I asked the following question to an open money mailing list:

With the people at Oekonux, I have a perpetual debate about open money, which they oppose, because the problem of infinite growth is not related to money, but to the functioning of capital itself. Though the Oekonux leadership is generally uninformed about monetary transformation, this one key argument makes sense and deserves an answer:

– that even with demurrage-based currencies, the productivity and competition logic of capitalism is such, that it would still be market with perpetual growth (the higher productivity of the best competitors forcing everyone else along)

Chris Cook already responded:

“One of the points which is often missed is that while compound interest is a driver of economic growth, and a source of system instability, it is not the only one.

Demurrage

I believe that demurrage in terms of a charge on positive balances acts as a counterbalance to interest (a charge on negative balances) and would thereby rid us of fluctuations (boom and bust) caused by unsustainable one-sided debt. Keynes understood this, which is why his Bancor and International Clearing Union proposal included charges on positive and negative trade balances.

However, the result of incorporating demurrage may (indeed, undoubtedly would) give rise to stable – but nevertheless unsustainable – growth, which is the subject of your question.

Profit

The reason is that there is another driver for growth – and this is also the source of the productivity and competition logic – which is the “For Profit” operation of transaction-driven intermediary businesses. I believe that, in fact, inflation is almost by definition driven by the profit motive. Not that anyone in power would ever admit this, even if they understood it. Yes, that’s right, the principal cause of inflation is the profit motive.

This profit motive is made pathological by the “free” limitation of liability enjoyed by “For Profit” Corporations. I have come to the conclusion that the solution lies in new – partnership-based – legal and financial frameworks I call “Open” Corporates. These are essentially a form of “legal XML” which link disparate jurisdictions and enterprises rather than disparate hardware and software. Law is Code.

Within a partnership there is no “profit” and no “loss” (and no rentier intermediaries) -merely the mutual creation and sharing of value in all its forms. The accounting requirement is for a “shared transaction and title repository”. In other words, double entry book-keeping becomes redundant in a Peer to Peer world.

With the profit driver removed, it is possible to arrive at a global market structure where participants cooperate together to make the best use of resources and to share the savings they make.

That is exactly what I am proposing in the context of a new global market in natural gas. Indeed, it is the only way such a market could evolve at all, since conventional oil market structures cannot work. I will not bore you with the reasons.

Even if no explicit carbon levy is made (and I think it is a viable alternative to both a carbon tax and a deficit-based “fiat” carbon credit solution), the guarantee charges collected on carbon energy trading balances would fund direct investment in renewables and energy efficiency which would act to rectify the imbalances, through transition from carbon energy to renewables.”