This research programme is based on analysis which expresses our profound concern on the dynamics of interest in our society, the accumulation of wealth and power it causes, and its effects on the purchasing power of the majority of people.

We are astounded by the obviousness by which the major premisses of neo-liberalism are accepted, without ever checking many of them or comparing them with factual data.

This programme intends to fill these gaps, and to construct a framework which is more close to reality, which does not encourage large scale accumulation and abuse, and which, most importantly, does offer a solid underground for those who wish tho act to improve their fates.

This is not intended as a discussion forum, but as an international research network in which we want to co-operate with anybody who shares the premisses of our analysis in creating both an analytical framework from which to act, and simultaneously a set of methodological tools with which to act.

What you will read hereafter is the outline of our analysis, and the themes whe identified as interesting research topics for countering the neo-liberal paradigm.

You are welcome to react. If you have critiques or corrections to the analysis you are very welcome to share them. If you whish to take part of the research or to investigate specific topics, please contact Camilo Ramada at Aktie Strohalm, c.ramada@strohalm.nl

Analytical background

Keynes, the renowned economist, observed in the nineteen-thirties that when interest falls under 3 or 4 percent, owners of money prefer to keep it, rather than to lend it or invest it. This led him to his wideley asserted economic understanding of the 'liquidity trap' which has manifested itself repeatedly all over the world. But: what does this knowledge imply?

A positive rate of interest means a price on money, which means that supply is smaller than demand. Keynes' discovery that as soon as supply and demand of money are balanced (interest zero) there will be a crisis (liquidity trap), forces politicians and authorities to prevent that this situation occurs.

The directors of the F.E.D. and the European Central Bank are actively engaged in attaining an endemic shortage of money. We can never realize this enough: a shortage of money means a shortage of means of exchange, this means a shortage of the possibilities for people to realize themselves and their goals in the economy.

Because of the competition that is ignited in the economy to obtain the scarce means of exchange, the weaker see their chances of realization unnecessarily minimized. They, for example, become unemployed.

One of the sophisticated aspects of our monetary system is that money comes into circulation against interest, hereby automatically creating the scarcity of money in the future because of the money needed to pay this interest.

The paradoxical effect is that the system has a continuous shortage on the one hand, but at the same time is forced into a dynamics of growth (or crisis).

The scarcity of money hardens competition. Competition is no longer only about markets, but also about finance.

Authorities will try to keep the price of money at a minimum level of 3 or 4 percent. It can be higher, of course, for example because of the need to pay interests over previously created money.

This interest results in a monetary flow from the poor to the rich.

At the same time, these flows imply a concentration of fortunes which accelerates itself and which moves according to it's own logics. Generation of returns becomes the main argument, in stead of other productive or economic motives.

Acceleration and pauperization take place between different (groups of) people, as well as within each of us. In rich countries life is being more and more commercialized, and despite all prosperity many people do not find the way to develop themselves.

Seen the endemic shortage of money the world finds itself not only in a competition for markets and competition for finance, but more and more also in a competition for purchasing power.

Economic theory assumes that prices give consumers information on which would be the cheapest purchase. This is only true in part if we take into account the importance of purchasing power in economic welfare.

Prices do not give any information on the ways in which the liquidity of the expenditure will flow. Will this money circulate locally, or will it leak away from the region, and therefore be lost as purchasing power? Prices do not tell anything about this, and a good with a lower price, may be cheaper to the individual, but if the good comes from outside the region the cheap price means a leakage of liquidity from the community. The local produced good may have a higher price but the money paid for it will circulate locally and eventually may come back to the consumer.

This prisoners dilemma for the consumer is a familiar theme everywhere where local producers face competition from large transnational corporations. As soon as consumers follow the prices, they have an advantage in the short run, but the entire community is left without liquidity in the long run.

This prisoners dilemma that exists for the purchasing power of consumers, also exists for savers: for any individual it is more lucrative to invest his/her money in richer areas. But for the community as a whole this means a drain of capital on the one hand, and a depreciation of it's possesions (in which nobody invests) at the same time.

An individual however does not see this in a price. He or she only sees the lower price from the foreign good, and is thus forced into a prisoners' dilemma.

