PROUT’s Rational Banking System

PROUTist Economics

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Cooperatives

By Trond Overland

Modern banking emerged during the Italian Renaissance.  The idea behind it was ancient:  To make money out of lending money.  

The present situation

Today the money lender has become the master of all trades; giant banks control everything under the sun.  Do they work in the interests of the people?  The answer is a resounding "No!"  

The main reason for the continuing recessions and depressions all over the world today is that vast deposits of money are not being released to those who require resources.  In the words of P.R. Sarkar, “the intrinsic demonic greed of banks has been allowed to jeopardize the life of common people.”(1)  

“Banks must not allow unwise administrators or governments to print monetary notes indiscriminately without reserving the proportionate amount of bullion in their treasuries.  It destroys the very life of society.  It leads to widespread inflation, which in turn jeopardizes internal trade and commerce as well as foreign trade and barter.  Even if there is abundant production in a country, the common people do not benefit from it.  The rich become richer and get more scope to continue their merciless exploitation.”(2)  

PROUT’s Proposals

Basically, money is a means of exchange.  For instance, if you have something that I require I may spend money in order to get it from you.  

I could also offer you something other than money that may be of interest to you.  Exchange of something other than money, such as goods and services, is called barter trade.  

A micro-economic example of barter trade:  I paint your house, you do my accounts.
A macro-economic example:  Bangladesh exchanges jute and hide exports for food imports.  

It may be noted here that barter trade excels under certain conditions.  On one hand, barter between countries works best at present between industrially underdeveloped – financially poor – countries with a large surplus of raw materials.  As they have no means to invest in refining industries under the present global exploitative regime, they should exchange raw materials in order to procure minimum necessities.  

On the other hand, the exchange of services between private persons would work very well where no government tax is levied on private income.  The abolition of income tax will to a great extent remove the problem of black money and bring about a welcome moral change in the population.  

Global capitalism does not encourage barter trade but wants to retain all trade within its exploitative speculative dollar-based paradigm.  PROUT encourages both types of purchase – using money or by barter – wherever they may serve people’s needs.(3)  

Money value increases with mobility

Money is not meant for piling up purchasing capacity but for paying expenses.  Spending money is the natural thing to do; accumulation is unnatural to the point where it becomes a mental disease.  Macro-economically, the accumulation of money is a dangerous socio-economic course to the point where it leads to large-scale depression; where we are today.  

The more money changes hands, the greater is its economic value.  The value of money increases with its mobility.  The motivation of PROUT’s banking system is therefore to keep money rolling.  

Apart from seeing to it that money is kept in circulation, banks should not act on their own behalf and turn into huge profit-making machines.  They should instead serve their community and remain directly associated with particular productive local endeavors.  

An economy of the people, not of banks

This is a natural idea:  Whenever people join in some productive effort they will soon need somewhere to deposit their earnings, a place where they can administer their common economy.  If no suitable means for deposit exists, the natural thing for them to do would be to form a cooperative bank themselves.  

People may need to borrow, as well, for both individual and collective needs.  PROUT’s cooperative banks will serve as both savings and lending institutions.  A cooperative bank may take a large loan from another bank or the government to purchase modern equipment and construct dams, barrages and shift or lift irrigation facilities to increase production, etc.(4)  

Under PROUT the banking system will have to be managed by cooperatives.(5) Only the government-controlled central or federal bank should have a greater reach by way of guaranteeing the currency.  

In conclusion, the mission of banks under PROUT is to keep money in motion and not become stagnant pools of personal wealth.  PROUT’s banks are non-profit cooperative organizations where ideally the balance is zero after all expenses are met.  

The Gold Standard

Financial circumstances are changing fast.  For instance, the last vestiges of the gold standard were thrown out by the Nixon administration some 40 years ago, and the gold standard has been ridiculed ever since.  The reason for this undue mudslinging is that pinning a currency to gold (“gold standard”) does not allow for free speculation.  

Today, as the global speculative system is in chaos and about to end in catastrophe, the gold standard is staged to make a return.  The price of gold has already risen phenomenally.  This proves that people in general accept gold as a basic guarantee for financial stability.  

PROUT supports the gold standard.  The main role of the central bank should be to guarantee the currency in measures of physical gold held by that bank.  Central banks must be ready to pay citizens the amount of gold represented by the currency.  This is the proper hedge against large-scale inflation.  The gold-standard protects against speculative bubbles.  

Psychology

The gold standard is more a question of psychology than physicality.  People view gold as the most precious commonly available thing.  

In the same way, the entire field of socio-economy is about physicality as well as psychology.  For instance, the present financial system is ridden by greed.  From a collective perspective the problem of unbridled greed is first a physical one, then a psychological one.  

First society has to find ways and means to stop and control the disease in a physical way.  Thereafter, when no one suffers anymore at the hands of greedy exploiters, society will be free to think about how to cure their mental disease.  

