can hardly, if not at all, be called an instrument serving the general wellbeing, which in societies claiming to be of a democratic nature, could nevertheless be considered a justified expectation As a consequence, there is more than ever a need for fairer and more just mechanisms of money creation than the ones that prevail now and which are, basically and literally, an invention of the Middle Ages, especially when it is further considered that these prevailing monetary mechanisms have in no way contributed to a fair global distribution of income and assets, whereby one should at the same time, above all, consider that money is but a legal instrument which provides a generally accepted means of access to the goods and services produced by the collective efforts of mankind, and that all human beings share a common interest in having access to these goods and services in a sufficiently fair and equal way From a philosophical and even spiritual point of view, every human being (and by extension: every living creature) undoubtedly comes into this world to exist and to develop in it Processes which have grown historically, such as the current monetary system should, at least in a (more) just and fair world, no longer be an obstacle to a human right to equal opportunities, at the very least as regards the most basic needs of life (in the broad sense as argued before; see above, at marg 129 of Chap of this book), but preferably also as regards all that which is necessary for a decent development of any human being in all domains of life A (more) just and fair world should at the very least ensure such an equal access to all that is necessary to lead a humane and dignified life, and it goes without saying that the current world (economies), especially given the way its leading socioeconomic defining system, namely untempered capitalism (as based upon the principles of economic neoliberalism and which i.a determines the monetary system), in addition to the fiscal and parafiscal policies of most countries, operate, falls well short As long as the monetary system and the supply of money within the economy remains dominated by the private interests of a small financial elite, especially given its limitless hunger for ever more money, it is hard to see how the tide can be turned On the contrary, one can but witness how this small financial elite, thanks to the way capitalism works, has succeeded, over the past centuries and not in a real way contributing to the creation of general prosperity2, in acquiring an ever growing This, as demonstrated before, in contradiction with the “trickle-down-economics” theory (See above, marg 123 of Chap of this book.) Concluding Reflections 491 disproportionate large part of the planet’s riches, while at the same time hardly making any noteworthy effort to share this enormous wealth with the less fortunate on the planet The sword to cut this “Gordian knot” which has been presented in the current book, would be to start with the development of a new monetary world order which would be based on altruistic principles This development of such a new monetary world order would, above all, imply that the ideas of economic (neo)liberalism dating back to Smith and on which capitalism is to a large extent based, would be abandoned, which in the monetary domain should lead to a resolute turnaround of the (financial-economic) ethics on which the current mechanisms of money creation are based The aforementioned fundamental turnaround of the mechanisms of money creation would hereby call for an uncompromising end to the power of private banks to create (scriptural) money Consequently, when considering money as a true “public good”, the power to create money should lie exclusively in the hands of a new global monetary authority which should have as its basic task the organization of the money supply within the economy, based on underlying principles of fairness, especially the radical altruistic insight that every human deserves a fair and equal chance to achieve a dignified life Such a resolute turnover of the prevailing monetary and financial system would also require clear limits on the possibility of unbridled asset and wealth accumulation provided by money (a policy goal for which, in addition to the monetary policy, fiscal and parafiscal policy should also offer the appropriate tools) It is in any case harrowing to realize that since the introduction, in the Middle Ages, of the currently prevailing monetary and financial system, the world is completely fully (and probably even more than ever) faced with the same questions that already have been raised by ancient philosophers and religious leaders about the sense—and a fortiori, the underlying justice—of: (1) a (monetary) system which allows a small (financial) elite to build up huge fortunes (enabling them to live a life of inconsequential luxury), while at the same time and in the same world, other people are forced to live a life of hunger and poverty (often weighed down by malnutrition and deadly diseases); (2) a socioeconomic system in which the labor power of the great masses is aimed, if not exclusively, then at least mainly, at enriching the same aforementioned (financial) elite, allowing a limited group of individuals to enjoy fortunes which are a multitude of what is left of the world’s