This concentration-of-wealth mechanism is, strictly speaking, a structural issue. Nonetheless, its behavioral effects are quite significant. Consider, for example, that the vast majority of us must work ever harder to maintain our middle-class lifestyles. This same mechanism not only corroborates the perception that the rich keep getting richer, but reveals that this concentration of wealth is an ongoing, self-perpetuating, systemic reality that endures despite our efforts to address it.
Interest-bearing money and the transfer of wealth it perpetuates have many important consequences, including the steady erosion of one of the key elements required for societies to function—trust. Today’s societies are instead plagued by mistrust in our hopes for the future, in our leaders and institutions, and ultimately, in one another. It is trust that backs our money and allows a free nation to function optimally. And it is the corrosive effects of a deficit of trust that ends relationships, divides nations, and has undermined entire civilizations down through history.
Much of today’s focus is placed on the accumulated negative consequences of industrialization, such as pollution, global warming, and our economic woes. It should be understood, however, that it is not interest-bearing money that is the principal cause of these and other troubles, but rather the fact that it is the only type of money available. What kinds of economic and behavioral patterns could be engendered if there were different types of currencies working side by side with central bank-issued money?
The importance of money’s non-neutrality and the extent to which it is linked to the human condition is examined further in Part III of this work. Suffice it to say here that money’s impact on society is of vital importance. Our ability or failure to understand this seemingly obscure feature of money may very well determine our capacity to successfully navigate the challenges of our age and realize a better future.
It may be difficult to imagine monetary systems other than the one currently in use, or how they might function and what effects, if any, they would have on society. Fortunately, we now have sufficient information to piece together the monetary paradigms of several past ages, as well as the different economic and social patterns they generated. One such epoch is explored next.
CLOSING THOUGHTS
Money is not value-neutral, but instead profoundly impacts the kind of society we live in. Interest-bearing national currencies were the hidden engines that propelled civilization into and through the Industrial Revolution. Both the best and the worst of what the Modern Age has achieved can be directly or indirectly attributed to the architecture of our money and the values they encourage, including: competition, the need for perpetual growth, and unrelenting wealth concentration. By intelligently engineering money, we can also engender different kinds of behavior and expect different societal results.
CHAPTER SIX - Back to the Future
The icons of old are the coding of tomorrow.
And tomorrow holds the promise of recovery of forgotten wisdom.
~JEAN HOUSTON
Historical evidence informs all our social, cultural and economic knowledge. In economics, however, it is only very recent data that tends to be considered, based on the assumption that experiences from past ages are not relevant to contemporary economic issues. Yet, our banking and monetary systems have remained fundamentally unchanged for centuries. Failure to examine the more distant past prior to the inception of the current paradigm risks overlooking potential insights useful for today.
One historical period of particular relevance is explored herein.
THE CENTRAL MIDDLE AGES
Once upon a time, there existed an age blessed by an uncommon prosperity that enriched each segment of society. There was work for all, with favorable working conditions and abundant time for family, community, and personal pursuits. This epoch was also characterized by significant advancements in science, technology, education, literature, music, arts, craftsmanship, and more. Its ethics included cooperation, an unusual civic pride, and long-term thinking. The many unusual traits of this period culminated as well in the creation of some of the most beautiful and enduring public works the world has ever known.
Though seemingly like some fairy tale, this age not only existed, but endured for centuries. It flourished in the very same region from where our current monetary and banking systems originated—Western Europe. It came into being, however, long before the advent of our present monetary paradigm and the modern era. A millennium hence, this bygone age offers unique lessons for us today.
The Middle (or “Medieval”) Ages were so named because this time period was the expanse of European history in the “middle” of the high civilizations of Rome (ending in the mid-400s CE) and the Renaissance (beginning in the late 1400s). This entire epoch is also commonly referred to as the “Dark Ages,” as popular belief regards this period as one of dismal poverty and primitive lifestyles, crowned by the horrific plague. The term medieval is still used today as a derisory label to dismiss something as hopelessly primitive.
Many of the opinions regarding this age, however, date back to 19th century assertions, which have since been proven to be incomplete or entirely mistaken. The Middle Ages spanned more than 1,000 years. Recent scholarship has unveiled key distinctions regarding what transpired over this long expanse of history.
A dismal view certainly remains justified for the epoch following the collapse of the Roman Empire—the Early Middle Ages (5th–8th centuries)—and is much more accurately descriptive still of the dramatic closing medieval centuries. It is in fact the particularly appalling Late Middle Ages (14th–15th centuries) that provided much of the fuel for the dark image that future generations would project, inaccurately, onto the vast entirety of the medieval millennium.
There were, however, two and one-half centuries during the medieval epoch when something quite different took place. This middle period is the “Central Middle Ages.”