Money and poverty

One effect of the abovementioned mechanisms is that money fails there where it is most needed. Entire populations are left without the symbol they need to organize and specialize and thereby improve their conditions. This is the more cynical because it has been exactly this monetary system which has in an earlier phase pushed aside other (traditional) systems of organization.

What we see in many places in the world today is unnessecary desorganization and lack of specialization, and hence poverty. We see people that cannot find the ways to effectively work for one another.

The weak point of the expanding monetary system is the exponential growing burden of debt. This is the logical consequence of a system that needs credit for the creation of money.

The flow of liquidity from the poor to the rich caused by interest payments, causes the debts on the periphery of the system to become so large, that all trust disapears and credit is no longer available. This effect can be seen in every country, but also on the international level.

It is in the margins of the world economy that we first encounter the effects of the exponential growth of debts. This is where you find monetary wastelands: there is no money left in the productive circuit, no more money can be lent to invest in modernization.

When money dissapears from a region while being the main symbol of economic organization the results are disastrous. When there is no more tool to admistrate the mutual exchanges, this exchange comes to an end. Companies that produce for local consumers disappear because of the lack of local purchasing power.

When mutual exchange diminishes, so do government revenues (taxes). This results in deteriorating structures such as education, housing, social programs, etc. These structures are essential not only for human wellbeing, but also for economic development. In this situation poverty and unemployment become hopeless.

This unending poverty and unemployment is in a large part not caused by the lack of contact with the world market, but simply by the lack of a means of mutual exchange.

The international rat-race for purchasing power

In the international arena we witness a growing competition. From our point of view the aim of this competition is to stop the constant leaking away of money to interest payments.

Where the creation of new (debt-) money is one mechanism to stop the money leak -one that leads to a larger leak in the future- another strategy is to obtain the money from other countries. This is of course a non-strategy, because the gain of one is the loss for the other, thereby resulting in a never ending rat-race.

At the same time, the local economy is pushed aside by the export-economy, thereby destroying valuable means of production for the population. In the next cicle this leads to the necessitiy of imports, thereby undermining it's own purposes.

What is even more amazing is the fact that supra-national organizations, such as the IMF and World Bank have actively pursued this strategy (Structural Adjustment: the opening of economies to the world market) as a path towards development. It is of course obvious that one individual country can gain from larger exports as it temporarily gets hold of external purchasing power, but this can be done only at the loss of another country.

In stead of offering a healty development strategy for the poor countries, the IMF has thus urged countries into a zero-sum competition for scarce liquidity.

The daily reality of a globalized monetary system is that consumers get no information in prices about where their purchasing power will flow to. In other words: when buying a locally produced good the chances that this purchasing power will return to the buyer when he/she is performing the role of seller/producer is larger than when buying an external good or service. Locally circulating liquidity will generate economic activity over and over again. So as a whole the comunity is benefited from 'buying local', even if the local prices are above world market levels.

Overall view

What we see here is a monetary system that needs scarcity to function. In it's systemic functioning it creates a lot of wealth, but at the same time it actively creates poverty. It accumulates the scarce liquidity and leaves a large part of people without any purchasing power, having destroyed other ways to symbolize their economic specialization and exchanges and mediate reciprocity.

At this moment we, Strohalm, are working on a book called 'Poor because of Money'. In this book we introduce and explain the abovementioned concepts and mechanisms.

If you or your institution want to adapt this book to your situation and your language, and thus become our co-authors, you are very welcome. We plan to have this kind of cooperation with a limited number of partners.

Methodology

Apart from developing an analysis on monetary dynamics and their consequences, we, and others, are actively involved in designing new systems for engaging in economic interaction. Many of these systems are working today and have the provide not only a new view on the funcitoning and possiblities of money, but, more importantly, provide immediate purchasing power and the means for economic self-realization for the participants.

The scope of the analytical framework as outlined above is to provide the theoretical backing for a practical and active movement in the field of monetary initiatives. For this movement we are working on methodological themes. This work is outlined on the page 'methodological development network'.

Contact

Please contact us for further elaboration of possibilities. Contact person is Camilo Ramada, camilo@instrodi.org