resources for the rest of the world’s population, the latter itself being the victim of exploitation mechanisms solely designed to make the rich of the planet even richer; (3) a global abuse of government’s power in order to sustain these intrinsically unfair systems and mechanisms, even, for instance through the operation of inherently unfair fiscal and parafiscal mechanisms, strengthening them As argued in this book, at least to a certain extent, an answer to these dilemmas could be offered by a fundamental re-orientation of the monetary mechanisms as proposed above, whereby, at the very least, both the mechanisms of money 492 Concluding Reflections creation, as well as the techniques available to control the global amounts of money, should be turned into instruments aimed at achieving a global minimum of general wellbeing for all mankind The here proposed approach will obviously only be sustainable provided that such an “altruistic” monetary system is paired with an equally fundamental re-orientation of the fiscal and parafiscal systems, whose main purpose should no longer be to finance the operation of the national governments (and other public authorities), but to achieve a truly fair distribution of income and assets, while, as more thoroughly explained in the Chaps and of this book, state financing itself should be provided for out of the monetary mechanisms themselves In this fiscal new approach, it should however be avoided that productivity incentives are completely removed People who (truly) work hard and who provide innovation for the (real) economy should indeed be rewarded for their efforts3, provided that the worker himself enjoys the fruits of his labor, and not, as happens far too much under capitalism, others who exploit the labor of those who work hard.4 As explained above, fiscality should, henceforth, only serve to skim the incomes and assets which tend to grow too excessively, because, to be honest, who can (continue to) claim that he deserves or is in need of a multiple of billions, in the knowledge that, at the same time, other people are living a life of poverty and misery To reach these objectives, the monetary system as proposed in Chaps and of this book has been based on a proposal to deactivate a number of historical capitalist practices which, on a global scale, have mainly affected the lower and middle classes in a negative way and which, i.a., have resulted in a socioeconomic order characterized by the fact that the riches of the planet, to a very large extent, have become concentrated in the hands of a limited elite Among these practices, there are, as said, on one hand, the mechanism of scriptural money creation by the private banking sector (which should be replaced by a differentiated mechanism of money creation by a global public monetary institution) and, on the other hand, the dependence of government financing in most countries on tax and parafiscal systems and on the taking up of credit from mainly As such, at least this idea of economic neoliberalism that those who work hard should be rewarded, bears some further consideration (see Brook and Watkins 2012, pp 76–77 and 124) However, the argument that those who work hard should be rewarded accordingly, should be dealt with in a fair and just way, as under prevailing capitalist mechanisms, it is not as much those who work hard themselves, but rather those who succeed in making other people work (too) hard and who seize the fruits of this labor almost exclusively to enrich themselves, who get even richer (see also Oxfam 2014, p 65) A good illustration of this question is whether the CEO of a company who gets wages which are a couple of hundred times larger than those of the other employees of the same company, is indeed working such a couple of hundred times harder than these other employees, or if he really is such a couple of hundred times more worth than those other employees Compare Galbraith (1996), p 61 Concluding Reflections 493 the private financial sector (which should be replaced by a system of public money creation based on allocations by the said monetary institution) In such an alternative monetary system, financing public authorities would become separated from the dictates of the national economies, and instead be linked to a realistic estimation of the needs of each country which moreover would be based on a global perspective and on a fair distribution of world resources As has also been explained in Chaps and of this book, under the here proposed new monetary order, the providing of new money to the private sector (s) would also be organized in such a way that it would be based upon a globally defined objective of general wellbeing, while at the same time respecting the limits of the natural resources of the planet in an intergenerational perspective, and, hence, no longer be aimed at maintaining mechanisms which mainly strive to make the rich of the planet even richer (and resulting in a lot of poverty and misery for a large part of the rest of the world’s population) Otherwise put, the new monetary world order proposed here (and through this, the new monetary policies, especially in the field of new money creation) should be based on two main “altruistic” principles: 10 • To aspire5 or a global level of general wellbeing everywhere in the world and for the