(This is the first of three blogs about innovative developments in economics and business which, it seems to me, may have a big effect on many campaigns)
To my mind one of the most interesting new campaigns of recent years is Positive Money (PM), set up in 2010. Yes it’s about economics but if you think it’s not really relevant to your campaigns, you are probably wrong. I suggest checking it out.
If you’ve not heard of Positive Money it’s probably because for a ‘campaign’ it is incredibly (to use an Anglicism) pointy-headed. It is full of really brainy people who mostly have little track record in the darker arts of campaigning (media, politics, advertising, marketing, state power, psychology, religion etc) but who know loads about economics. Such cleverness can be both a strength and a weakness, as campaigns need to be put in very simple terms if they are to gain public leverage.
Pincer Movement Potential
So far Positive Money hasn’t come up with campaigns that capture the public or hence media or indeed mainstream political attention but I think it may well do, only rather than bottom-up, it’s working its way down from the top. In some ways it’s what the 1%/99% ‘bottom-up’ movement always needed to meet coming down, in order to create a pincer-movement with potential for systematic real change in real time.
A possible deficit of street-fighting tacticians aside, Positive Money has a basic problem in that it is selling, indeed inspired by, what for most of us is a very unexpected insight. This insight is that almost all of what we think of as ‘money’ is now not so much ‘currency’ (coins, bank notes) but electronic money, such as debt. Indeed it is the issuing of debt by banks (such as mortgages for houses and other lending by commercial banks), which creates most of the money in a modern economy. 97% of the money in the UK, says Positive Money (and it cites lots of evidence such as from Bank of England economists) is this non-currency money. Like many ideas which could have a revolutionary effect, it’s counter-intuitive and so people don’t immediately spring to act on it.
The Grip of Death Moment
By his own account Ben Dyson the founder of Positive Money, was set on the campaign trail by a theory in the book he read called The Grip of Death. This explained ‘why most economic theories failed, and why governments were usually unsuccessful in manipulating the economy’, because ‘almost all money is now created by commercial (high-street) banks, as debt, when they issue loans’. Lots of bad stuff followed such as financial crashes when ‘expert’ economists who themselves did not understand this, tried to deploy ‘conventional’ policy measures to which might old style economies running on real money might have responded but to which modern economies full of electronic debt did not respond.
I found this fascinating but anyone who knew much about campaigns would see the pitfall: Positive Money was then drawn into an educational campaign, which is largely incompatible with instrumental campaigning. It’s been on a bit of a mission-to-explain. The two things can hardly ever be done at the same time.
Positive Money’s central proposition which can get rather lost in a forest of stuff about why-it’s-a-good-idea to reform aspects of the banking and finance system, is to:
‘remove the ability of banks to create money, in the form of bank deposits, when they make loans … [and] transfer the ability to create new money exclusively to the state, creating what we have termed a ‘sovereign money’ system’.
This is what they mean by ‘Positive Money’, and although ‘Democratic Money’ might possibly get you there quicker, the central idea is highly political and quite understandable: that creation of money should be under democratic control, and that means it should be controlled by elected, accountable politicians because control of the creation of money – how much, when and what for – is of crucial public interest. Left to itself, with each cycle the ‘market’ operation of the system just ratchets up the difference between rich and poor, making the disparity greater and greater.
Put simply, the proposition is to ask who should be in charge of our national currency, the nation or the banks ? A case maybe of “give us back our money” which for most people would be awfully similar to “give us back our money”. What other metaphors might one use ? ‘Robbery’ perhaps, springs to mind.
QE or Public Money ?
This summer, Positive Money got a bit of a gift when a side effect of the UK EU Referendum vote for Brexit was a political crisis, which led to a fall in the value of the Pound Sterling and in turn a new Conservative Government, which promptly jettisoned previous Chancellor George Osborne’s policies of austerity and ‘balancing the books’. So in August to try and boost growth, the Bank of England set out on a new round of QE or Quantitative Easing, often called ‘printing money’.
outside the Bank of England with a message
This gave Positive Money a chance to campaign about a real choice by calling on new Chancellor Philip Hammond to convert this newly created ‘money’ into real money and not just the electronic value of stocks and shares. Such stocks and shares are mainly held by the wealthy as investments. Positive Money point out that the previous UK round of QE increased the wealth of each of the richest 5% of households by an average of £128,000, thereby also increasing inequality, which the government is supposedly against.
Instead, Positive Money argues, and an increasing number of economists agree with them, that the Bank should create money and put it into the real economy, in ways that mean it gets spent and creates work here and now. Either as ‘helicopter money’ whereby individuals get cash (which in the case of poorer people they are likely to spend), or, by investment in infrastructure projects, which also create real world economic activity including jobs, also leading to cash in circulation.
So why doesn’t QE normally do this ? Even at Positive Money’s own website you have to drill down to get the details but as I understand it, essentially it’s because the government gives the money to financial institutions and banks not to people to spend, or to itself to spend. Under QE the Bank of England creates a new ‘reserve’ account for itself and uses it to buy up ‘government bonds’ from pension funds or insurance companies. ‘Money’ then appears in the bank account of a Pension fund, such as in RBS. Only if this then gets spent will it benefit the real economy. Seeing as the wealthier shareholders in Pension Funds don’t need to spend it like the poor do, they mostly don’t: as a result, £375bn of QE produced only about £25bn economic activity in the real economy.
Positive Money says the Bank of England should give the money straight to people, especially poorer ones, or to the government, which should then spend it on infrastructure.
Relevance to Campaigns
If your campaign issue has anything to do with trying to or needing to reduce inequality, it is self-evident that taking control of the creation and direction of money into public hands, could play a huge role in shaping outcomes.
This has also to be one of the best ways of seriously using money to resolve critical practical problems for instance in the environment, and there is coincidence of interests between those wanting to achieve outcomes that rely on new investment (such as energy or transport infrastructure, or buying and managing forests), and those who want to stimulate flagging economies, such as politicians.
Tackling climate change is perhaps the most obvious example. If for instance we had a global decade or so of green investing to replace the old fossil based economy with a renewable-powered economic base, we’d be a long way down the track to implementing what governments promised in Paris. (The necessary investment cost has been put at $270bn out of $6trillion spent globally on new infrastructure a year, or just 4.5%).
Positive Money can be contacted at www.positivemoney.org