Today's money is based on the belief
that it's worth something. Crazy, no? Why not back your
dollar in sustainable energy produced in your hometown?
By Julian Darley
The decline in the availability of cheap energy is
likely to be accompanied by an equally ominous
possibility of world financial meltdown. That we are
facing both of these threats now is not an accident:
energy and financial stability are intimately linked. I
believe the solutions for dealing with these twinned
threats are equally linked. To build an environmentally
sustainable, monetarily stable world, we need to create
an economy in which locally produced energy provides the
backing for local currencies.
Let's start with energy first. Energy decline will soon
challenge just about every common notion of life that we
have developed during the industrial era. Most of what
we have built in the globalizing world of the last half
century depends on cheap energy, particularly oil and
natural gas.
After years of oil-industry financed obfuscation, there
is a broad scientific consensus that our profligate use
of fossil fuels is producing global warming. And despite
similar oil industry denials, there is a growing
consensus that we are rapidly approaching Peak Oil,
after which world oil output will go into permanent
decline. (The United States experienced Peak Oil in
1971.) After global Peak Oil, oil will still be
available, but at ever increasing prices.
To lessen the impact of global warming and the
inflationary pressures of Peak Oil, we should be moving
as rapidly as possible to an energy system based on
locally based renewable energy production. (Go here for
more details about why cornucopian schemes like nuclear
power or oil from tar sands will not solve our energy
problems).
Accepting the limits of locally produced renewable
energy flies in the face of one of the basic assumptions
behind the current energy system, that there is an
endlessly increasing, supply of cheap fossil fuels,
especially oil.
And here's the link to money: we have made the same
limitless assumption about money, that the world
monetary supply could grow without end as well. In both
cases, we assumed that the growth in energy-use and in
money supply was an unmitigated good.
There have been a growing number of voices warning us
that both of these assumptions were wrong, that the
notion of unchecked growth was leading us toward
environmental and financial meltdowns. And while we have
been making some progress in understanding the energy
problem, there is virtually no mention of the role of
money.
I admit that thinking clearly about money can be
difficult. Money has been around far longer than the oil
age, the industrial era, and may even pre-date
civilization itself. But though we may take money for
granted, it is neither simple nor solid nor reliable --
far from it. Money is a complex and fragile
construction, and as history has shown over and over
again, money can become worthless almost overnight. In
the long run, money has proven very difficult to manage
-- it's a tricky and strange invention.
The original driving force behind money was our need for
specialization as we grew from hunter-gatherer societies
to settlements of a few thousand, and now cities of
millions. Money helped us to increase our carrying
capacity -- the number of humans a given area will
support at a certain level of technology -- but it has
also helped us to become largely disconnected from the
real material world.
Today's global monetary system is based on currencies
controlled by national banks, and the global trading
system is mainly based on one of those currencies: the
US dollar. This system leaves communities and
individuals vulnerable to the fluctuations of the global
market. The level of trade in a locale is heavily
dependent on money that flows in from external sources.
Any disruption to that flow can restrict trading
activities locally. This potential shortage leads people
to try and obtain more and more money, a quest which is
ultimately unsustainable.
Money can be "backed" by all kinds of physical
substances, like precious metals. Or money can be "fiat"
("let it be made") like most national currencies today,
backed by nothing except faith and confidence -- or
sometimes just confidence tricks.
Unlike a backed currency, a fiat currency can at least
in theory quite literally expand for ever. There is no
direct link to material reality to impose limits, only
economic theory, which is devoted to eternal growth and
doesn't like to deal with limits -- or reality -- at
all. An unlimited currency along with unlimited growth
and (so far) unlimited energy has allowed us to do
almost unlimited damage to the planet. However, as the
availability of cheap, abundant energy declines, energy
will soon become the dominant partner in the
relationship with money, and money's true dependence on
energy will finally become apparent for all to see.
As energy becomes increasingly expensive and scarce, the
colossal size and scale of our infrastructure, which has
characterized the rise of industrialism, will
selectively crumble and become unserviceable. It is only
the energy subsidy from hitherto ever-increasing use of
cheap fossil fuels that has allowed our current
grandiosity. If this argument is correct, national
currency reform will become an oxymoron. It will become
apparent that local currencies must be created,
currencies based on the resources of the locale -- be
they abundant or austere.
Communities can further insulate themselves by
de-monetizing as many goods and services as possible and
try to produce as much of their vital needs as locally
as possible, especially food (from local farms and
processors) and renewable energy. Demonetizing means
taking a product or service out of the market so that it
does not need a monetary value. Hence the need either to
stop using a product or to produce it yourself.
When you take a potato from your garden, if you are
fortunate enough to have one, you don't pay yourself a
dollar for the privilege -- you just clean it, cook it,
and eat it. Demonetizing can also be done via barter,
and this is in fact quite common in business, including
in the industrialized world. But demonetizing flies in
the face of globalization and the Industrial Revolution.
Communities that create such local or regional
currencies will have a much better chance both of riding
out the coming energy decline and of being buffered from
any monetary or economic collapse that may happen for
whatever reason. The sooner such systems are created,
the more ready that region will be to withstand shocks
and to avoid the terrible unemployment which severe
monetary instability invariably brings.
Backing money with local renewable energy would cause
the material economy to be constrained by the amount of
energy available from the sun -- just like all other
living things, which have been around far longer than we
have. This limitation would undoubtedly mean that some
places would be more suitable for human habitation than
others. But since nature is now starting to teach us
this lesson anyway, it would surely be a much better
idea to plan for constraint than to wait for the energy
and climate avalanches to hit us broadside, especially
as we can now hear increasingly ominous economic and
environmental rumbling.
In our forthcoming book, Relocalize Now! Getting Ready
for Climate Change and the End of Cheap Oil, we discuss
strategies for how communities can create local
currencies. Making the transition to an ecologically
sustainable world is going to be the most difficult task
which our species has ever undertaken. We have a much
better chance of success if we develop strategies that
incorporate an understanding of the unavoidable linkage
between energy and money.
Reprinted by permission from www.evworld.com