whole of mankind; • To establish a deeply rooted and fundamental awareness of the limits of the planet (in an intergenerational perspective).6 The (rest of) economy itself could (provisionally) continue to be based on the principles of the free market, in the knowledge that another way of supplying the economy with money will necessarily (and especially within the guidelines and directives that will be worked out by the new monetary authorities) encourage the economic players themselves towards greater discipline and towards greater respect for the objectives underlying the new monetary order, namely the general wellbeing and a fundamental respect for the limits of the natural resources of the planet in an intergenerational perspective Such a new monetary system could moreover result in an important economic impulse (perhaps even comparable to the dynamic after WWII which stemmed from the Marshall-plan7) For instance, given the objective to work out a more just and fair world order, it is to be expected that, at least during an initial period, in the new monetary world order, the (poorer) developing countries in particular, would dispose of more As has been explained in the Chaps and of this book, this should become the case on all levels of money creation, both money creation on behalf of the (national and other) of the countries participating in the New Monetary World Order, as money creation on behalf of the private sector (s) To paraphrase one of Hollands most renowned authors, namely Godfried Bomans (1913–1971): the world asks for a policy that accepts that it should be limited (see Bomans 1961, pp 80–83) Compare Dawkins (2006), p 18; Hoefnagels (1975), pp 12 a.f See Berend (2006), pp 233 a.f.; Vandewalle (1976), p 247 11 494 12 Concluding Reflections operational funds (both on the level of allocations to the national authorities of the countries participating in the NMWO, as on the level of money creation on behalf of the private sectors).8 Provided that the increased purchasing power deriving from more available funds is used in a fair and intelligent way, this could generate an important dynamic for the development of the national economies of these developing countries9, but at the same time also of the economies of other countries (which, for instance, would be able to contribute on a much larger scale in helping to build up the infrastructures of said developing countries) In this process, the global efforts of the world economy would gradually serve towards the creation of a world which will be humane for everyone everywhere (and which would no longer mainly exist for the benefit of enriching a few individuals).10 This re-orientation of the world monetary order and hence of the world economy itself, will obviously need to be sufficiently drastic It can indeed not be considered sufficient that, from time to time, a multibillionaire, probably out of remorse about how his own selfish craving for ever more money and power negatively effects the world, donates a few millions (expressed in whatever currency) to charity11, while at the same time aspiring to keep the existing economic and monetary world system in place12, especially given the fact that this prevailing economic and monetary world system, namely capitalism, inherently results in a fundamentally unfair distribution of the world’s riches, including the stockpiling of mega fortunes in the hands of a happy few to the detriment, through poverty and exploitation, of a large part of the rest of the world’s population It should, on the contrary, become the aspiration to completely turn around the underlying values driving the world economy and to resolutely replace the principle of unbridled selfishness which, especially since Smith, is considered as the sole value determining economic processes, by its opposite value, namely that of radical altruism Compare Stiglitz (2012), pp 216 a.f and pp 234 a.f Compare Stiglitz (2012), p 236 10 On the importance of government spending to stimulate the economy, especially in times of crisis, see e.g Stiglitz (2012), pp 234 a.f 11 One nevertheless should also admire the charity works of some of the world’s richest people, such as Bill Gates and his spouse (see Baer 2014) 12 See, for instance, the famous reaction of Bill Gates to the findings of Thomas Piketty as quoted by the latter himself: “I had this discussion with Bill Gates a couple of weeks ago,” Piketty, the author of “Capital in the Twenty-First Century,” said today at an economics conference in Boston “He told me, ‘I love everything that’s in your book, but I don’t want to pay more tax.” A tax on wealth is one of Piketty’s key recommendations for addressing inequality “I understand his point,” said Piketty, who teaches at the Paris School of Economics “I think he sincerely believes he’s more efficient than the government, and you know, maybe he is sometimes.” (See http://www.forbes.com/sites/timworstall/2015/01/04/as-thomaspiketty-says-of-course-bill-gates-is-more-efficient-than-the-government/; last consulted on February 22nd 2016) Concluding Reflections 495 As proposed in the present book, such a drastic re-orientation of the world’s monetary system could imply a first, albeit huge step in this direction If the global community were ever willing to further reflect about the installation of the new