No one should be oppressed or suppressed.  Everybody should be allowed to realize their potentialities and attain their goals in life and thereby learn to utilize all sorts of resources to a maximum.  

At present the world of banking is dominated by all-devouring colossuses that crave to be fed by public money first thing in the morning (by way of “quantitative easing”) in order to continue their existence as masters of global trade.  

In contrast, PROUT’s banking system presents a rational human approach to supplying money wherever and whenever it is needed and required.  

The mission of PROUT as a whole is to pave the way for a society where people can express their true self.  Only a socio-economic system that allows and supports people’s all-round needs, interests and dreams can be termed as truly progressive.  

Notes

(1) “Keep Money Rolling – Excerpt B”, P.R. Sarkar, 1986.  Published in PROUT in a Nutshell Volume 3, and in Proutist Economics.  Ananda Marga Publications.  Web:  proutglobe.org/2011/05/quadri-dimensional-economy

(2) “Economic Dynamics”, P.R. Sarkar.  Published in A Few Problems Solved Part 9, in PROUT in a Nutshell Part 13, and in Proutist Economics.  Ananda Marga Publications.  Web:  proutglobe.org/2011/05/economic-dynamics

(3) “Trade for Regional Self-Reliance”, Dr. Michael Towsey.  Web:  proutglobe.org/2011/09/trade-for-regional-self-reliance
“Cooperative Production – Excerpt B”, P.R. Sarkar.  Published in PROUT in a Nutshell Part 14 and inProutist Economics.

(4) “Some Specialities of PROUT’s Economic System”, P.R. Sarkar.  Published in A Few Problems SolvedPart 9, PROUT in a Nutshell Volume 3, and in Proutist Economics.  Ananda Marga Publications.  Web:  proutglobe.org/2011/06/some-specialities-of-prouts-economic-system

(5) “Economic Dynamics”, op.cit.  

Copyright The author 2012  

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Why: Iceland's Strong Economic Recovery after Complete Financial Collapse in 2008

By Martin Zeis for Global Research 

Iceland’s President Olafur Ragnar Grimmson was interviewed over the weekend (26./27.01.2013) at the World Economic Forum in Davos on why Iceland has enjoyed such a strong recovery after it’s complete financial collapse in 2008, while the rest of the Western world struggles with a recovery that has no clothes.

Grimsson gave a famous reply to the financial MSM reporter, stating that Iceland’s recovery was due to the following primary reason:

„… We were wise enough not to follow the traditional prevailing orthodoxies of the Western financial world in the last 30 years. We introduced currency controls, we let the banks fail, we provided support for the poor, and we didn’t introduce austerity measures like you’re seeing here in Europe. …“

When asked whether Iceland’s policy of letting the banks fail would have worked in the rest of Europe, Grimsson replied:

„… Why are the banks considered to be the holy churches of the modern economy? Why are private banks not like airlines and tele-communication companies and allowed to go bankrupt if they have been run in an irresponsible way? The theory that you have to bail-out banks is a theory that you allow bankers enjoy for their own profit their success, and then let ordinary people bear their failure through taxes and austerity. 
People in enlightened democracies are not going to accept that in the long run. …“

Whole interview with Grimmson (02:56 min):

This article originally appeared here  

The Non Zero-Sum Society

by Robert Reich
January 28, 2013


As President Obama said in his inaugural address last week, America “cannot succeed when a shrinking few do very well and a growing many barely make it.”  

Yet that continues to be the direction we’re heading in.  

A newly-released analysis by the Economic Policy Institute shows that the super-rich have done well in the economic recovery while almost everyone else has done badly.  The top 1 percent of earners’ real wages grew 8.2 percent from 2009 to 2011, yet the real annual wages of Americans in the bottom 90 percent have continued to decline in the recovery, eroding by 1.2 percent between 2009 and 2011.  

In other words, we’re back to the widening inequality we had before the debt bubble burst in 2008 and the economy crashed.  

But the President is exactly right.  Not even the very wealthy can continue to succeed without a broader-based prosperity.  That’s because 70 percent of economic activity in America is consumer spending.   If the bottom 90 percent of Americans are becoming poorer, they’re less able to spend.  Without their spending, the economy can’t get out of first gear.  

That’s a big reason why the recovery continues to be anemic, and why the International Monetary Fund just lowered its estimate for U. S. growth in 2013 to just 2 percent.  

Almost a quarter of all jobs in America now pay wages below the poverty line for a family of four.  The Bureau of Labor Statistics estimates 7 out of 10 growth occupations over the next decade will be low-wage — like serving customers at big-box retailers and fast-food chains.  

At this rate, who’s going to buy all the goods and services America is capable of producing?  We can’t return to the kind of debt-financed consumption that caused the bubble in the first place.  

