Our Meeting is working through Seeds of Violence, Seeds of Hope, a very helpful document produced by the Friends Testimonies and Economics, a joint project of the Earthcare Working Group of Philadelphia Yearly Meeting and Quaker Earthcare Witness. It is a study-guide for those interested in environmental concerns to learn more about economic issues as they relate to issues of ecological sustainability (and to some extent social justice issues as well).
I was just reading the article, "Money, Banking, and Finance" (by Ed Dreby, assisted by Keith Helmuth and Gary Lapreziosa), and was astonished to learn what money is and how it is created.
What I didn't fully understand before is how the process of lending money at interest actually creates new money! If I am understanding correctly, here is how it works. Banks hold a lot of money that people have deposited that just sits there. So they lend it out at interest, so that it can go back out into the economy and do things. (This much I did know.) When people pay it back, with interest, then the interest is the creation of new money! What this system does is spur people to have to produce more than they might otherwise have produced. Ideally, what they have thereby produced in some sense now backs up the new money created through those interest payments.
If ideally new money is created at a healthy rate, that constitutes a healthy growing economy. There is this steady stream of new money being created and backed up by productivity.
This is thought to benefit everyone, because lenders make a profit (interest collected), and borrowers are able to do more and produce more than they otherwise would have been able to do.
Now, in the real world, it gets more complicated than this, mainly because there are lots of factors that play into the rate of growth, and if the economy either grows too fast or slows too much, then that has other effects that are problematic. Two such factors are (1) not everyone can repay their loans with interest, and (2) there are very likely ecological limits to production rates.
So, all of this gives rise to questions I have. If anyone knows enough about economics to be able to help me with these questions, I would appreciate it!
1. Is growth necessary for a healthy economy? It seems that this system ultimately depends upon a few having concentrations of more money than they really need, so that they can use the lending of this money as a spur to make large numbers of people have to work hard. It is very strange to me that our system is such that some people are making lots of money off of other people doing lots of work. (But maybe there is more justice to this than I realize, since bankers and investors are doing some work in keeping track of all of this, and do deserve to be paid for this work.)
2. Is the reason that growth (the creation of new money) is important ultimately because it is necessary to support an ever-growing population? If so, if population growth stabilized, would we no longer need a growing economy? Would there still be ways to continue to power the circulation of existing money in a steady-state economy?
3. Does ecological sustainability ultimately demand a steady-state economy instead of a growing one? Or is there some level of continuing economic growth that is consistent with ecological sustainability? That is, is there some natural pace of renewability of natural resources that correlates with a modest level of continued economic growth?
5 years ago