"You cannot create a new economy without first establishing a new society."
-- Alvin Toffler
Barter Trade:
After millions of years as hunter-gatherers, humanity took an exciting leap around 10,000 years ago, settling near rivers and adopting agriculture and animal domestication. This shift led to a fascinating reliance on barter, shaped by necessity. Although early coins emerged from Roman and Greek civilisations around the eighth century BCE, their use was still quite limited compared to the vibrant practice of barter. This reflects a remarkable journey in human commerce and community development.
"From the Gupta Age onwards, barter trade between different countries continued, but in towns and cities, the buying and selling of commodities with Money significantly increased. The use of metal coins began to replace seashells as media of exchange in an improved system of exchange. Much later still, paper notes were introduced in China." [Shri P R Sarkar]
The era of coins, banknotes, and currency began with the establishment of various national currencies by sovereign countries. However, barter trade persisted among nations until the mid-20th century. Following the devastating aftermath of World War II, the U.S. dollar was recognised as the global reserve currency at the Bretton Woods Conference in 1944.
Physical Money:
Money is created through the production of economic goods and services and is extinguished upon their consumption. It functions as a medium of exchange. "..has the advantage of eliminating inefficiencies of barter; a unit of account, which facilitates valuation and calculation; and a store of value, which allows the conduct of economic transactions over long periods and geographical distances. Money has to be available, affordable, durable, fungible, portable, and reliable to perform the functions. Because they fulfil most of these criteria, metals such as gold, silver and bronze were for millennia regarded as the ideal monetary raw material." (Niall Fergusson: The Ascent of Money).
Digital Money:
Historically, money has developed diverse identities. The exponential growth of economic transactions has occurred over the last two centuries. The advent of the Industrial and post-industrial revolutions has transformed limited local connectivity into global connectivity, resulting in a dramatic increase in the global population from 900 million to 7.8 billion in just two centuries.
We have transitioned money from coins, bills, bullion, and currency to plastic and virtual forms, which now appear on desktop and mobile screens. This shift has enabled millions of transactions and the movement of billions of dollars across the globe in seconds. Digital currencies—both plastic and online—are rapidly replacing physical currency, a trend accelerated by COVID-19 social distancing norms.
Many countries are moving towards a cashless society, aiming to achieve it by 2022. Leading the way are Finland, Sweden, China, South Korea, the UK, and Australia. The cost of producing, distributing, and maintaining traditional currency for any country is about 0.5 per cent of its GDP, while the cashless system costs a fraction of that and is faster and easier to implement.
As a result, we are witnessing the rapid emergence of digital payment platforms such as Razorpay, Google Pay, Amazon Pay, and Paytm, which facilitate cashless transactions. The world is steadily moving towards becoming a cashless society.
Tradable Share Flips Commodity:
Marx references Aristotle's ideas on barter trade. Aristotle explained that the original form of trade was barter; however, as barter expanded, the need for money emerged. With the invention of money, the essential practice of trading goods shifted to trading commodities. Over time, this development strayed from its original purpose and evolved into chrematistics, which focuses on wealth measured in money—the art of making money. This marked the beginning of a relentless pursuit of money to generate more wealth.
The events surrounding this development are part of history. Until the late sixteenth century, companies primarily operated as guilds or partnerships, in which members pooled their resources to accomplish tasks they could not do individually. However, on September 24, 1599, a groundbreaking company was established, introducing the concept of ownership divided into small, tradable shares. These shares could be bought and sold freely and anonymously, much like pieces of silver. This meant individuals could own a portion of the new company without being directly involved in its operations. Thus, the first global joint-stock company was born—arguably one of England's most revolutionary inventions. Its name? The British East India Company.
Separating 'ownership' from the East India Company's other activities unleashed a powerful and dynamic monetary institution: the Stock Market. As it operated without checks, the East India Company became more powerful than the British State, answering only to its shareholders. Domestically, its bureaucracy was corrupted and largely influenced the British government. Internationally, its 200,000-strong private armies oversaw the dismantling of well-functioning economies in the Indian subcontinent and several Pacific islands, ensuring the systematic exploitation of their populations.
