HACK MONEY, HACK BANKING
by Douglas Rushkoff
March 20, 2009
I’ve received a ton of great email and response from last week’s piece [“Let It Die”] on letting the banks die and letting the market go down another 70 percent. My commentary also generated some confusion, though, so I’d like to clarify and expand on a few points. (I’ll do this again on WFMU on Monday evening, when I’ll have the opportunity to take some calls and actually converse.)
First off, and I can’t stress this enough: Commerce is good. Commerce is not the problem. Monopolies are.
Except in a few rare cases, corporate charters and centralized currency were never intended to promote commerce. They were intended to prevent locals and non-chartered entities from creating and exchanging value. They are not extensions of the free market, but efforts at extracting value from the free market. Corporate monopoly charters were extended to a king’s favorite companies in return for shares. Then, no one else was allowed to do business in that industry. Centralized currency forced businesses to run their revenue through the king’s coffers. Likewise, in its current form, centralized currency is more akin to a ponzi scheme of interest rates, each borrower paying up to the banker above him.
Both of these innovations—corporate charters and centralized currency—tend towards resource exploitation rather than innovation. They are extractive in nature, not productive. And, more importantly, these particular innovations cause wealth to end up being generated through speculation rather than creation. They cause scarcity, not abundance. Over time, it becomes easier to make money by having money than by doing anything. And this was the pure, stated intent of centralized currency and banking in the early Renaissance: to keep the wealthy wealthy, in the face of a rising merchant class.
This isn’t some extremist perspective. It’s just historical fact, though largely forgotten and seemingly refuted by our collective false memory of the Renaissance’s greatness. If you’re interested in finding out more about this, or seeing the evidence on which my research is based, take a look at the best historians writing about the era: Fernand Braudel (The Wheels of Commerce: Civilization and Capitalism: 15th-18th Century, Volume 2, Univ. of California Press, 1992), Carlo M. Cipolla (Before the Industrial Revolution: European Society and Economy, 1000-1700, WW Norton, 1994) or Bernard A. Lietaer, whose book On Human Wealth used to be available for free download off his site, but doesn’t seem to be anymore. In these books, you can find out about the sustainable local economic systems of the Late Middle Ages, learn that the Black Plague actually began after mandated centralized currency had impoverished Europe, and find support of my contention that cathedrals were built with local money before the Renaissance, not Vatican money during the Renaissance.
For reasons I cannot understand, people seem to think that my explaining this phenomenon somehow means I want us to go back to a hunter-gatherer stage. Or that I long nostalgically for a return to a late-middle-ages lifestyle. Or that I am somehow renouncing my earlier enthusiasm for new technology and media.
Nothing of the kind.
The cyberpunk ethos was actually based in the very same DIY (do-it-yourself) ethos I’m espousing now. Cyberpunk was about reclaiming technology, making modifications oneself or with one’s friends, generating value from the bottom up, exchanging goods and services in an alternative economy. I’m not saying we get rid of money—only that we learn to make it ourselves, as communities. I’m not saying we get rid of banks—only that we stop outsourcing our banking to Wall Street firms that mean only to extract value from our communities.
I have always admired hackers—computer hackers and social hackers. I’m just trying to expand the range of technologies and institutions we feel ready and willing to hack. We should hack money. We should hack banking. We should hack business. This doesn’t necessarily mean hacking the dollar, which is just one kind of closed source currency. We should hack money by coding new kinds. Bank hacking has been around for a long time—it’s just that credit unions and other local or community-based bank models were driven down by the anti-competitive practice of banking conglomerates. It’s time for those institutions to be renewed, as well.
When I say it’s okay if the Dow Jones goes down another 70 percent, I’m not calling for an apocalypse. I’m calling for the re-balancing of the speculative economy. The speculative economy owns, represents and controls a disproportionate amount of money. There are simply too many investors, traders, and brokers trying to get rich off moving pieces of paper back and forth. These pieces of paper represent shares in companies (or derivatives based on the value of these shares), and trade at valuations unsustainable by real world commerce and activity. That’s why it’s a good thing, and not a bad thing, for these valuations to move back down to a level corresponding to the revenue stream of the company. This helps the company make decisions consonant with the needs of its customers and employees—its real culture—rather than people who invest from afar, with little personal human stake in its affairs.
