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Mahinism: Making Money Real

p 19, 20

Money is a commodity that a society agrees to use to trade for every other commodity or service in that society. Money ultimately represents the work of the holder of the money, and, as with all forms of work, it is subject to the laws of thermodynamics. While that work has been represented by a bushel of wheat or an ounce of gold, the representation can be anything the society agrees to use as a counter of the work being exchanged.

Money represents work properly when the society uses it as though it is work. If the society uses it in another way, it represents something else.

There is no “more” to money being a representation of work than making the laws that affect money conform with the laws of physics that affect work.

Our society uses money that represents debt with interest: this is how we create and use it. Our lenders let us use their “work”, but when debt plus interest is repaid they have obtained more “work” without adding any of their own. Conservation of energy forbids this. For a society using money as debt, interest demands growth or becomes theft.

p24

Money is a commodity that a society agrees to exchange as payment for every other commodity or service in the society. It can be a real or an imagined thing, as long as it is something the society deems to be a universally acceptable form of payment.

p37

Our banks are creating money on demand, so the money we use in our daily lives represents debt with interest. The only real limits on this process are the bankers’ belief that they will ultimately be repaid, and if applicable, the Central Bankers’ estimate of what amount might result in unacceptable levels of inflation.

Our societal money is thus an abstraction of promises to pay without effective limitations. All the dollars in all the wallets in all the pockets of all the people in all the cities of all the countries on this planet are backed by the unlimited debt that created them.

p40,41

If growth is built into our definition of money, there can be no long-term stability. Such a system is not sustainable. Our definitions must at least permit us to keep our civilization and our economic system healthy without growth1.

We use an erroneous definition of money as “debt with interest,” thus violating the law of conservation of energy to “make money work for us.”

We use our erroneous definition of ownership as having “self-propagating benefits” to allow ownership to make money.

These violations represent additional work accruing to the lender or owner, i.e., work that appears as money in their economy without work being done. It is impossible to do this sustainably, and it is always theft in some sense. The additional work demanded in such cases can only be supplied from work belonging to someone else, somewhere else. It does not matter if the other person agrees to the transaction or if they exist in the present or the future. The owner/lender is being paid for a legal condition that has no limits, in a transaction that makes no sense in the real world.

This is described as “rent-seeking.” Rent-seeking2 occurs when someone tries to increase their share of existing wealth without creating new wealth; it is a form of theft, whether it is legal or not. It is one of the perks of being in the owning class (referred to as the rentier class by some) and it is a basic tenet of “capitalism,” despite the observation that something owned must rot, rust or return to dust unless work is added to it. The father of capitalism, Adam Smith1, asserts that rent to the landlord is a valid component of the price of corn. “In the price of corn, for example, one part pays the rent of the landlord, another pays the wages or maintenance of the labourers and labouring cattle employed in producing it, and the third pays the profit of the farmer.”

Adam Smith, explained rent as follows: “As soon as the land of any country has all become private property, the landlords, like all other men, love to reap where they never sowed, and demand a rent even for its natural produce. The wood of the forest, the grass of the field, and all the natural fruits of the earth, which, when land was in common, cost the labourer only the trouble of gathering them, come, even to him, to have an additional price fixed upon them. He must then pay for the licence to gather them, and must give up to the landlord a portion of what his labour either collects or produces.” In my opinion, Smith never questions whether rent or rent-seeking should be a fundamental part of his economics. Both of them had always been a constant in his world, so the question never arose. Nonetheless, it is impossible to read the above passage today without recognizing that rent is not payment for work: it is payment for fences that prevent work.

It is a form of legalized extortion that benefits the owning class.

