The Politics of Money, January 2006

© Hazel Henderson, January 2006
All Rights Reserved
(word count 1,753)


Hazel Henderson

The word is out that economics, never a science, has always been politics in disguise. I have explored how the economics profession grew to dominate public policy and trump so many other academic disciplines and values in our daily lives. Economics and economists view reality through the lens of money. Everything has its price, they believe, from rain forests to human labor to the air we breathe. Economic textbooks, Gross National Product (GNP) and the statistics on employment, productivity, investment, and globalization – all follow the money. Happily, all this focus on money is leading to the widespread awareness of ways money is designed, created and manipulated. This politics of money is at last unraveling centuries of mystification.

Civic action with local currencies, barter, community credit and the more dubious rash of digital cybermoney all reveal the politics of money. Economics is now widely seen as the faulty sourcecode deep in societies’ hard drives….replicating unsustainability: booms, busts, bubbles, recessions, poverty, trade wars, pollution, disruption of communities, loss of cultural and biodiversity. Citizens all over the world are rejecting this malfunctioning economic sourcecode and its operating systems: the World Bank, the IMF, the WTO and imperious central banks. Its hard-wired program: the now derided “Washington Consensus” recipe for hyping GNP-growth is challenged by the Human Development Index (HDI), Ecological Footprint Analysis, the Living Planet Index, the Calvert-Henderson Quality of Life Indicators, the Genuine Progress Index and Bhutan’s Gross National Happiness… not to mention scores of local city indices such as Jacksonville, Florida’s Quality Indicators for Progress, pioneered by the late Marian Chambers in 1983.

As with politics, all real money is local, created by people to facilitate exchange, transactions and is based on trust. The story of how this useful invention, money, grew into abstract national fiat currencies backed only by the promises of rulers and central bankers is being told anew. We witness how information technology and deregulation of banking and finance in the 1980s helped create today’s monstrous global casino where $1.15 trillion worth of fiat currencies slosh around the planet daily via mouse clicks on electronic exchanges, 90% in purely speculative trading.

US President Bush embraced former chief economic advisor and new Fed Chairman, Ben Bernanke’s opinion that the mystery of low bond yields and interest rates was due to a “global savings glut.” Former Fed Chairman Greenspan, whose zero real interest rates flooded the US economy with excess liquidity and helped create the dot-com, housing and global asset bubbles, declared himself “perplexed.” The anomaly involves the global economic imbalances between the USA, the world’s largest debtor – borrowing the lion’s share of global capital – and the developing countries of Asia and those exporting oil as the world’s new lenders. I doubt there is a “global savings glut” or a “Shift of Thrift” from indebted U.S. household’s zero saving rates to thrifty Asian savers as claimed in The Economist editorial of Sept. 24, 2005. My view is that there’s a global flood of fiat paper money – mostly trillions of US dollars – amplified by the pyramiding of financial “innovations” (derivatives, hedge funds, offshore “special purpose entities,” currency speculation and tax havens) vis-&agrave-vis real production of goods and services in the real world.

Today, we see worldwide experimentation with local exchange, barter and swap clubs, such as Deli-Dollars, LETS, Ithaca Hours and other scrip currencies in the USA and Canada. Billions of people still live in traditional non-money societies and the world’s mostly female voluntary sectors. I have described these huge unchartered sectors as the “Love Economy” estimated by the Human Development Report (United Nations Development Program 1995) as $16 trillion simply missing from economists’ global GDP that year of $24 trillion. Others have described these non-money sectors, notably Karl Polanyi; in Primitive, Archaic and Modern Economies (1968); Lewis Hyde in The Gift (1979); Genevieve Vaughan in For-Giving (1997); Dallas Morning News financial editor, Scott Burns in Home, Inc (1975); Edgar Cahn’s No More Throw Away People (2004) and his time-banking programs now emulated worldwide (The Time Dollar How To Manual,

All this hands-on experimenting resulted in an explosion of grassroots awareness about the nature of money itself. As local groups and communities created their own local scrip currencies and exchange systems, they learned about economists’ deepest secret: money and information are equivalent – and neither is scarce! As money morphed from stone tablets, metal coins, gold and paper to electronic blips of pure information – the economic theories of scarcity and competition began to be bypassed by electronic sharing and community cooperation. Barter, dismissed in economic textbooks as a primitive relic – went hi-tech. eBay, the world’s largest garage sale, is an example of how to bypass existing markets.

People began to see how central banks and national money-systems control populations by macro-economic managing of scarcity, employment levels, availability of mortgages and car loans, via the money-supply, credit, interest rates and all the secretive levers and spigots used by central bankers. Even Nobel prizes were politicized as mathematicians in 2004 challenged the so-called “Nobel Memorial Prize in Economics” demanding its de-linking from the Nobel prizes and to confess its real name, “The Bank of Sweden Prize in Economics.” The mathematicians, Peter Nobel, grandson of Nobel and many other scientists object that economists misuse mathematics to hide their faulty assumptions – and that economics is not a science but a profession. The row over the 2004 Bank of Sweden Prize was because its recipients had authored a 1977 paper with a mathematical model purporting to “prove” why central banks should be independent of political control – even in democracies. Central banking too, is politics in even deeper disguise, as I describe in “21st Century Strategies for Sustainability” (downloadable at 21st_century_strategies).