The banking bailout is a fiasco because it is taking money from future generations to restore the lending-based economy. I believe it would be cheaper and better to use a tiny fraction of the money to actually employ people, and to educate communities in how to rebuild local economies.
This doesn’t necessarily mean the global economy has to go away—just that it be balanced by local activity. This doesn’t necessarily mean computers go away, or that we lose our internet. We can still work in big groups making really complex stuff. We can still enjoy cities and farms, Radiohead and Britney. We can still ship refrigerators from South Korea to Australia.
It’s just that this activity would be based less on the requirements of corporate debt structures than it would on actual supply and demand. It would be a much more efficient economy, by virtue of being one that would require people to create real value. I think it’s that final part that scares people so much at the mere mention of such reforms: they think the last time people actually created value was back in the Middle Ages, when folks made shoes or raised chickens.
Well, there are many different things people can do to create value for one another. And a few people can still be bankers and brokers. Just not so many of them. Maybe about 70 percent less.
Longtime Arthur columnist Douglas Rushkoff has just finished his life’s work, “Life Inc: How the world became a corporation and how to take it back,” to be published June 2, 2009 by Random House. (Pre-order info: Amazon). His talk radio show, Media Squat Radio, broadcasts Mondays 7-8pm EDT on WFMU. Streams and archived shows at www.wfmu.org and iTunes.
Previous Rushkoff columns on the economy:
“Let It Die” (arthurmag.com, March 16, 2009)
“No Money Down” (Arthur No. 31/Oct 2008)
“Riding Out the Credit Crisis” (Arthur No. 29/May 2008)
Arthur Magazine 
I read somewhere that peer to peer lending is on the increase, and incidentally the rate of defaults on p2p loans is really low. The lenders are normal people and risk only $10 each. You could call that ‘hacking banking’ I suppose – or crowd-sourcing lending.
I wonder if they crowd-source financial advice too. It almost seems like a no-brainer to create a forum within this service to connect people together and start mutually beneficial conversations. A possible adjunct to a business oriented social network like LinkedIn perhaps.
Thanks Douglas,
You clarified and re-inforced my earlier posted response to “Let it die”.
I must, however, condem all forms of “hacking” as I am familiar with it. I get computer viruses al the time that dive me nuts, for no apparent reason. I would be extreemly pissed if a hacker mokeyed with my bank accounts, personal recors, etc.
I am all for taking down Wall Street and it’s speculative extraction of everyone elses money, and the “Having money makes more money” mechanics.
I’m in. Now, how do we do it??? (without hurting everyday people and businesses that don’t “earn” $165M bonuses).
Hacking and cracking are two different things.
Hacking is just re-engineering. Without it, you would have no internet at all. So don’t condemn all forms.
Pingback: In Pursuit of Mysteries » Blog Archive » Followup Rushkoff on the Economy
I’m enjoying this conversation. Thank All of you. May good health and happiness be your constant companion.
Here, here. But enough theory … how about a practical problem? To illustrate the hacking opportunities you describe: we have a $243K mortgage on a ~$310K townhouse in a desirable metropolitan suburb. My wife and I have been reliably paying Wells Fargo 5.875% annually since November 2003 in monthly payments on a 30-year loan. I hear about people parking their money in 0% short-term treasuries or losing money in equities everyday, but marvel at the fact that I would happily pay them 5%, 4%, or lower (of course) annually and give Well Fargo some competition. But no, the closing costs, fees, blah, blah , blah involved in refinancing (we’ve NEVER pulled ANY money out of our home equity BTW) are prohibitively onerous! We looked into refi at 4.375% with a local credit union and it will take over 14 months to recoop the refi costs! Why isn’t this simpler! I *just* want to borrow $243K to pay off Wells Fargo and pay someone else the monthly payments. There has got to be a better alternative to the ton of paperwork, fees, and lawyer subsidies.
I think this is what Doug means by hacking…
Pingback: LET IT DIE: Rushkoff on the economy | ARTHUR MAGAZINE - WE FOUND THE OTHERS
What do you think about the Chinese proposal to move away from the dollar in favor of a global “super-currency”?