p50,51

An attempt to break the first and second laws

To break the first law, the boat owner also charges the fisherman for the right to use the boat. Effectively, this constitutes a charge for the ownership of that boat. Call it one fish—so the owner gets 2 rather than 1, or call it theft because this fish is not exchanged for any work by the owner. Either way, the fisherman must catch extra fish, so his work increases for no actual benefit on his part. The “owner-maintainer” charges the baker 3 extra loaves “profit” as well. There is no limit to ownership: it is a legal condition, but there are hard physical limits to the work that can be done. This is the way that “money from ownership” breaks a society. Profit is a similar concept, as it is additional payment to a worker as a premium for the product of work rather than payment for the work itself. The owner now has an extra fish and 3 extra loaves every week as profit, and they are magically able to be stored indefinitely without becoming garbage, which breaks the second law. We are all aware that it only takes about three days for fish to stink and bread to go stale. If only our existing money did the same. As the owner now gets fish and bread without working, he accumulates many fish and a lot of bread: he becomes “wealthy.” He buys another boat and hires other people to do maintenance on it. He brings in more fishermen and bakers. The economy is thriving? Not really. Now there are 10 boats, 10 fishermen, 10 bakers, and 10 sets of ovens. The owner gets 10 fish and 30 loaves for nothing and has hired 5 people at 1 fish and 3 loaves each to do the extra maintenance. The catch has gone from 3 fish to 40 fish. Instead of 3 people taking 3 fish, there are 26 people taking 401—but there is more to this than just the wealth of the owner increasing by 5 fish and 15 loaves per week now. The growth of this economy is now unlimited. The owner sits on the veranda, sips his drink and contemplates his “well-deserved” success. Others in the society look on in envy and aspire to that sort of wealth as well, driving even more growth. The more the economy grows, the wealthier the owner becomes and the more unequal the society becomes as an ever-increasing number of fish have to be caught to support it. And we have not even touched on grain and ovens yet. The owner has become wealthy, the society has become unequal, and the fish stocks will quickly be depleted—all in the service of profit from ownership that breaks the laws. The owning class has been created and the fishing sector and the society are both doomed because this is a demand that can never be satisfied. No matter how many fishermen there are, more and more fish are required to pay the owners.

p54

Unreal money fuels real consumption. Promises of work flood the system with a false ability to consume, causing our economy to become both overheated and more unequal while it inflicts damage on our environment and incurs physical debts on which our children cannot default. When this environmental debt is added to the monetary debt, we create a total that would reduce an astrophysicist to tears.

p61

If all the existing money in the world represents debt with interest, the interest on that debt is money that does not yet exist. In terms of real money, new work done (growth) is required to create that new money. If that does not happen, something else has to break because the first law cannot be broken. So, whose “something else” gets broken, and how?

The money for the interest is stolen from future generations of workers (ownership produces no work, so the work has to be taken from others, and they are not consulted) and environmental destruction is also a form of theft from future generations. The money for the interest is either a wealth transfer from workers to the owning class, or growth that we can no longer afford.

p63

Consumption has to grow continuously in order to service the debt with interest. This explains why goods are designed to last long enough to get them home and to be unrepairable when they break.

The profit from the interest is, of course, the basic business model of the banker. It is a challenge for the banks when we try to fix the definition and remove the interest charges.

p65

The demand for continuous growth was not itself a bad thing until we exceeded the carrying capacity of our environment. It gave us very rapid development of technology and knowledge, along with the surpluses supporting artists and sportsmen and researchers everywhere.

p69

The supply of money is unlimited, whereas the natural world clearly is not. The destruction of the environment threatens human civilization1.

p76

Held in thrall by the owning class, we are bombarded by propaganda from the think tanks and media that they control and fund. We are told to view the owning class as “wealth creators” and our media assume they deserve to be admired and respected for their successful accumulation of money, instead of being regarded as the metastasizing cancer they have actually become.

p81

Are we able to govern ourselves or are we already enslaved, owned, and helpless to save ourselves?

p87

knowledge is the most important evolutionary advantage contributing to the survival of Homo sapiens,

p88

Accumulated knowledge is a vital part of what each generation of humans inherits from its ancestors. Many lives depend on our knowledge and it comprises the largest part of our real wealth—

p89

This does not prove we “have to” do something, but it does establish consequences for inaction. The Darwinian imperatives, “adapt or die” and “survival of the fittest,” apply to us both in terms of our individual survival and through the survival of the societies of which we are members. Size matters and growth has always been an advantage in the competition for survival. Growth was demanded by our societal competition and warfare. The measure of growth that our societies commonly use today, the “Gross Domestic Product” (GDP), was defined to measure wartime productivity. Until recently, that growth has provided a decisive advantage in the competition between societies, and the most rapid growth of all occurs when money is defined as debt with interest to demand it.

p94

BASICS FROM HISTORY (HUMAN REQUIREMENTS)

“Where does government derive its right to govern?” Democracy was inherent in the thinking of the authors of the Constitution and this first requirement is drawn from Thomas Jefferson: “I know no safe depository of the ultimate powers of the society but the people themselves; and if we think them not enlightened enough to exercise their control with a wholesome discretion, the remedy is not to take it from them, but to inform their discretion by education. This is the true corrective of abuses of constitutional power.”—Thomas Jefferson1

p95

Our survival as human beings depends on the survival of the society of which we are a part.

p96,97

BASICS FROM OTHER SOURCES (HUMAN REQUIREMENTS)

Those listed below are derived from the Charter of the Green Party of Aotearoa New Zealand3. Monbiot lists 16 principles in Out of the Wreckage, which is his discussion of a new form of society4.