Casino Capitalism:
The banks and their influential clients create money out of thin air for each other. First, bankers extend large overdraft facilities to their wealthy clients to enable them to purchase shares. These clients use entirely fictitious money to acquire shares in various companies. They do not seek dividends from the companies' profits; instead, they sell their shares at a higher price to others who also use fictitious money obtained through overdrafts from different banks. As long as this system continues, trading in shares thrives, and their prices soar. If the companies earn profits, share prices increase even further, resulting in substantial commissions for bankers. However, when the bubble eventually bursts, the overdrafts become Non-Performing Assets (NPAs) on banks' books, and the losses are transferred to taxpayers or public savings. The political establishment plays a role in converting individual financial losses into a broader public loss.
Marx argued that money represents commodified labour appropriated by the capitalist class, with tradable shares serving as the primary instrument. To restore investors as stakeholders in any enterprise and to connect investment to the real economy, we must replace tradable shares with non-tradable shares. By eliminating tradable shares, we could free stock markets and the economy from the influence of casino capitalism.
The US Dollar as World Currency:
Sovereign nations issue their own currency, which serves as legal tender within their territories. Each country also maintains two major accounts to manage its economy. The first is for Internal Income and Expenditure, commonly known as the national budget, which uses the sovereign currency. The second is the Current or External Account, which records payments and receipts in the global currency (the US dollar) for the import and export of goods and services.
The devastation of Britain and Europe's dominant economies during the two world wars, combined with the emergence of the United States, largely unscathed and accounting for fifty per cent of global GDP, led to the dollar's recognition as the global currency. At the 1944 Bretton Woods Conference, the dollar was linked to gold at $35 per ounce, while America held two-thirds of the world's gold reserves. However, the United States rejected an alternative proposal by economist John Maynard Keynes for a neutral world currency managed by a global bank and an "international clearing union." This decision is historically linked to the current global economic crisis.
In 1971, under President Nixon, the US unilaterally ended the direct convertibility of the US dollar to gold. This move effectively dismantled the Bretton Woods Agreement and unleashed a wave of anarchic monetary-market fundamentalism worldwide.
The US Gaming CAD:
A Current Account Deficit (CAD) occurs when a country imports more goods and services than it exports; if the opposite were the case, the country would be in a current account surplus. The United States addressed its Current Account Deficit by printing more dollars. Simultaneously, the US and its allies held significant influence over the International Monetary Fund (IMF), the European Central Bank (ECB), and the World Bank (WB). The stringent conditions and interest charges on loans provided to weaker nations drained the resources and wealth of underdeveloped countries and vulnerable segments of society.
The banks, along with institutions like the IMF, World Bank, and ECB, act as bill collectors for affluent countries, influenced by a handful of billionaire capitalists and multinational corporations (MNCs). This system of financial exploitation has its roots in the Bretton Woods Agreement, which gave the United States the unique advantage of printing dollars as a global currency instead of borrowing to pay for its imports, unlike other countries. Meanwhile, China, as a major lender, is aggressively promoting its own currency as part of its economic expansion. Therefore, the Keynesian idea of a neutral world currency managed by an International Clearing Union warrants serious consideration.
The Concentration of Wealth:
In the words of Marx, "The accumulation of wealth at one pole is, therefore, at the same time the accumulation of misery, the agony of toil, slavery, ignorance, brutality, and mental degradation at the opposite pole." The crony and casino capitalism of the wealthiest one per cent thrives in stock and commodity markets, while the remaining ninety-nine per cent pay for it with their blood and sweat. Every aspect of life—culture, politics, and the economy—has become subservient to the one per cent, who are the masters of a financial capitalism that monetises the universe. They control both human and natural resources to maximise profits for the few. Tradable shares and global stock markets play a crucial role in this relentless transfer of wealth from the working class and poorer countries to a tiny group of billionaire oligarchs worldwide.
"Ideas are the currency of the new economy"
-- Richard Florida
Shri P.R. Sarkar advocates for the principle of "keeping the money rolling," emphasising that the more frequently money changes hands, the greater the benefits for society. He cautions us to be vigilant about two important points.