Today, rapid social learning about the politics of money and how it functions is revealing this key mythology underlying our current societies and its transmission belt: that faulty economic sourcecode still replicating today’s unsustainable poverty gaps, energy crises and resource depletion. Climate change creeping upon us for 25 years is the latest media wake up call, and predictably economists quickly “captured this issue for our profession,” as a UK economics group put it (Henderson, 1996), to promote their pollution and C02 trading “markets.” In spite of such efforts, the defrocking of economics, the deconstructing of money systems and the growth of all the healthy local, real world alternatives is propagating widely. The World Social Forum launched in sunny Porto Alegre in 2000 by Brasilian reformers is one of many such worldwide movements. Argentina’s default in 2001 taught its citizens that they could trust their own local scrip, flea markets and electronic swap systems more than the country’s official currency: the peso. Argentina, Brasil and Venezuela have announced they will repay their IMF loans in full – to free their economies from “Washington Consensus” prescriptions.

I have documented over the years many of the pioneers of money reform, from the Time Store in Cincinnati in the 1890s, Ralph Barsodi’s “constants” in New Exeter, and during the 1930s “bank holiday,” Vermont’s own Malted Cereals Company scrip, issued in Burlington and the Wolfboro Chamber of Commerce’s scrip in New Hampshire.

Margaret Thoren has kept alive The Truth in Money Book by Theodore R. Thoren and Richard F. Warner (from P.O. Box 30, Chagrin Fall, OH, 44022). Other perennials: E.F. Schumacher’s Small is Beautiful (1973); James Robertson’s Future Wealth (1989); Margrit Kennedy’s tireless teachings; Robert Swann’s Community Economics are all in the Schumacher Society’s Library. The Society runs the SHARE credit system while documenting other community credit pioneering, such as Michael Linton’s LETS experiments, Paul Glover’s Ithaca Hours and many other projects since the early 1980s. Bernard Lietaer’s The Future of Money (2001); Lynn Twist’s The Soul of Money (2004); William Krehm’s COMER Newsletter ( and James Robertson and Josef Huber’s Creating New Money (2004) continue to keep these lessons alive and updated. My bookshelf on alternative economics, barter, credit and currency system continues to grow, and includes Ralph A. Mitchell and Neil Shafer’s indispensable eye-opening self-published Standard Catalog of Depression Scrip of the United States in the 1930s (Kranse Publications, Iola, WI) (1984). It contains thousands of pictures of alternative scrip currencies issued in almost every US state and city and many in Canada and Mexico after the Great Crash of 1929 and the bank failures that followed. During the 1980’s in all my talks across North America advocating local self-reliance and alternatives to fiat money, I carried this heavy volume along to show how local inventiveness helped overcome the failures of national banking and finance. People would raise their hands in recognition as I would show on overheads the scrip used in their state. “I remember these in my Dad’s bureau!” “My Mom used that to buy our groceries!”

So, today, as the global casino again reaches crises of abstraction, derivatives, currency futures and financial bubbles – we have been here before. Today’s global imbalances, deficits, bouncing currencies, poverty and debt crises require a systemic redesign of that faulty economic sourcecode. Worried finance ministers and central bankers call vainly for a “new international financial architecture.” They do little but fret about this behind closed doors, at meetings of the G-8, WTO, and in Jackson Hole and Davos. Some clever libertarians try to beat the bankers at their own game with global digital currencies backed by gold, including e-gold Ltd, Gold Money and Web Money. Based in offshore havens, Nevis, Jersey, Moscow and Panama, they have become platforms for cyber-crooks (Business Week, January 9, 2006). The rest of us are redesigning healthy homegrown sustainable local economies – all over the world.

Before we fall into “either/or” errors, we should avoid doctrinaire “smallness,” ideological localism and knee-jerk libertarianism. None can protect local communities from the ravages of market fundamentalist-driven globalization. Like it or not, we are all “glocal” now. Communities, like cells in the body-politic and the body, need boundaries or membranes to keep out elements destructive to the cell’s integrity. But all cell membranes are semi-permeable to allow needed elements, information and energy exchanges from the environment to pass through. In today’s information saturated world, communities need to understand anew which elements to reject and which to embrace. Wholesale rejection can lead to rigidity, xenophobia and misreading of history. Wholesale acceptance of current unsustainable economic global trends will surely lead to loss of local culture, biodiversity and resource-depletion. We humans have been adept at creating new scenarios and technologies that mirror our lack of systemic knowledge and foresight. From such social changes and unanticipated consequences, we must then learn and evolve – or suffer ecological collapse.


Hazel Henderson, author of many books since Creating Alternative Futures with Foreword by E.F. Schumacher (1978, 1996). She co-created with the Calvert Group, the Calvert-Henderson Quality of Life Indicators, regularly updated at She serves on the Advisory Board of the Schumacher Society and ? often teaches at Schumacher College in Britain. She is currently writing (with co-author Simran Sethi) Ethical Markets, the companion book to her TV series, aired on PBS stations nationally and on TV channels in Brasil and other countries

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