monetary system proposed here which would be based on altruistic principles (or at least on a more or less similar (more) “altruistic” monetary system), then, obviously, settling existing monetary reserves and (monetary) debts will most likely be a particularly problematic issue In a truly (radical) altruistic perception, countries (or states themselves, but also national entities such as “sovereign funds”13), in addition to supranational institutions, such as the IMF and the World Bank, should be more than willing to renounce their receivable positions to other countries (or other supranational entities) in return for being allowed to participate in a truly fair world monetary system, as this would promote the interests of all countries of the world in a fair and equal way Altogether, this “price” for building a truly just, fair and enduring world monetary system based upon altruistic principles could turn out to be low in comparison to the cost of a full collapse of the world economy and its monetary and financial system (and hence of global peace) to which the blind continuation of the prevailing free market system could lead (whereby debt and/or reserve positions could de facto become a dead letter).14 A further question when implementing the proposed New Monetary World Order is in what way one will be able to ensure the conversion of existing monetary positions (in addition to other positions measured in money, such as those laid down in securities and other types of financial instruments), including those that are in the hands of private individuals and companies As was done when the euro was first introduced, one way of handling this issue could consist at first of calculating and then, during a preparation phase, freezing the exchange rates of the currencies of the countries which participate in the NMWO After that, possibly spread over time, all outstanding monetary positions and other positions expressed in a monetary value could be converted to this New Currency in accordance with these fixed exchange rates Furthermore, upon the introduction of the New Monetary World System, one could decide which positions should be reduced entirely to zero, for instance, in the 13 See Bassan (2011), p 171 As has been suggested earlier in this text (see above, at marg 120 a.f of Chap of this book), a method of bringing such an aspiration in practical reach of the (rich) countries disposing of (huge) monetary (and other) reserves in foreign currencies, respectively the (poor) debt countries, could be that the allocation policy of the new monetary authorities would take into account the existence of reserve and debt positions of the past For instance, past reserve positions (as these would be entirely abolished when first implementing the NMWO) could during a certain period of time lead to higher allocations of allocations, while past debt positions (also entirely to be abolished) could result in lower allocations As such a system would obviously lead to inequalities in the allocation policy, a sufficient degree of caution will have to be kept in place, whereby the aspiration of creating a truly fair and just world monetary order should be preferred above a policy of precise measurements aimed at ensuring that every existing reserve or debt position of the past would be taken into account to the last dollar or euro 14 13 14 496 15 16 Concluding Reflections “public sphere”, the mutual reserve and debt positions between the countries participating in the NMWO (possibly in addition to those between other national and supranational public entities) (see above, under Sect 2.7 of Chap of this book) A further question arises whether or not to deal with the existing positions of private individuals in a similar way (for instance by reducing some of them to zero).15 As regards such private debts and claims, probably the most simple approach would be to, at the date of introduction of the NMWO, simply convert (and hence provisionally retain) all such private positions and only later, by means of transparent and legally secured fiscal (and “parafiscal”) mechanisms, work towards the underlying objective of a better re-distribution of the world’s resources An exception may however be considered with regards to the claims of the private banking system on states (and other public national and supranational institutions) As regards such banking claims, one could also consider an immediate cancellation (albeit possibly in return for some type of compensation), taking into consideration that it is mainly because of the techniques of credit lending (and the interest mechanism), in addition to similar practices of the banking sector, that the world community has been burdened with so many socioeconomic problems If the world community were ever and effectively to become willing to adhere to the fundamental re-orientation of the global monetary system proposed here, it should be also clear that its introduction will need to take place in a sufficiently prudent way Needless to say that such an introduction of the New Monetary World Order should first be adequately studied and prepared, whereby a great deal of attention should be paid to the required preparatory financial calculations in addition to the drafting of the legal framework (including the treaty (ies) which will govern the NMWO and