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:

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:

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:

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.

From Community Exchange News No.29, 16 April 2007

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