Money, the 'Operating System' of the Economy
By Tim Jenkin


Computer users are familiar with the concept of operating systems. There is the Windows operating system, the Linux operating system, the Macintosh operating system and many others. While all of these do more or less the same thing by turning an inert lump of technology into a useful device, each operating system gives the user a distinctly different experience. A computer operating system is a set of software rules and instructions that governs the way a digital processor device works.
The concept of 'operating systems' could be applied to many things, not just electronic or mechanical devices. You could say that all living organisms have 'operating systems' that govern the way they behave. Cats are 'hard wired' to act like cats and dogs are 'hard wired' to act like dogs. This is not to say that there are no variations. Each organism has a different life experience that makes it distinct from others of the same kind, but on the whole each member of a species 'operates' like other members of the species. Fish don't behave like chickens, for example!
An 'operating system' is a low-level set of instructions that determines how a thing will operate. It is the 'base system' that is more or less fixed and gives the thing or organism its primary or common characteristics. On top of the operating system usually lie a number of 'higher level' systems that give the thing or organism its unique individual characteristics. A computer program works on top of the operating system and allows the user to get the machine to do something useful, but always within the bounds set by the operating system. An organism's ability to learn and memorise is one of its higher level systems. This gives it its 'personality' that makes it different from other organisms of a similar type.
You could say that our economies have 'operating systems' too, for despite national and regional variations, most economies today tend to operate in pretty much the same way and produce or hope for similar outcomes. We could define the following as some of the general characteristics of all present day economies:

• They need to grow continuously. An economy that is not growing is said to be a failing or 'sick' economy. The units of the economy, companies and individuals, also need to grow within the overall growing economy.
• Power and influence tends to concentrate and centralise at the upper end of the economy. There is a general tendency towards corporatisation. The economic units at the upper end amalgamate and merge and become ever more powerful and influential
• They are all competing in the international marketplace. This leads to the specialisation of entire economies in order to realise their 'comparative advantage'. As such there is a focus on export industries. Local industries suffer by the importation of cheaper goods from elsewhere
• They compete for investment by lowering barriers and removing controls and restrictions against businesses
• Competition is more prevalent than co-operation. Since all units are attempting to achieve the same ends, they need to compete for resources and customers. Co-operation more commonly takes place through mergers and the swallowing of formerly competing entities. Co-operation is seen as a form of competing against other co-operative entities.
• They suffer from cyclical tendencies ('business cycles'), with periods of boom followed by periods of bust (recession, depression)
• They display inflationary tendencies with a general rise in prices over the long term
• There is a convergence of patterns of production and consumption
• They create, promote and maintain the class structure of society. Wealth accumulates at the top and there is a tendency to widen the gap between the rich and the poor
• They are undemocratic in the sense that decisions about the direction of development and how social effort is deployed are taken by a narrow strata of powerful, wealthy individuals at the top
• There is an expansionist tendency as the growing units of production need to find ever larger markets. The expansion is not only outwards but inwards, with large businesses steadily encroaching on the commons
• Technological innovation replaces labour

But what is the 'operating system' of our economies that produces these common characteristics?
Some would say the 'operating system' is the built in set of subjective factors that drive human beings. Humans are naturally greedy, avaricious and self-seeking, and to promote themselves they need to challenge their competitors. It's a matter of the 'survival of the fittest'. As human nature is 'hard wired' there is not much we can do about the way the economy works.
If, on the other hand, we believe that human behaviour is largely a product of the environments in which we find ourselves then it is the 'operating system' that produces the self-seeking and competitive behaviour rather than the other way around.
In order to identify the operating system, we need to find what is common in most economies that makes them operate in much the same way. What is common to all modern economies is the way their money systems work. This is hard for most of us to see, for money (as we conventionally understand it) is usually taken as a given and so is not seen as a variable. It is therefore treated as a factor that can safely be ignored because it is something 'permanent' and 'unchangeable'.
The way our money works determines how our economies work. If we are prepared to see 'money' in the broadest possible sense as the set of laws, rules, regulations and conventions that govern our behaviour in the realm of producing our means of life, then it becomes apparent how 'money' produces the general characteristics of modern economies identified above. This is the 'operating system' of our economies.
All national money systems are debt-based. This means that money is issued into circulation by financial institutions when it is loaned in one form or another. These loans have to be repaid, usually with interest or benefit of some kind (i.e. more has to be paid back than was originally loaned). The only way that the extra amount can enter the economy so that the borrowers can earn it to pay back the interest as well as the principal is if more money is loaned into existence by others. The rate at which new money enters the economy must be equal to or exceed the amount of interest that has to be paid back. There is thus a never-ending, upward spiral of debt, interest and money creation. If the amount of new money created is less than the amount owed in interest, the economy enters into recession with the dire consequences that are so familiar, including foreclosures and rising unemployment. This need for the money supply to grow the driving force behind the need for all economies to grow. They have to grow or the system collapses.
The way that this debt-based money system works explains all of the above-mentioned characteristics of economies today:

