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To save humanity and the planet, we must redesign money

Writing towards the end of World War II, the economic historian Karl Polanyi showed that the idea of the “self-regulating market” led to a recurring tension between the idea of free trade and the problems of transforming people, land, and money into commodities. If society did not protect itself from its logic, he argued, the market would inexorably increase economic inequality, environmental degradation, and financial instability. Polanyi saw the rampant nationalism of the two world wars, and the intervening economic crisis, as reactions to the 19th century expansion of world trade.

Today, we have every reason to reconsider Polanyi’s warning. Unprecedented economic growth in North America and Europe after World War II made it possible to regulate the market. In the affluent global North, the most damaging consequences of turning people, land and money into commodities seemed possible to alleviate. This was the golden age of the welfare state.

Karl Polanyi in 1923. Karl Polanyi Institute of Political Economy

Critics arguing that the impoverishment of people and land had simply been displaced elsewhere – to the developing world – could be contradicted by blaming corrupt politicians. But since free market thinking took over in the 1980s, the insidious logic of the untamed market soon became obvious. Precisely as Polanyi could have predicted, increasing inequality, environmental degradation, and financial instability have plagued the world since.

Visions vs reality

Meanwhile, those of us who are passionate about making the planet a better place have held on to visions of a future world society promoting justice, sustainability, and resilience. Regardless of political leanings, we have imagined a world where seven or more billion people can prosper.

These visions have remained fundamental to the moral identity of large portions of the middle class. But to believe that modern consumer society can be universalised is as misguided as to deny climate change. Given the widening inequalities, soaring greenhouse gas emissions, and exponentially increasing debts, the faith in world trade has lost its credibility.

We have somehow been able to disregard the fact that, if European or American affluence were universalised, it would require four additional planets. People might want to believe that the world is about to abandon fossil energy, but it continues to account for 86% of global energy use and shows little sign of abating. If anything, our economies are growing increasingly wasteful of materials. In 30 years’ time, the world’s population will need three times more resources than it does today. So much for sustainability.

As regards justice and resilience, we have been told that 1% of the world’s population now owns more than the remaining 99%, and that global debt keeps going up and up (now at US$152 trillion). So the neoliberal praise of free trade could hardly be more distant from reality.

Rewriting the rules of the game

It sounds less and less credible when members of the affluent middle class claim to want to promote global justice and sustainability, as the very economic logic which makes their affluence possible inexorably increases global gaps and environmental degradation. Even those of us who are most intent to save the planet find ourselves belonging to its heaviest burden, but must struggle to maintain our moral identity.

Fightback of the 99%. EPA/Michael Reynolds

The solution requires us to recognise that the operation of markets and money is socially constructed. The rules of the game can be rewritten. To acknowledge the extent to which the destiny of human society and the biosphere has been delegated to the mindless logic of objects like money and technology is like snapping out of a delusion. To fathom the implications of this delusion would make us more receptive to the idea of a fundamentally reorganised economy.

When Polanyi predicted the insidious consequences of the market, he was tracing the logic of money and capital itself. To finally curb that logic we must redesign the very idea of money. We need to make the economy serve human goals.

Rather than positing that every possible aspect of human existence is exchangeable on the same market, we must distinguish between the local integrity of communities and ecosystems, on the one hand, and global communication, on the other. One way of doing this is by authorities issuing a monthly basic income for all citizens. This should not be in “ordinary” money, but in a special currency that can only be used to purchase goods and services originating within a certain distance (say, 50km) from the point of purchase.

This distinction between the local and the global would alleviate a number of problems. It would encourage a resurgence of local economies, promoting resilience, diversity, and recycling. Meanwhile, it would reduce long-distance transports, carbon dioxide emissions, and asymmetric global transfers of resources.

Most fundamentally, it would prevent human lives from being reduced to commodities. Nobody would have to sell their labour just to survive.

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