Thomas Greco talks economics

thomas-grecobwMoney is the root of all evil, so the saying goes.

It’s not just a tired platitude, says Thomas Greco, who has spent the past 30 years studying that notion, reaching one conclusion. “The money problem” as he calls it, has to go.

Greco is an economist, author and consultant on alternative economic systems that wrest control from multinational corporations and return it to the common man. The titles of his books, “The End of Money” and the “Future of Civilization,” echo his mantra that it’s not just about the little guy getting more money. It’s about the future of our planet, our health and our democracy.

And it’s not just the wishful thinking of a disgruntled academic. The systems Greco supports are in operation around the world, including in the United States. They include the LETS movement — Local Exchange Trading Systems. And the Swiss WIR Bank, a credit-clearing system that has more than 70,000 members, not to mention all the national and international barter exchanges that involve hundreds of thousands of businesses trading in billions of dollars of goods and services.

Joanne Zuhl: At what point in your life did you realize that the current monetary system had to be replaced?

Thomas Greco: That goes back 30 years. I was teaching in the college of business in upstate New York, and essentially money and banking was being taught pretty much to accept the system as it is, with the Federal Reserve and the International Monetary Fund and the money creation process, but I really didn’t understand any of that.

It wasn’t until I had left my academic career behind and got involved in the peace and justice movement that I began to see information that was calling into question the dominant paradigm and the structures of banking and money that we had inherited in the past.

I was trying to get to the basic causes of the world’s problems, like starving amidst plenty, the gaps in income and wealth around the world, why some countries were very affluent while other were economic basket cases, and why we had recurrent wars. And in the process of doing my research, I quickly realized that there were a number of causes at different levels. We have the personal values added to beliefs, cultural factors that dispose us in certain direction, but those all result in some fundamental structures: political, economic and social structures, and institutions that channel those ideas and channel human energy.

J.Z.: With the recent economic crisis, is the time ripe for a new understanding of alternative monetary systems?

T.G.: It is a ripe time because we’re starting to feel the pain right here at home. Before, we were able to export the problem to other countries, Third World countries, I called them economic colonies of the Western economies — Europe, the U.S. and Japan. By dominating markets, both the market and the politics, the Banana Republics have been under the thumbs of the United States for well over a century. The U.S. military has been the enforcement arm of the imperial ambitions of American companies, not just American, these are multinational companies with no allegiance to any one country.

J.Z.: It reminds me of “Confessions of an Economic Hit Man.” The author’s name escapes me, but it was very simply laid out how the banks and the military operated in vulnerable countries.

T.G.: John Perkins … he makes it very clear how that works. But before the United States, the empire was headed by Great Britain, and other European powers. Throughout the 18th and 19th centuries, you had many countries dominating other countries as political colonies and later as economic colonies.

We’ve seen a shift from political colonialism to economic colonialism, just as on the micro level we’ve seen a shift from overt slavery to wage slavery, but it sill reflects a shift in balances of power.

J.Z.: You say that your search for social justice led you to conclude that the economic model was the root of the problem. How, then, will a different system correct environmental and social injustice?

T.G.: I quickly came to realize that the fundamental linchpin, the keystone of this structure of power is the money and banking system. Money is the medium of exchange, and whoever controls the allocation of the medium of exchange controls the economy, and whoever controls the economy controls the politics.

The key to understanding all of this is to realize what the substance of money is. It’s just credit. It’s no longer gold or silver. It’s not even any longer bank notes redeemable for gold or silver. What’s behind the money today is a debt obligation. When a bank makes a loan, they create the money in the process of making the loan.

But banks, when they make a loan, they only create the principal and not the interest, the system has a debt imperative, which is a growth imperative. That’s why economists constantly talk about growth. Because we have ever-increasing debt. And this compound-interest formula, it forces growth to accelerate over time.

We’re seeing basically an explosion of the financial system with an explosion of debt. And as debtors try to service what they owe, they have to continually expand their profits, and so we continue to tear up more of our planet, to make more stuff, and we continue to consume more stuff and that’s what’s driving the consumer economy.

Once we realize that money is only credit, then we can take control and allocate it to whomever we want.

J.Z.: How would the alternative economy work?

T.G.: You create a credit-clearing organization, associated with a group of others, who are both producers and consumers. When you sell something into the system, your account is credited and when you buy something, it’s debited.

We’re reinventing money and banking from the bottom up. The banks have been perverse in their actions, and it’s gotten worse and worse over time. We used to have community banks that used to provide credit. Most community banks have been gobbled up by large bank holding companies. And the credit is allocated to big corporations.J.Z.: It’s like “It’s a Wonderful Life,” only in reality the small Bailey Savings and Loan was taken over by Mr. Potter.

T.G.: There have been a lot of sound principles of sound banking that have been pushed aside and left behind, and so banks do more and more things that are not only dysfunctional but harmful to local economies.

When we realize that money is nothing but credit, and it’s our credit, we don’t have to give our credit to the banks and beg them to lend some of it back to us. By organizing a global exchange system, we can directly allocate credit to those we want to support.


J.Z.: Describe some alternative systems you would favor. You’ve praised the “LETS” movement — Local Exchange Trading Systems, and the Swiss WIR Bank, which has 70,000 members and is the longest-running credit clearing system in the world. How do these systems operate?

T.G.: There’s actually hundreds of direct exchange systems. What we’re talking about is reciprocal exchange. And that means it’s an exchange among producers. Almost all of us are producers as well as consumers, we have a way of earning money, as well as spending money, even if it’s only by selling our services to an employer. It’s not exactly charity, it doesn’t take care of those who are not able to produce anything. But indirectly it benefits them because it creates more wealth at the bottom of the pyramid. They’re able to support those nonfinancial transactions that support charities in the gift economy. Right now, more of the value is going to the stop of the pyramid. We have CEOs giving themselves obscene bonuses even as the middle class is being destroyed.

by Joanne Zuhl, Staff Writer

2 responses to “Thomas Greco talks economics

  1. Pingback: Thomas Greco’s Alternatives to Our Broken Economic System : Chelsea Green

  2. This article talks about producers and consumers. It looks at one side of the coin only.The operations of civilization entail irreversibly using natural capital in the production of the goods and services that are consumed. Natural wealth is used to build up the temporary wealth of civilization and its inhabitants. This is an unsustainable process. Reformation of the economy along the lines proposed would make no difference in priniciple to that stark reality.

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