Is there a way we can pay for our basic needs – a home, fridge, TV and car – without having to pay back the principle and interest on our purchase? How does interest fit into current thinking about what constitutes just and sustainable societies?
Interest is the price we pay for the money we borrow. Those who lend us the money see themselves as giving up the advantage of having that cash – the liquidity advantage of money – so they charge a percentage on the principal loaned to us to compensate themselves for losing the benefit of having the cash to use.
So interest creates money for the lender without their actually producing anything for it. According to some thinkers, charging interest, or usury, violates natural law.
The theory of a natural law was put forward by Thomas Aquinas who said that this type of law is found in nature. Therefore, humans, being part of nature, have an innate sense of what’s right and wrong for both themselves and when acting towards others.
When interest is charged on the original amount of the loan, it has a compounding effect. This maximises returns for the lender at the expense of the borrower because your interest to be repaid is compounding. The financial economy operates on the basis of compound interest, whilst nature works in harmony with simple interest.
Money deposited in a bank grows from the interest added, but an apple tree can’t guarantee it’ll produce a harvest with compound interest. There is disjuncture between the natural and financial economies because each sees life from a different perspective.
Some commentators assert that the result of these two different approaches to growth – by living within natural limits and by creating man-made limits – is not sustainable. They claim that in living with arbitrary limits devised by humans to satisfy their need for greater growth, nature is being destroyed, and social justice is trodden into the dust of over-exploitation.
At the root of it, this clash is the result of two very different ways of valuing life – ‘mine’ and ‘yours’ – and as we know, this difference in values and perspective is the history of our human growth and evolution.
From a financial perspective, some commentators suggest that this difference is now intensified to such an extent that the recent 2008 Global Financial Crisis (GFC) was the first indication, in a now global context, that some values can no longer be accommodated in our changing world.
As the cost and demand for goods rises, many need to borrow money to pay for them, and many are feeling increasingly doomed to live out their whole life chained to work to pay off this compounding debt.
Is it possible for humanity to sustain such a diversity in its values, or are there some values now outmoded and a result of a dying industrial age? Can we continue on our current trajectory of extremes in wealth and poverty, in lush irrigated lands and drought-ridden deserts? How can we sustain a comfortable lifestyle, not just for the few but for us all – by making changes in the way we view life and its purpose, so that all humans can be set free to live according to their potential?
It is the responsibility of being a human to choose. How will each decide from this day on? Some can’t see the problem because it doesn’t impact on them – yet. Or they can see it but the fear of change, of being too small, of having nothing to offer, petrifies any ability to act.
The speed of change is so rapid that nothing of the past is assured. Will enough choose use their creative power – their intelligence and will – qualities inherent in all humans, to assist this process? Many will not for reasons discussed. But there are enough, a seed group, that can see the bigger picture and want no longer to be, as Rousseau put it, born free but in chains.
This seed group, the pioneers, the social entrepreneurs, the visionaries and the practical idealists, are the Creative Change Makers. Those who have captured a glimpse of the future are questioning whether sacred cows like bank interest or usury, will be relevant as attitudes to equality and sustainability gain momentum.
Many are instead choosing to use their unique skills, knowledge, personality and creative genius, to experiment with ways of running a business, making a scientific discovery, devising new building methods or raising a family, without an interest debt burden. For instance bartering and local currencies allow people to purchase and sell items without interest-bearing loans, and they encourage local business.
This is one example, and by no way a perfect solution, but being an innovative race, humans are busy experimenting with lots of alternatives to the current system. These Creative Change Makers believe that positive, sustainable, enjoyable and just social and environmental change can come about from the grassroots, with minimum disruption and maximum benefit. So that one day, those monthly loan repayments with interest won’t be needed, and perhaps they’ll just go out of fashion – like the routine labotomy did.
Reference:
Jean Jacques Rousseau, The Social Contract
French political philosopher (1712 – 1778)