Book Review

Modernising Money

Andrew Jackson and Ben Dyson, £14.99 Positive Money, 2012. ISBN 978 0 9574448 0 5

As Hermn Daly’s Foreword states, ‘Money ranks with fire and the wheel as an invention without which the modern world would be unimaginable. Unfortunately, out-of-control money now injures more people than both out-of-control fire and wheels.’

The book is in 10 chapters, plus Introduction and Conclusion, three Appendices and a Bibliography. It is organised as Part 1: The Current Monetary System, covering a brief history of money and banking, how the current sytem works, its influencs and economic effects, and its social, environmental and economic impacts; while part 2 describes ‘The Reformed Monetary System’, essentially: stopping private banks from creating money along with interest-bearing debts, and restoring to government the function of supplying society with a circulating stock of money in the amount needed to meet social needs, as periodically adjusted, and spending it into circulation without any accompanying debts.

The text is supported by a range of very telling graphs, boxes and ‘figures’, and has footnotes sensibly placed on the pages they refer to. It is regretable that there is no index to these graphs, boxes and figures.

One small criticism I have is that the authors accept without question the current aim of keeping inflation to about 2%. Why not 0%, or, considering the effects of the reform of reducing levels of debt along with the costs of interest which on average currently add about 50% to prices, why not, perhaps, -50%, at least eventually?! (This is perhaps a decision taken on political grounds; the change is challenging enough in itself for most people, and in itself challenging to the aim of perpetual growth.)

In support of its analysis and proposals, it quotes much useful data. It notes, for example, that ‘In the five years running up to the start of the financial crisis, the banking setor’s gross lending to households and individuals alone (not including lending to businesses) came to a total of £2.9 trillion. Meanwhile, total government spending during the same period was less, at £2.1 trillion. Because the banks decide where to lend (for example on housing, personal loans, car finance or invesment in small businesses), they can shape much of the spending and activity in the economy.’

The final chapter considers the likely impact of the proposed refoms on the banking and financial sector. It argues convincingly against the accusation that the reform will ‘drastically curtail the lending capacity of the UK banking system, rducing the amount of credit available to huseholds’, as claimed by the Independent Commission on Banking, though it does not point out that the reform would drastically reduce the need to borrow.

I can strongly recommend this book to anyone in doubt about this proposed refom or its impact on social and environmnetal issues. Other reforms are needed, to accompany this one, and campaigns for these are gaining strength (and mostly are already part of the GPEW’s collection of policies); but in the absence of this one, they can be no more than palliatives.

Brian Leslie