the other regulatory texts), the establishment of the NMWI (which, as suggested above, could perhaps be the result of a thorough reformation of the IMF; see above, at marg 2–3 of Chap of this book); the preparation of the network of national central banks that together will form the NGSCB, etc.16 The proposed creation of a new monetary and financial system based on altruistic principles rather than on the (neo)liberal ideal of a world dominated by greed could, furthermore, be just a first step in the right direction towards a global economy based on altruistic goals Indeed, if the global community were found willing to put into effect the here proposed monetary system based on altruistic principles (or a sufficiently similar one), this should not necessarily represent the final phase in promoting an economy based on altruism 15 Compare Middelkoop (2014), p 167 The experiences with the establishment of the Eurozone and of the ECB and the ESCB could probably also here be an important source of inspiration 16 Concluding Reflections 497 Hence, in a later phase of re-orientation of the global economy towards a more altruistic system, one could, for instance, advocate a fairer organization of the business world, whereby the development of mechanisms rewarding labor above capital should be one of the central themes, in addition to the development of fairer and more transparent pricing methods regarding all transactions of goods and services First and foremost, every human being, in his combined roles of global citizen, consumer and laborer, should gradually come to the very basic understanding that any enterprise (regardless of its legal form) making enormous profits is doing this merely due to the fact(s) that: 17 (i) its consumers are (and remain) willing to continue to pay way too much for its products and services, as we all can experience this (basic) truth for ourselves in our various daily expenses, going from expenses for basic goods, such as food, to expenses for computer software licenses and telephone and internet services, in addition to other even more luxurious expenses (such as perfume and luxury clothing).17 Hence, it should not come as too big a surprise that the owners of some of the enterprises providing such (basic) goods and services, in addition to those in the financial sector itself, belong to the richest people on earth (see for instance Bill Gates (computer software); Carlos Slim (telephone and related products); the Walton and Ortega families (retail); Stefan Persson (clothing); Liliane Bettencourt (cosmetics); .) and, (ii) its employees (in the broad sense of the word) remain operative under the rule of the (already ancient) “Iron Law of the Wages” In addition to the intrinsically unfair mechanisms of private money creation based on interest credits by private banks, and of fiscal and parafiscal skimming of the average incomes (and assets) of the middle and poor(er) classes by national governments, the said pricing and wage polices are precisely two of the main building blocks of the current unfair world economy, characterized by an ever wider and deeper gap between the rich and the poor (see above, under Sect 3.4.8 of Chap of this book) Coming to this awareness, while at the same time taking into further consideration the detrimental impact of the free market mechanisms (or, otherwise put, of the capitalist system) on mankind and on the planet it inhabits, one can but recognize that the ideologies advocating the free market have utterly failed, and it is from this awareness that the proposals as described in the current book have been drafted The question will certainly be raised whether the proposals as described in this book are (or can be) realistic in the actual world, and whether it is, simply put, 17 For an enlightening overview (albeit already of the year 2012) of the American retail market, see https://nrf.com/resources/top-retailers-list//top-100-retailers-2012; last consulted on December 8th 2014) 18 498 19 20 21 Concluding Reflections not too late to deploy another economic system than the prevailing free market or capitalist economic system itself In anthropological terms, this raises a so-called “TINA”-question (where “TINA” stands for “There is no alternative”).18 According to Belgian anthropologist Rik Pinxten, this type of argumentation is typical for people pleading for the adherence to the free market(s) and the mechanisms through which this (these) operate(s)19, hence for the adepts of the school of economic (neo)liberalism.20 The question returning to the aforementioned TINA-question (see above, at marg 18 of Chap of this book) then becomes how realistic it can be to allow the new neoliberal feudal system as driven by the invisible forces of the free market (or is it by the “selfish genes” of the rich and powerful of the planet) to continue to proceed in the way it is today What will be needed in the first place in order to ensure that mankind starts its search for a more just and fair global social and economic order, for instance by establishing the here proposed monetary and financial system, is a sufficient willingness to fundamentally re-orientate their economic thinking and action As regards more specifically the monetary and financial systems, the basic underlying question should therefore be what future effect