Ecological wisdom The basis of ecological wisdom is that human beings are part of the natural world. This world is finite; therefore, unlimited material growth is impossible. Ecological sustainability is paramount. Social responsibility Unlimited material growth is impossible. Therefore, the key to social responsibility is the just distribution of social and natural resources, both at a local and global level. Appropriate decision-making Decisions will be made directly at the appropriate level by those affected when implementing ecological wisdom and social responsibility. Non-violence Non-violent conflict resolution is the process by which ecological wisdom, social responsibility, and appropriate decision-making will be implemented. This principle applies at all levels.

p98

You are only paid for what you do, never for what you own.

p99

Margrit Kennedy:

“A further reason why it is difficult for us to understand the full impact of the interest mechanism on our monetary system is that it works in a concealed way. Thus the second common misconception is that we pay interest only when we borrow money, and, if we want to avoid paying interest, all we need to do is avoid borrowing money.” ... “this is not true because interest is included in every price we pay. The exact amount varies according to the labour versus capital costs of the goods and services we buy.”

p100

LIST OF REQUIREMENTS For human society to thrive, we require the following (in order of necessity): 1. Survival 2. Money that respects entropy (second law) 3. Ownership that does not make money (first law) 4. Ecological wisdom 5. Democracy 6. Social responsibility 7. Appropriate decision-making 8. Non-violence 9. Growth

p131-135

The statement “benefits of ownership are self-propagating” seems to be universally accepted in economics and in our lives, without evidence or justification. The concept just appears, without any comment, in our definitions of ownership. Economics assumes that it is true, and the origins of this assumption are obscure and possibly as old as money itself. This principle is, by itself, a violation of the first law and nonsense in human evolutionary terms. It is trivially true in a society of one person, but the benefits then accrue to the owner as the society.

The assumption that we can profit from ownership by offering those benefits in trade is not justified. We can trade work that we have done for money, but the benefits of natural increase must not be sold for profit.

According to Locke’s formulation, people “own” the fruits of their labor—they still do: when we work, our labor enters into the object that we work on, and as a result it becomes our property. He extended this to land, and also offered some limitations (the Lockean proviso “at least where there is enough, and as good, left in common for others”) which were ignored in the frenzied capitalism that evolved from the initial error of self-propagating benefits.

The economic benefits of property are currently provided to the owner without limitations. All of the energy (work) that flows through the property belongs to the owner: The sunlight and rain making crops grow, the electricity from the river running through the hydroelectric dam, electricity collected from our rooftop solar. Every kWh of work that is a function of the item owned rather than the work done by the owner is handed to the owner, who does no work at all by the current rule. If the owner is paid for this by the society, everyone else in the society (including many not yet born) pays that owner for doing nothing at all.

The “owning class” is everyone who makes money by owning things—the bankers, the rent-seekers of Ricardo, and the rentiers of Marx. To the extent that they work to maintain the things they own and rent to others, their income is legitimate in thermodynamic law. People must be paid for their work (unless they have volunteered to do things for free). However, if owners hire someone else to do that work, the owners should obtain no work or money from us solely based on the legal condition of ownership. In our society, as it stands, the owners obtain the right (should they have a monopoly) to demand everything we have.

I will repeat this answer as it is critical to understand the limitations. The owner has the right, within the bounds of the society, to refuse to let other people use the things that he owns. He can use the land himself, or let it lie fallow, but he cannot obtain money or work (beyond maintenance) from people for allowing them to use it without effectively stealing that money from the rest of the society.

The owner is privileged in the current system to let his property work for him. Moreover, he pays a lower rate of tax on the income from that ownership than workers pay when they produce things.

p137-141

In this pure-capitalistic view, our rights are total. We can rent to someone else, sell rights, build, extract minerals, and collect and sell anything of value that our property produces. We can sell or lease some of our rights to others while retaining the rest. We can sell to people who are not members of our society—people who are not even part of our nation.

This is the form of ownership that the capitalist aspires to—ownership with no limitations on the owner and no responsibilities to the society. Restrictions only appear when their activities interfere with the rights of other owners.

Pure capitalism removes the concept of stewardship, allows the assets of a nation to be sold out from under its population, enshrines inequality based on ownership, entitles owners to grow wealthy on the work of everyone else in the society, and excludes all publicly owned parts of the environment from any protections whatsoever. (The oceans and the atmosphere are cast into the purgatory of “No-One-Owns.”)