• Wealth accumulates at the top because the lenders collateralise property and hard capital to the loans. When borrowers cannot meet their interest 'obligations', particularly during hard times, the lenders take possession of the property. This concentrates and centralises property/capital ownership
• The lenders lend money to make money and so each loan is an 'investment' from their point of view. If they perceive that a loan will not bring satisfactory rewards they do not lend. In this way the money lenders decide how society directs its efforts. This is why shopping malls, casinos and five-star hotels get built and not housing, hospitals and public amenities
• Because money is loaned into existence there is no accurate connection between supply and requirement. Often the two get out of synch leading to inflationary or deflationary tendencies. Interest rates are used to control the money supply and this sometimes creates bubbles that burst, leading to economic slumps. All economies using a debt-based money system are susceptible to cyclical tendencies because the money is issued into the circuit of buyers and sellers by an outside entity that does not receive proper feedback
• Competition is endemic because there is a permanent shortage of money relative to requirement. All economic players have to compete for what there is in order to avoid going under. Usury ensures that some succeed and some fail. The most ruthless come out on top while those who show concern for labour or the environment do not succeed
• Economies have to compete in and comply with the dictates of the global marketplace or else they are sidelined. The money lenders will not invest their surplus 'funds' where suitable profits are not guaranteed
• Inflation is endemic because debt has a price. The interest that has to be paid on new money gets added to the prices of everything we buy. When too much lending takes place this results in an oversupply of money-making assets, reducing the returns but not the amount of interest that has to be paid. The only way to continue affording the interest is to raise prices
• Debt-based money knows no loyalty and cannot operate with restrictions and confinement. It always flees to the 'money centres' where profitability is greater, leaving behind 'money deserts'
• Economies floating on debt are wasteful because so much effort goes into earning the interest that has to be paid on new money. This is another way of saying that the real producers of wealth have to support the parasitic money class that produces nothing but consumes the most!
• And so on and so on... Hopefully it is now clear that the 'operating system' that produces the kind of economies we have today is the money system on which they rest

In the same way that we can change the operating system of our computers, it is possible to change the 'operating system' of our economies. Obviously this is not as easy as changing an operating system on a computer because it is not just a personal decision! Nonetheless, in the real world it is possible to have more than one 'operating system' running in parallel. By applying another 'operating system' to control our economic affairs we can expect to see different economic outcomes and consequences. Naturally there will be friction between the 'operating systems' but that has always been the case between competing systems and organisms. 'Natural selection' will decide which wins in the end.
Money doesn't have to be based on debt and it doesn't have to be issued into existence by profit-seeking third parties outside the circuit of real buyers and sellers, consumers and producers. In fact money doesn't have to be issued at all and it doesn't need to exist for us to trade. Money can be treated as pure information, recording what has been traded rather than being a pre-condition for trading to take place.
The Community Exchange System is an attempt to create a new kind of money, a prototype of a new 'operating system'. We have shown already that it is possible to trade millions worth of goods and services without having a supply of 'physical' money. Every Talent in 'circulation' was 'issued' interest free by the buyers and sellers of the exchange, showing that it is possible to have a money system without a parasitic 'third force' (banks) sucking the life blood out of the real producers and providers.
Our new kind of money has shown too that:

• we don't have to be obsessed with growth because we can have as much as we can produce
• the source of 'money' is the application of our own skills and talents and not a job
• wealth can be created and kept in our own communities
• the playing field can be levelled, giving everyone an equal opportunity
• competition is not endemic and that we can co-operate
• centripetal forces can overcome the centrifugal forces (i.e. money doesn't have to continually seek new markets)
• concentration and centralisation are not inevitable
• it is possible to have a non-exploitative economy
• it is possible to eliminate or reduce crime and fraud
• economic cycles could be a thing of the past because the 'supply' of money can never get out of synch with requirements
• monetary inflation is an absurdity
• unemployment is an absurdity
• usury (interest) is an abomination
• money never has to be borrowed
• money can belong to us and does not have to come from 'them'
• we can decide how our efforts are directed, not the money lenders

Encourage businesses, organisations, friends and family to join the CES and help us beta test this new 'operating system' so that we can build a healthier, less destructive economy that benefits us all instead of the wealthy few. Let us bring the 'money power' back to the commons so that we can take control of our destinies and save our beautiful planet from destruction.


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No.29, 16 April 2007