Highlights of the Central Middle Ages
Toward the middle of the 10th century, a marked shift in consciousness paralleled dramatic economic improvements in many areas of Western Europe. The progress spanning 1040–1290 is noted by medieval scholars as the “First Modernization,” the “European Takeoff,” and the “True European Renaissance.” Between 1180–1230, for instance, the first wave of universities was founded in Europe.91 Abstract sciences, such as mathematics, once thought to have developed in the official Renaissance of the 16th century, occurred instead centuries earlier during this period.92
The Central Middle Ages were also characterized by a most unusual prosperity.
Prosperity for All
The prosperity of this era was quite unusual not only in quantitative terms, but also by the extent to which it benefited the general populace. A number of contemporary medievalist historians report that the quality of life for ordinary people in the 12th century may very well have been the highest in all of European history, comparing favorably in important respects even to present-day conditions. Workers, for example, seldom had fewer than four courses at lunch or dinner and enjoyed three or even four meals a day. Daily caloric intakes, estimated at 3000 calories in developed countries today, was instead 3500–4000 calories in the Central Middle Ages.93
Working hours were limited as well. When the dukes of Saxony tried to extend the workday from six hours to eight, workers in the region rebelled. Sunday was the “Day of the Lord” and the appointed day for public matters, while the so-called “Blue Monday” was designated as a free day, set aside for the general public to attend to their private affairs. In addition, there were at least 90 official holidays annually. In some regions, there may have been as many as 170 holidays in a single year!
In addition to favorable working conditions, the working class also enjoyed a remarkable level of economic independence. As medieval economic historian Guy Bois explains: “In the agricultural sector, for the first time the small landowners as a group become much more productive than the Seigniorial holdings. In short, Europe becom
es more and more a world of small producers with the family unit as its fundamental engine.”94
A number of medieval historians offer testimony to the expansion and improvement that took place in virtually every dimension of Central medieval society. Medievalist Marcel Bloch claims that increased private ownership is accompanied by “the largest increase in cultivated agricultural land in the entire span of the historical record.”95 Guy Fourquin reports: “not only did the land available expand, but also the average yields more than doubled in most cases.”96 F. Icher writes: “Between the 11th and 13th century, the Western world experiences a high level of prosperity that is reflected concretely by a demographic expansion without precedent in history.”97 Between 1000 and 1300, Europe’s population is generally estimated to have increased an unprecedented twofold, one expression of the increased capacity to feed and maintain the population. Moreover, as Guy Bois writes, “Growth isn’t limited to a demographic explosion combined with a strong agricultural expansion. A flourishing commercial expansion was its third dimension.”98
Medievalist Jean-Pierre Bayard reports that, “ordinary life is revolutionized: coal is used for heating, candles for lighting, eyeglasses for reading, glass is used more and more commonly, paper is manufactured on an industrial scale.”99 Robert L. Reynolds writes, “[There is] a growing manufacture of textiles, pottery, leather goods, and many other things. The products get better and better. Prices go down in terms of man hours because of more efficient management, improvement in tools and machinery, and better transport and distribution.”100 According to medievalist R. Phillippe, at the beginning of the 12th century there were in operation in France alone no fewer than “20,000 water mills, which represented the energy of 600,000 workers. Such technologies liberated massive amounts of labor.”101
Urbanization, previously thought to take off with the Industrial Revolution of the 1700s, began during the Central medieval period. Frances and Joseph Gies write, “Europe was turning from a developing into a developed region. The growth of industry meant the growth of cities, which in the 12th and 13th centuries began to abandon their old roles of military headquarters and administrative centers as they filled with the life of commerce and industry.”102 Robert Lacey and Danny Danzinger report that “Warwick, Stafford, Buckingham, Oxford—most of the county towns of modern England originated in the tenth century.”103
Guy Bois summarizes:
One can only be impressed by the extraordinary vitality and power of the changes that occurred during those three centuries. Whether one considers the demography, the urbanization, the techniques, the relationships between labor and money, every one of these aspects of society was completely revolutionized…One will have to wait five hundred years to live another wave of transformation of that scale: the capitalist Industrial Revolution.104
Heights
Confirmation of the unusual prosperity of this age comes in an equally unusual form of physical evidence: bodily remains.
It is well known that today’s generation is substantially taller than the previous one—better nutrition and care, particularly in youth, is credited with this process. In a study of the skeletons of bodies in the same geographical area—London—informative findings emerged. The women of London were taller on average during the 10th–12th centuries than any other period in recorded history, measuring a whopping 7 centimeters taller than her Victorian counterpart and even 1 centimeter taller than today! Regarding males, it is only within the past fifty years that they have caught up to and, by 1998, finally outgrown their medieval counterparts, by a mere two centimeters (see Figure 6.1).105
The increased height of Londoners of the Central medieval period appears to reflect the greater quality of life for men and women of that epoch.