mankind wants to give to the social contract at the basis of the global monetary system, namely the ideal of a world where (unbridled) selfishness and greed can continue to grow and determine man’s fate, or rather one of a world advocating a fair and just socioeconomic order in a spirit of true altruism 18 Pinxten (2014), p 16 See Pinxten (2014), pp 16 a.f See also Ongenae (2014), pp 44–45 Pinxten has in this regard pointed out that particularly since the 1980s (ergo since the rise of neoliberal ideologies), the world has been heading towards a new feudal system in which a small elite of extremely rich people is (socioeconomically) repressing and exploiting the rest of the world’s population, a development in which the financial crisis of 2008 itself (and the principle of “privatization of gains and socialization of losses”) has only had a catalytic effect According to Pinxten, it is to maintain and ever more enhance this new feudal system that neoliberal thinkers have systematically aimed at rejecting anyone who has dared to express different economic ideas as being “irrational”, “irrelevant” or bluntly “idiotic” Pinxten convincingly argues that, especially in light of the state the world is in, this approach hardly makes any sense and that mankind must dare again to “re-invent the world”, whereby one should aspire to a new social and economic project in which the values of freedom, equality and fraternity/solidarity are effectively given a true meaning once again See even John Paul II (2005), pp 121 a.f., in this regard also having pointed out that 19 the capitalism of the early industrial revolution did violence to liberty, equality and fraternity in various way, allowing the exploitation of man in defence to the law of the markets (p 123) 20 See also Galbraith 1994, p xiii: It is my introductory and, I trust, guiding confession that I believe the greatest error in economics is in seeing the economy as a stable, immutable structure Concluding Reflections 499 Already the so-called “hunger” (or “food paradox”) (see above, at marg 174 of Chap of this book and under Further Illustration 3.12 in Chap of this book) speaks for itself In a world where over 800 million people are hungry21, albeit enough food is produced to feed everyone, and whereby this situation is only the result of the current socioeconomic system,22 including its money creation and distribution mechanisms, it could even be considered criminal not to search for alternative mechanisms to create and distribute money than the current ones of (mainly) private money creation based on capitalist principles.23 Furthermore, from a historical perspective, up till today, not a single system of socioeconomic and political (or other) order has been perpetual, so, why should this be the case with the prevailing capitalist system The question then becomes in what way the transit to another socioeconomic order should be introduced, namely either starting by introducing a new global social contract regarding (the creation, distribution and use of) money, or by taking refuge in other solutions which have too often been applied in the past (such as, in extreme cases, revolution and war) With this question in mind, the essential question becomes why mankind should even want to continue to maintain capitalism, with all its excesses and adverse effects, including its intrinsically unjust method of money creation Even so, through the course of monetary history, several earlier monetary systems have been witnessed to collapse In recent history this has for instance been the case with the (nineteenth century) gold standard and with the Bretton Woods-“dollar standard” as it functioned in the period 1944–1971 within the framework of the IMF.24 Further back, history on several occasion has witnessed the need to counteract the private banking system itself, for instance when gradually, from the (late) 21 As explained above, hunger is even so becoming even more and more manifest in traditional “prosperous” countries where, under the dictates of economic neo-liberalism, poverty has been increasing during the past decades and the gaps between the rich and the poor are becoming ever deeper and larger (For further details, see Sect 3.4.8 of Chap of this book.) 22 See e.g Koba (2013) 23 Van Erp (2014) 24 See Pettifor (2014): The gold standard was largely designed to protect the interests of moneylenders concerned to protect the value of their assets – loans – and to ensure their assets were not eroded by inflation To this end it was argued that society could only afford, or be trusted to employ a fixed sum of economic activity – equal and limited to a quantity of scarce lumps of gold dug out of the earth – and used by moneylenders as collateral And so it was that the gold standard operated as a fantastic machinery for protecting the interests of creditors, while constraining and depressing economic activity, in particular employment That is, until society rebelled against the moneylenders and demanded change Change was duly brought about in the UK in 1931 and the US in 1933: first as a result of the influence of Keynes and then as a result of the leadership of President Roosevelt 22 23 24 500 25 Concluding Reflections seventeenth century on, but increasingly in the course of the eighteenth and nineteenth centuries, in most of