Hummel, Sam

For millennia, numerous faith and philosophical traditions discouraged money lending or forbade or stigmatized the charging of interest. By comparison, little theological, philosophical, or intellectual discussion has focused on resolving how money should be created in the first place. Who should have the permission to create new Dollars, or Euros, or Yen and add them to the economy? For what purposes can they create new money and for whose benefit? These questions are highly relevant at a time when the creation of money is being contested in so many ways (e.g., cryptocurrencies, central bank digital currencies, payment apps, etc) and blamed for so much (e.g., inflation, dropping demand for the US dollar, etc). These are inherently political questions with big implications for society and governance, which is why matters of equity, justice, power, and wellbeing for all need to be included in the conversation.

One thing that is precluding moral thought leaders from participating more actively in the discussion of money creation is that 85% of people, research shows, have an incorrect understanding of how their nation’s money supply came into existence. This paper presentation will clarify how money is created today and illuminate important moral questions raised by the process. The goal is to prepare participants to engage in the fight for money creation systems that are fair, truthful, accountable, and aligned with wellbeing for all.

Why should there ever be a shortage of money for solving urgent social and ecological problems? Today, proven solutions to many crises are not being deployed due to a lack of funding. It would make sense if solutions were going undeployed due to a lack of materials, or labor, or technical know-how. But that is not the situation we face. Around the world, money scarcity leaves massive numbers of people unemployed even when the material and know-how exist to support them in providing much-needed social and ecological care work. In such situations, why can we not create more money, more numbers, to unlock the underutilized capacity to solve problems? After all money is just numbers, something we cannot run out of.

This paper argues for an even more powerful line of questioning, one conceivable only within a systems-level analysis of national money supplies and their governance. Current governance processes differ radically from the conception held by 85% of people, according to extensive survey research. Therefore, the paper begins by illuminating the current governance of national money supplies and the ways it violates every one of Ostrom’s eight design principles.

In the second section, the paper shows there are alternative wellbeing-promoting money supply governance processes that better align with Ostom’s principles. These alternatives are proven to work well at local and national scales. If implemented in a country like the United States, they would channel trillions of dollars in funding into solutions to social and ecological problems. Such a change is not wishful thinking. The United State employed many of these alternative money supply governance mechanisms to fund New Deal programs, WWII mobilization, and massive public investment postwar. Germany still uses many of those same mechanisms today, which is a key to its remarkable economic strength.

Currently, these governance choices are made without substantial stakeholder engagement. Empirical evidence shows that among stakeholders there is not universal agreement about which governance design is best. However, there is near universal agreement (86%) that the governance system in place today in most countries is undesirable.

In all, the paper invites and prepares commons researchers to join a growing community of thinkers in law, economics, political science, and banking that are calling into question the current governance of national money supplies and putting forward proposals for change.