Why? Because it detaches the value of work done from the people doing it and reattaches it to the owners of everything. This system allows the owning class to profit from the work of everyone not in the owning class.

It succeeds only to the extent that there is some profit left for the society as a whole after the owning class has taken its unearned rentier income out of the working economy. The economy has to grow to replace this money to enable that theft to be ignored. As the concentration of wealth intensifies, the advantage of ownership income over the workers’ wages increases, turning productive workers into wage slaves desperately trying to get a foothold on the “property ladder” (escape). Our revolutions change the names and mechanisms by which we are owned, but not the disadvantages of being slaves.

Most nations restrict foreign ownership to some degree to ensure that their assets are not sold out from under them. Most nations have environmental laws to enforce good stewardship. Most have some tax on Capital Gains to capture part of the unearned wealth stream that owners enjoy (though none of them have raised this to a confiscatory level that would properly implement the first law). And all nations have a form of “eminent domain” that permits the state to force an owner to surrender land that is required for the purposes of the state (some compensate the owner fairly, others not so much).

Historically, there has also been a “debt jubilee” to periodically reset the debt and the advantages of ownership1. This fell out of favor as more extreme capitalism took hold and debts became more enduring.

So, we can see some of the restrictions.

• No foreign ownership • Environmental responsibility enforced on ownership • Capital gains taxed (but usually not enough) • Eminent domain The degree to which these restrictions are employed in a society can make this form of capitalism a nearly reasonable choice or an impossibly unreasonable mess. There will be Americans reading this who object to eminent domain, but they forget Franklin’s admonition: “...private Property therefore is a Creature of Society and is subject to the Calls of that Society whenever its Necessities shall require it, even to its last Farthing.”

The problem for capitalism is that capitalism and sustainability make uncomfortable bedfellows. Our efforts to improve the sustainability of our property ownership actually eliminate people’s ability to generate or accumulate capital. The wealth that so distorts our economies is not available.

The accumulation of wealth and automation of theft are effortless and unlimited for the owners.

p144

Mahinism makes money a creation of the state; it is not necessary to tax people to obtain it.

Effectively, we are only making society the owner of the land and the means of production when it comes to stewardship and profiting from that ownership.

p149

The very concept of “profit” as we know it (profit for the individual) is thus a creature born of ownership and the introduction of money. It does not exist unless there is a society providing the money, as well as “trade” based on ownership.

p151

The profit is due to ownership, not work, and thus cannot represent work that benefits the society. If it does not represent such work it cannot be the basis for additional money to be created by the society. If additional money is not created then this profit, whether agreed to or not, is a form of theft from everyone else in the society. If the society creates money that it is not allowed to create by the laws, it creates inflation which is a form of theft from everyone else in the society.

p152

The actual profit in the barter exchange comes from efficiencies of specialization and is shared throughout the society (of two) as a whole. The advantage to a larger society emerges from the collective efficiencies of each person in a chain of production doing what they do best. This provides profit to the society overall. This is what profit actually means in terms of real money: a positive benefit to the society as a whole.

p157

We rely on the market and the profit motive to simply and automatically discover the value, which is estimated by the aggregate price the members of society are willing to pay, after being swayed by advertising. Thus, the value to our society is distorted by the advertisers and subject to the motives of those who obtain the profits, pay the advertisers, and buy legislation to restrict any possible competitors. The invisible hand belongs to the owning class, and it is literally giving us all the finger.

p159

Cost vs Value, Need vs Want, Society vs Individual are all ignored when we adopt the invisible hand of the market and a price set by supply and demand.

p164

This design provides real markets in place of our distorted markets created by advertising. The cost savings of any innovations or efficiencies are passed to the consumers. Producers who create or obtain those efficiencies and innovations are rewarded. There are incentives to produce good, cheap bread. Competition in terms of cost, quality, and price is still present. Tastes and preferences still affect the market. Anyone with the skills can take out a loan to start a new bakery and add to the supply. The loans carry no interest, so the cost of entry can be low, but a business case has to be made to the bankers.

We have not removed competition and our pricing reflects costs. However, we have removed pricing set by scarcity and profits that come from ownership.

p165

We can measure whether bakers are “better” by measuring efficiency (raw materials and energy used in production). We can also measure whether bread is better based on its nutritional value, so we can also have efficiency and nutrition quality adjustments. The market measures quality based on how easily the loaves are sold (flavor). The society can even “put its finger on the scale” and add adjustments to encourage more production, pre-empting the market when shortages are anticipated.

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