the (then existing) European countries, it was decided that private banking, because of past excesses, was no longer allowed to issue paper bank notes, albeit at that time the (relatively) “newly” emerging technique of scriptural money creation escaped policy attention, a historical mistake which stands corrected for too long already “The Dhammapada”, a collection of sayings attributed to Buddha, starts with the following verses25: All that we are is the result of what we have thought: it is founded on our thoughts, it is made up of our thoughts.26 26 Irrespective of whether these verses indicate that every human being perceives the world through his own thought system (or “ego”), or that the world is shaped because the thoughts (of people) precede (their) actions, or (probably) both of the aforementioned meanings, this eternal “Buddhist” truth can easily be extended to the sphere of the collective processes which shape society Applied to the monetary system, all of mankind should become fully aware that the monetary system as it is today is indeed nothing more than an (extremely poor) product of men’s thoughts, which has on many occasions in the past demonstrated many flaws To the extent that the entire socioeconomic order is also but a product of the human mind, the question whether or not the search for a fairer and more just system of money creation and distribution should be undertaken can therefore but be answered affirmatively here The question may then even become why mankind would not advocate replacing the current clearly intrinsically unjust and unfair functioning mechanism of money creation by a system that does aim at establishing a greater fairness in the socioeconomic dimension At the very least, from the academic world, there should be a call for more reflection on this subject, which has been one of the key objectives of the present book 25 Byrom (1994), p 17 Translation of F.M Muller, at http://www.fullbooks.com/The-Dhammapada.html (last consulted on December 1st 2015) Compare Vivekananda 1989, pp 25–118, especially p 30: 26 All the actions that we see in the world, all the movements in human society, all the works that we have around us, are simply the display of thought, the manifestations of the will of man References 501 References Baer D (2014) 21 insightful quotes from Bill Gates, who just turned 59 http://www.business insider.com/quotes-from-bill-gates-the-worlds-richest-man-2014-10 Last consulted 29 Oct 2014 Bassan F (2011) The law of sovereign wealth funds Edward Elgar, Cheltenham Berend I (2006) An economic history of twentieth-century Europe Cambridge University Press, Cambridge Brook Y, Watkins D (2012) Free market revolution – how Ayn Rand’s ideas can end big government Palgrave Macmillan, New York Bomans G (1961) Het is de hoogste tijd In: Noten kraken Zuid-Nederlandsche Drukkerij nv, ’s Hertogenbosch Buddha (trans: Muller FM) The Dhammapada http://www.fullbooks.com/The-Dhammapada html Last consulted Dec 2015 Byrom T (1994) De Dhammapada – De woorden van Boeddha Altamira, Heemstede Dawkins R (2006) The selfish gene Oxford University Press, Oxford Galbraith JK (1994) A journey through economic time – a firsthand view Houghton Mifflin Company, Boston Galbraith JK (1996) The good society – the humane agenda Houghton Mifflin Company, Boston Hoefnagels HJM (1975) De toekomst staat op het spel De Nederlandsche boekhandel, Kapellen John Paul II (2005) Memory & identity Personal reflections, Hachette, UK Koba M (2013) A hungry world: Lots of food, in too few places http://www.cnbc.com/id/ 100893540# Last consulted 24 Oct 2014 Middelkoop W (2014) The big reset – war on gold and the financial endgame AUP, Amsterdam Ongenae C (2014) Antropoloog Rik Pinxten roept op tot verzet – Het oude kastendenken is terug In: Knack November 26th 2014, pp 44–45 Oxfam (2014) Even it up – time to end extreme inequality Oxfam GB, Oxford Pettifor (2014) The power to ‘create money out of thin air’ https://www.opendemocracy.net/ ourkingdom/ann-pettifor/power-to-create-money-out-of-thin-air Last consulted 18 Nov 2014 Pinxten R (2014) Schoon protest (want er is wel een alternatief) EPO Berchem Stiglitz J (2012) The price of inequality Allen Lane (an imprint of Penguin Books), London Vandewalle G (1976) De geschiedenis van het economisch denken Kluwer, Deventer Van Erp A (2014) Wereldvoedseldag: Er is voldoende voedsel beschikbaar, niemand zou honger moeten lijden http://m.knack.be/nieuws/planet-earth/wereldvoedseldag-er-is-voldoendevoedsel-beschikbaar-niemand-zou-honger-moeten-lijden/article-normal-443595.html Last consulted 16 Oct 2014 Vivekananda (1989) Karma yoga In: The complete works of Swami Vivekanda (Mayavati Memorial Edition), Advaita Ashrama, Kolkata, Volume I ... “trust in the fabrications of the collective imagination”7 The said historical analysis above all aims at demonstrating that money has an intrinsic changeable nature, and hence that “we”—mankind—might... societal consensus about what is accepted as money, or about what money “is.” 2.3.5.2 49 50 51 On the Conventional Nature of Money Precarious Nature of the New Money Creation System A major drawback... Chap 1, the present book will also make an attempt to conceive an alternative approach for the current organization of the monetary system (see in particular Chaps and 5) See especially Galbraith