Douglas is guest-blogger at Boing Boing.

In his take on the current crisis, he distinguishes two kinds of money, and traces the historical origin of our current system in the Renaissance. What he writes entirely fits with the research I have read from a manuscript of Benard Lietaer.

We also quote Douglas’ conclusion, which is that the current crisis is an enormous opportunity for relocalization.

Read the full contribution here.

Douglas Rushkoff:

1. The Two Kinds of Money

“In brief, the money we use is just one kind of money. Invented in the Renaissance, and protected with laws banning other kinds of money, it has very particular biases that lead to almost inevitable outcomes.

I just finished a book (more on that later in the week), where I make the case that our highly corporatized society was really forged during the Renaissance. Aristocrats were losing power just as a new merchant class was gaining it. So they made a series of deals through which merchants’ companies were granted monopoly charters from the monarchs in return for a sweet cut of the proceeds. Merchants got to lock in their status as newly rich, while monarchs stopped their own descent. Merchants supported the monarchs whose charters granted them exclusive access to new territories or industries, and monarchs got to do colonial expansion once-removed.

The invention of centralized, national currency was meant to support all this. Where localities had previously been free to mint their own currency based on the crops they had grown, now they were forced to borrow money from a central bank. This allowed the issuer of currency – the crown – to extract value from every transaction. Anyone who wanted to buy anything from anyone else had to run it through the central authority – coin of the realm – one way or the other.

This engendered competition for money, which was now a scarce currency issued at interest, instead of a local currency as abundant as the year’s crop. Moreover, any business wanting to borrow money for equipment or development had to pay back several times what they had borrowed. This meant bankruptcy was built into the currency system. If a business borrows $100,000, for example, they’ll have to pay back $300,000 by the time the loan is due. Where does that money come from? Someone else who borrowed.

Meanwhile, local currencies had the opposite bias of centralized currency. Local currencies lost value over time. They were really just receipts on the amount of grain that farmer had brought to the grain store. Since some of that grain was lost to rats or water, and since the grain store had to be paid, money devalued each year. This meant the money was biased towards being spent. That’s why reinvestment in infrastructure as a percent of total revenue was so high in the late Middle Ages. It’s why they built those cathedrals. They were local efforts, by people looking to invest their abundant wealth into real assets for their communities’ future. (Cathedrals were built to attract pilgrims and tourism.)

Unlike local currencies, centralized currencies were biased towards retaining their value over time. Capitalism (in addition to being a lot of other things) is the way people get rich simply for being rich. Capital becomes the most important component in the capital/labor/resources equation. Since the purpose of the Renaissance innovations was to keep the currently wealthy wealthy, the currency was biased to favor those who had it – and could mete it out at high interest rates to those who needed it for their transactions.

What we witnessed over the past decades has been the necessary endgame of the scenario.”

2. The Crisis as an Opportunity

“If we can adopt what we Boingers might call the “Happy Mutant Approach” to this crisis, however, this is not an entirely hopeless situation. Yes, corporations may lose the ability to keep us employed as the banking investment they depend on to operate dries up. But this corporate activity was always extractive in nature, getting (or, historically, forcing) people to buy mass-produced, and nationally distributed food and other goods that were once produced locally.

The collapse of centrally controlled commerce and currency simply creates an opportunity for local commerce and currency to revive. For people to learn to work and live together on a human, local scale – as the original free market advocate, Adam Smith, actually suggested. Admittedly, this would be a painful transition for many – but it’s better than maintaining dependence on a fiscal system designed from the start to turn people and communities into extractable corporate assets. (Think about that the next time you’re called up to “human resources.”)

Whether or not we’ve had time to fully embrace the Craft/Maker/cyberpunk/Boing ethos, our ability to provide for ourselves and one another directly, locally, even socially instead of entirely through centralized commerce, will determine how well we can navigate the near future. “