Get it?  It’s not a zero-sum game.  Wealthy Americans would do better with smaller shares of a rapidly-growing economy than with the large shares they now possess of an economy that’s barely moving.  

If they were rational, the wealthy would support public investments in education and job-training, a world-class infrastructure (transportation, water and sewage, energy, internet), and basic research – all of which would make the American workforce more productive.  

If they were rational they’d even support labor unions – which have proven the best means of giving working people a fair share in the nation’s prosperity.  

But labor unions are almost extinct.  

The decline of labor unions in America tracks exactly the decline in the bottom 90 percent’s share of total earnings, and shrinkage of the middle class.  

In the 1950s, when the U. S. economy was growing faster than 3 percent a year, more than a third of all working people belonged to a union.  That gave them enough bargaining clout to get wages that allowed them to buy what the economy was capable of producing.  

Since the late 1970s, unions have eroded – as has the purchasing power of most Americans, and not coincidentally, the average annual growth of the economy.  

Last week the Bureau of Labor Statistics reported that as of 2012 only 6.6 percent of workers in the private sector were unionized.  (That’s down from 6.9 percent in 2011.) That’s the lowest rate of unionization in almost a century.  

What’s to blame?  Partly globalization and technological change.  Globalization sent many unionized manufacturing plants abroad.  

Manufacturing is starting to return to America but it’s returning without many jobs.  The old assembly line has been replaced by robotics and numerically-controlled machine tools.  

Technologies have also replaced many formerly unionized workers in telecommunications (remember telephone operators?) and clerical jobs.  

But wait.  Other nations subject to the same forces have far higher levels of unionization than America.  28 percent of Canada’s workforce is unionized, as is more than 25 percent of Britain’s, and almost 20 percent of Germany’s.

Unions are almost extinct in America because we’ve chosen to make them extinct.

Unlike other rich nations, our labor laws allow employers to replace striking workers.   We’ve also made it exceedingly difficult for workers to organize, and we barely penalized companies that violate labor laws.  (A worker who’s illegally fired for trying to organize a union may, if lucky, get the job back along with back pay – after years of legal haggling.)  

Republicans, in particular, have set out to kill off unions.  Union membership dropped 13 percent last year in Wisconsin, which in 2011 curbed the collective bargaining rights of many public employees.  And it fell 18 percent last year in Indiana, which last February enacted a right-to-work law (allowing employees at unionized workplaces to get all the benefits of unionization without paying for them).  Last month Michigan enacted a similar law.

Don’t blame globalization and technological change for why employees at Walmart , America’s largest employer, still don’t have a union.  They’re not in global competition and their jobs aren’t directly threatened by technology.  

The average pay of a Walmart worker is $8.81 an hour.  A third of Walmart’s employees work less than 28 hours per week and don’t qualify for benefits.

Walmart is a microcosm of the American economy.  It has brazenly fought off unions.   But it could easily afford to pay its workers more.   It earned $16 billion last year.   Much of that sum went to Walmart’s shareholders, including the family of its founder, Sam Walton.  

The wealth of the Walton family now exceeds the wealth of the bottom 40 percent of American families combined, according to an analysis by the Economic Policy Institute.  

But how can Walmart expect to continue to show fat profits when most of its customers are on a downward economic escalator?  

Walmart should be unionized.   So should McDonalds.  So should every major big-box retailer and fast-food outlet in the nation.  So should every hospital in America.

That way, more Americans would have enough money in their pockets to get the economy moving.  And everyone – even the very rich – would benefit.

As Obama said, America cannot succeed when a shrinking few do very well and a growing many barely make it.


This work is licensed under a Creative Commons License

Robert Reich, one of the nation’s leading experts on work and the economy, is Chancellor’s Professor of Public Policy at the Goldman School of Public Policy at the University of California at Berkeley.  He has served in three national administrations, most recently as secretary of labor under President Bill Clinton.  Time Magazine has named him one of the ten most effective cabinet secretaries of the last century.  He has written thirteen books, including his latest best-seller, Aftershock: The Next Economy and America’s Future; The Work of Nations; Locked in the Cabinet; Supercapitalism; and his newest,Beyond Outrage.  His syndicated columns, television appearances, and public radio commentaries reach millions of people each week.  He is also a founding editor of the American Prospect magazine, and Chairman of the citizen’s group Common Cause.  His widely-read blog can be found at www.robertreich.org.

Editor's Note:  It is the perspective and purpose of PROUT to move commerce toward worker-owned co-operatives within economic decentralization and economic democracy.  The labor/management, and labor/owner bifurcations are garishly obsolete, viciously exploitive, and demonstrably parasitic like a malignant carcinoma on the body of humanity and the planet at large.  PROUT's economic democracy paradigm is progressively homeostatic, positively affecting every realm of life, both for humans and all other life forms conjugating the mysteries as to why they and we exist on this magnificent planet.  Explore PROUT further.