If we want a better game
of economic life well
have to change the
scoring system

James Robertson

James Robertson argues for changes in the way we run the money system.

Surprisingly few politicians, public officials, economists, sociologists, political scientists and other professionals have been interested in money as a system that might be made to work better as a whole. Perhaps it is even more surprising that few campaigners for good causes - social justice, ending poverty, dealing with climate change, a more peaceful and fairer international order, human rights and so on - seem to realise that the money system is a prime cause of the ills they oppose. The development of the money system over the years has been piecemeal - and largely in response to powerful interests - and this means that it is now not only incoherent and incomprehensible to most of the worlds people, but also systematically perverse. It fails to make wealthier and more powerful people and organisations and nations pay for what they take from the common wealth, and it taxes the value of the rewards that less powerful people get from contributing to it.

The reason is simple. The main interest of the goldsmiths and bankers and government servants who in the past evolved the monetary, banking and financial system, and the main interest of those who manage it today, has been to make money for their customers, shareholders and other associates, and for themselves and their own organisations. There has never been anyone whose role has been to ensure that the monetary and financial system would work efficiently and fairly for all its users - that is not the purpose of the system. The arrival of the Information Age should make it possible to work out a better way for the money system to evolve, so that it can be managed with the aim of making it perform efficiently and fairly the functions we require of it. In the context of sustainable development, the challenge for policy-makers is to make sure that the money system evolves as an accounting (or scoring) system that will operate to serve common interests, and the interests of all its users.

1It is now urgently necessary to face up to that challenge. More and more people are experiencing the existing money system as damaging, in terms of economic efficiency, social justice, environmental sustainability, physical and spiritual health, and peace and security. They see it as responsible:

The worldwide economy - at personal, household, local, regional, national, international and global levels - is obviously much more important than a game. But it may be helpful to think of it as a game, and to think of money as its scoring system.2 The scoring system for any game rewards some things and penalises others; and so, by motivating the players to play in some ways rather than others, it shapes what kind of game it is and what kind of outcomes it will have. Moneys power in that respect is even greater than most other scoring systems; the scores serve as a means of survival and success as the game goes on. So how should we change the evident faults in todays money system, so that most of the worlds people can have better economic lives?

Lessons from the twentieth century
The twentieth century showed that a centralised socialist economy cannot work efficiently, justly or ecologically. But the idea of a free market economy based on objective prices is also sheer fantasy. In industrialised countries today tax takes at least a third of the total value of economic activity away from some activities, and public spending puts it back into others. Taxes add to the cost of what they tax, while public spending reduces the cost of what it supports. This skews the price structure of the whole economy against some things and in favour of others. It makes the proverbial level playing field a mirage.

This means we not only have to go beyond the traditional conflict between a centralised socialist economy and free-market capitalism, but also beyond ill-defined Third Way and End-of-History prescriptions. The democratic state must take on a crucially important role: to manage its own money dealings in ways that provide a framework of incentives for its citizens and their organisations to deal with their money in ways that, in serving their own interests, will automatically serve the interests of others too.

Another lesson is that Milton Friedmans teaching that there aint no such thing as a free lunch is the reverse of the truth. By profiting from more than their fair share of the value of common resources (i.e. resources such as land sites and unextracted fossil energy, see pxx for more details), powerful individuals and organisations and nations, enjoy massive free lunches. The value of such resources should be shared as a main source of public revenue. The democratically elected government of the day would then decide how to use this new source of income: whether to increase public spending; or reduce existing taxes; or reduce government borrowing and the national debt; or all of those.3
This shift in the sources of public revenue would be a shift towards predistribution and away from redistribution. By sharing the value of essential inputs to economic activity, predistribution will correct an underlying cause of economic incapacity, injustice, inequality, exclusion and poverty. It will be empowering, in contrast to redistributive taxes which, while aiming to correct the outcomes of economic activity, actually serve to generate economic inefficiency, stimulate tax evasion and reinforce dependency; and, moreover, they are very complicated and costly to administer.
One further twentieth century lesson is important. Centralised control of the money system at the national level (and of the currency at the Eurozone level) causes local and global inefficiencies and injustices. In many countries local monetary and financial initiatives - like LETSystems, time banks and community development banks - are beginning to support local economic activity and trading.4 I discuss later the need for a genuinely global currency, global taxes and global public spending, to support fairer international trading and fairer sharing of the value of global resources. But first, what changes are needed in the money system at the national level?
The monetary and financial responsibilities of the national state.
The state has three operational monetary and financial responsibilities:

  • to arrange for the money supply of official currency (pound, euro, dollar, etc) to circulate efficiently and fairly;