Looks like people fear the hacker like Osama. Crazy. Hacking is another area where people can find freedom in spite of the shitstorm. The system demonizes anything you can do without help from the system. Open Source software might have become illegal if it wasn’t absolutely impossible to stop it. Drugs which grow out of the earth are illegal because the system can’t do hacking of its own on the chemicals you ingest if you’re not buying from the system. Sorry to use the phrase “the system” again but it’s been hacking you for a long, long time. Condemn that and start hacking yourself back to humanity.
As for China… http://edgeofcivilization.com/node/62
The hacking can involve humanity – the education continues and issues from making the goal clear while subrosa:
move to what you can afford, own, produce, grow – no, ~really~. Move to crediting between people, not non-people corporations (all rights, no responsibilities).
Douglas,
Why not hack religion? As you point out, this top down economic model is predicated on supporting monarchy, but monarchy is based on monotheism, ie. the divine right of kings. The logical flaw with an absolute ideal is that the universal state of the absolute is basis, not apex. Zero, not one. A spiritual absolute would be the essence of life and consciousness from which we rise, not an all knowing, moral ideal from which we fell. Reality is bottom up, not top down. The top is just a momentary peak. Consider the dichotomy of good vs. bad and the theological assertion that belief in God is the foundation of morality. The attraction of the beneficial and repulsion of the detrimental is the primordial biological binary code. Amoebae distinguish between good and bad. Our intellectual processes are just a very complex manifestation of this basic impulse. Between black and white is not just shades of grey, but all the colors of the spectrum. The problem with idealizing good vs. bad is that it creates a brittle linear morality, where if a little of something is good, than a lot must be that much better and anything at all bad, is all bad. There is no conceptual valuation of reciprocity, reaction, balance, laws of unintended consequences, etc. This complexity is usually derided as moral relativism. So everyone choses sides and lines up behind the loudest and bossiest.
It was the polytheists who invented democracy, not the monotheists.
So we have an entire society operating under the assumption that the pinnacle is the goal and the result is we fight endlessly to be the ones on top. The reality is that it is just a crust and when it gets to hard to allow further growth, it has to be shed and a new elite takes over. At some point we have to begin controlling the process, not be controlled by it. There has to be some balance. Nothing is completely top down or bottom up. Nor is there a happy medium, as that’s just a flatline.
How do we create society which isn’t constantly breaking into factions and fighting, or dictated to by autocrats? I do think it has to do with how we conceive money. Currently we treat it as a commodity to be traded, because that’s what it evolved from. What it really is, is a public utility. One that is no longer based on anything other than public support. So if we understood it as a form of public commons, like a road system, it would remove the moral foundation for everyone to claim as much as possible, as well as removing the impulse to monetize all value out of our communities and environment in order to compete. This would be the force to repel humanity away from the monetary monoculture.
Pingback: P2P Foundation » Blog Archive » Extractive vs. Productive Anti-meltdown measures
Pingback: CrowdSourcing the Bank Recovery by Douglas Rushkoff | ARTHUR MAGAZINE - WE FOUND THE OTHERS
Pingback: Revolution Money
I’m confused about what you mean by “local economies”. How would we go about making our own money as communities? You seem to simply say it’s great, but not how it actually works. Sorry for this teenager’s ignorance.
Pingback: Corporations, Scriptural Sacrilege and Saucepan Revolutions » Young Anabaptist Radicals
Already on it. Also check out flowplace.org, metacurrency.org and openmoney.org
Lots of interesting work in progress.
Pingback: Mikrokosmos: Was leisten neue Währungseinheiten im Web? « Social Banking 2.0 – Der Kunde übernimmt die Regie
Pingback: What to do when you’ve got money in the bank and you’re worried about a dollar collapse: The Past and Future of Money | Thinkahol's Blog
Pingback: Let the economy die?! Rushkoff’s goals are noble but his plan needs work | Lullaby Pit
Pingback: Rushkoff on the Economy | Desultory Heroics
Pingback: CROWDSOURCING THE BANK RECOVERY by Douglas Rushkoff | Arthur Magazine
Pingback: LET IT DIE: Rushkoff on the economy | Arthur Magazine