Age of Cathedrals
This medieval epoch has also been referred to as the “Age of Cathedrals,”106 as nearly all of the cathedrals of Europe were built at this time. Historian Sacheverell Sitwell writes, “It was the greatest period of building activity that there has ever been, and no mere catalogue of names and places can convey any idea of the strength and quality of its products.”107
It is estimated that by 1300 CE there were almost 1,000 cathedrals in Western Europe, alongside 350,000 churches and several thousand large abbey foundations. Yet, the total population back then is estimated at only 70 million, which calculates to an average of one Christian place of worship for every 200 inhabitants. The ratio was even higher in parts of Hungary and Italy: one church for every 100 inhabitants!108
This medieval building phenomenon is more remarkable still given that there was no central authority, church or otherwise, in charge of initiating or funding the construction of these cathedrals. Contrary to popular belief today, these structures were neither built by nor belonged to the church or nobility.109 Local nobility and royalty customarily did make contributions, but these monuments were typically owned and financed by the citizens of the municipalities where they were built.110
The cathedrals embody some of the most beautiful gifts of Western history. These monuments stand as a strong statement of faith, ingenuity, and generosity. From a narrower economic viewpoint, they also offered a viable long-term income strategy for the community (see insert).
Cathedrals: an Investment Forever
Besides their symbolic and religious roles, the cathedrals served another key function. Attracting currency into a community has clear economic advantages, as those living in proximity to today’s tourist attractions such as Disney World will confirm. In medieval times, this was realized by attracting pilgrims, who played a similar economic role to that of today’s tourists. A proven way to draw pilgrims was to build the most accommodating and spectacular cathedral in the area, which may help explain why medieval communities built cathedrals that could house two to four times their own population.
Additionally, these cathedrals, which were built to last forever, created cash flow not only for the population of the time, but for many future generations. The bulk of the businesses in Chartres, France, for example, still thrive today from tourists coming to visit its medieval cathedral 800 years after its construction.
Few medievalists today doubt the extraordinary economic and building boom of the Central Middle Ages. One fundamental matter, however, remains unresolved: “The medieval blossoming has been described many times in its manifestations, its chronology, and its many facets, but never explained. Its mechanism remains an enigma.”111
The economic mechanism that justified the remarkable blossoming of that period remains unclear. Where did the resources come from to fund hundreds of building projects on the scale of cathedrals? Faith and devotion alone cannot explain this construction any more than they can explain the remarkable prosperity of the ordinary people.
One medieval feature has, however, gone almost entirely overlooked—the monetary system. This previously ignored element may help explain the peculiar dynamics of that period.
The Invisible Engine
Two different types of currencies functioned in parallel to one another throughout much of Western Europe during the Central Middle Ages. One type of currency consisted of centralized royal coinage, with many features in common with present-day national currencies. Its usage was primarily for long-distance trading and for the purchase of luxury goods. The second type of currency consisted of an extensive network of different local currencies, used primarily for community exchanges.
Many of the local currencies had a very peculiar feature—a demurrage charge. Similar to a negative interest on money, the demurrage feature functions like a parking fee, which is levied for holding onto the currency for too long without spending it.
The demurrage was implemented through a general recoinage practice, enacted during the transfer of power to a new lord, usually due to the death of one’s predecessor. As a rule, four old coins were handed in and exchanged for three new ones, each with the same individual value of the coins that they replaced. This tradition, calle
d “renovatio monetae,” amounted to a 25 percent tax payable by anyone in possession of dated coins at the time of recall. The uncertainty about the duration of a lord’s life (and thus, the functional lifespan of the currencies) acted as an incentive for users to spend or invest rather than save such coins.
In technical terms, when demurrage is applied, money continues to function as a “medium of exchange” but no longer serves as a “store of value,” that is, something worth hoarding. Though saving was very much encouraged, it was not done by storing currency, but took the form of productive assets. Examples of such investments were land improvements or high-quality maintenance of equipment such as water wheels and windmills, or enduring investments in the community such as the cathedrals. The specifics of how demurrage was applied differed from region to region, but generally speaking, provided a built-in incentive to invest in this way.
Written records from the period offer testimony to the benefits of this kind of savings. A significant number of mills, ovens, winepresses, and other heavy equipment were improved upon or even completely rebuilt each year. “They did not wait until anything was breaking down…On average, at least ten percent of all gross revenue was immediately reinvested in equipment maintenance.”112 No other period since then has encouraged such intensive preventive maintenance.
New Money for a New World Page 7