First, the inherent greed of banks should not jeopardise the lives of ordinary people; banking should be managed by cooperatives rather than by private hands. Second, banks should not permit irresponsible administrators or governments to print currency indiscriminately without ensuring a corresponding amount of bullion is reserved in their treasuries.
Nations are facing pressure to print money amid the economic stress of the COVID-19 pandemic, leading to a significant loss of fiscal discipline worldwide. As a consequence, we can expect inflation and economic hardship in many countries. Post-pandemic unemployment, reduced wages, and rising food prices are pushing millions of families into nutritional poverty, leading to malnutrition among children.
Cashless Community:
Cashless trading systems have gained popularity under various names to stimulate economic activity in communities worldwide. The largest of these is the Barter Club of Argentina, which was founded in 1995. As the economy faced a recession, bartering became more popular and diverse, leading to the creation of a paper trade unit called the “Credito.” Today, over ten million people participate in more than 8,000 locations across the country. These cashless transaction instruments should be convertible into stable local and national currencies.
De-Dollarisation and Samaj-Wise Central Banks
A Central Bank Digital Currency (CBDC) is a form of legal tender issued digitally by a central bank and supported by blockchain technology. The development of digital government currencies, commonly referred to as 'govcoins,' will enable individuals to deposit funds directly with a central bank, thereby bypassing the traditional banking system. This innovation could reduce operating costs for the global financial industry. Moreover, digital government currencies would enable instant payments to citizens and the possibility of interest rates falling below zero. For everyday users, the advantages of a free, secure, instantaneous, and universal payment method are clear.
According to The Economist, more than 50 monetary authorities, covering a significant portion of global GDP, are exploring the development of digital currencies. This includes countries such as China, the EU, Britain, and the United States. However, the centralisation of the monetary system within national central banks raises concerns about the potential for abuse, allowing governments to penalise dissenting individuals and entities instantly.
Prout's model of a locally controlled Samaj Cooperative Central Bank's CBDC, known as SamajCoins, addresses these concerns and acts as a firewall to prevent the unauthorised transfer or depletion of Samaj wealth.
Socio-economic Groupification - Samaj:
A Samaj is a unit of socio-economic grouping, characterised by similar economic challenges, comparable economic potential, ethnic similarities, shared historical legacies, and common geographical features. In India, 44 and globally 200 such socio-economic units have been envisaged. Third-world countries could especially benefit immediately, with Samajas designed along these criteria, promoting economic development and eradicating poverty.
"You cannot get a new economy without a new society."
-- Alvin Toffler
Samaj is a self-sufficient and self-reliant community living in its familiar territory. As a movement, Samaj opposes economic, psychological, cultural, and psycho-economic exploitation.
In addition to their Cosmic citizenship, which grants them unrestricted freedom in the infinite mental and spiritual realms, human beings have the right to reside in and claim citizenship in any Samaj worldwide without discrimination. The only requirement is that an individual's socioeconomic interests must align with those of the chosen Samaj.
Prout's Monetary System and Banking:
Shri P.R. Sarkar emphasises that to achieve socio-economic development in each community, it is crucial to prevent the outflow of money from one region to another. If this outflow is not controlled, the per capita income in a socio-economic unit cannot increase. Each community will have a Cooperative Central Bank that will serve as the fiscal and monetary regulator for the community's specific currency and banking operations.
In a cashless economy, digital technology will be superior to traditional currency in terms of security and traceability. Additionally, it is cost-effective for production and distribution, making implementation easier and faster. This system serves as a safeguard to prevent the depletion of a community's limited physical wealth.
The community's economy is based on ‘local production for local consumption’. Exports of processed surpluses are permitted only after all local needs have been satisfied.
Prout advocates for a convertible national or trans-samaj world currency with a stable standard value to prevent inflation. Therefore, the European Union's experience with the common currency, the Euro, and the individual home currencies of its member countries since its introduction in 2002 warrants study for potential adoption in a Prout Society.
"To fulfil the mutual needs between regions, Prout encourages the barter system in preference to the export system. The export system ultimately becomes commercial and competitive and leads to exploitation." [Shri P R Sarkar]
Author: G Surender Reddy
Email: reddy.gsurender@gmail.com
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