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A World Without Banks?
Instead of saving for the future, we should build for it instead.

by James Leroy Wilson
May 14, 2008

Note: some ideas expressed here were inspired by three articles at Reality Sandwich: Charles Eisenstein's Money: A New Beginning, Money: A New Beginning Part 2, and Alexis Zeigler's Biofuels and the Rise of Nationalistic Environmentalism.

Al gets his paycheck. After expenses are paid, Al finds he have some money left over. What is the smart thing for Al to do?

Conventional wisdom says Al should save it for retirement or for a rainy day. Better that, than to blow it on booze, gambling, and frivolity.

Maybe so. But there's another way to look at it. Al has some extra money, but what if Bob doesn't have enough money?

Why shouldn't Al give his extra money to Bob?

I'm not saying that Bob has a right to Al's money, or deserves it, or that governments should take the money from Al to give to Bob.

But I am asking. why should Al address a theoretical future need for himself and ingore Bob's real, present need?

Al's future need is theoretical for at least four reasons. First, Al could die later today, which makes the future irrelevant. Second, perhaps Al will make a good income in the future regardless and doesn't need to save money today. Third, money is only a means of exchange: what Al would really need in the future is what he needs today: food, clothing, and shelter. If, due to calamities of varying kinds, food and resources are lacking in the future, then the money one saves now won't mean much then. No sense having money if there's nothing to buy. Last, there is no reason to assume the value of today's money won't decline drastically in the future, wiping out the purchasing power of one's savings. Wars, regulations, over-spending, and other crimes of the government can quickly destabilize an economy and currency. 

In the future, Al's needs might not be met no matter what "prudent" course of action he takes with his money today. Not in an age where peak oil and global warming are possibilities, and war and inflation are realities. But today, he can meet  both his own and Bob's needs.

Now, imagine if everyone stopped saving and started sharing, as Al gives to Bob. Would this be bad for the economy? No money going into banks, meaning no money for banks to loan to others. People can't borrow for major purchases like houses. Businesses can't borrow to expand and create jobs. The economy comes to a halt.

Or does it?

The sharing of surplus income with others shouldn't harm the economy. If anything, it keeps money in circulation and keeps the economy humming along. At the same time, banks won't be pouring more money into circulation, which means prices will remain constant or even fall. A businesses could expand based on current profits, or raise capital by selling shares in the business in exchange for a portion of the profits. This isn't a loan, it's co-ownership. If the business fails, it fails - it doesn't go "bankrupt" and nobody loses more money than they put in. Nobody has to pay interest on  the debts of a failed business.

A loan is a gamble on the future. The lender has confidence the borrower will pay back more through interest than what was lent out. The borrower believes that, with talent, hard work, and possibly luck, he will come out further ahead even after paying the lender back with interest. But politics, accidents, and weather can turn good luck into bad for any business or homeowner. The paid-for house, the profitable business, the comfortable retirement - these are but hopes, and events often kill them. The future is too uncertain.

If people shared their surplus incomes instead of putting it in banks, the lending industry would dry up. Realtors, however, could raise money to build homes by selling shares, with shareholders getting first pick of the units to lease or purchase. Houses would be seen as places to live in, not as "investments." That's because, in a world with no banks and no easy credit (indeed, no credit at all), no one will be able to just borrow more and more money to buy an overpriced house.

Less saving for oneself, more social cooperation with others. What a wonderful world that would be! I don't believe we can or should get there through politics or coercion. But I do believe it is wiser for individuals to stop being concerned about their own retirement or leaving an inheritence for their children, and use those savings instead to start, well, "fixing" things today. Working toward making sure there's enough food and energy for the next couple of generations will be more important than how much money our children and grandchildren will have. Using one's surplus income to build a voluntary community with other individuals, and then establishing networks with other communities, may be the best investment one can make. Alexis Zeigler writes,
"I have built houses that use 90% less energy per inhabitant than the American average, and done so at very low expense. But they are not suburban tract homes. Far from it. They are urban and rural cooperatives. Cooperatively based societies, the kind in which most of humanity has always lived, can achieve high standards of living with a tenth of the resources that Americans currently use without any new technologies. If we are talking about global solutions, is it even possible to apply expensive alternative energy systems on an individual or single-family basis on a global scale? The answer, very clearly, is no. Social design - how and where we choose to live - and cooperative use are far more important the new technological gadgets."

Our economic, political, and environmental problems are inter-related. The age in which Americans can take for granted that their savings and Social Security will be enough for their retirement is gone. Indeed, we don't even know if we'll have affordable food and energy when we retire. Global warming may or may not be a myth. Peak oil may or may not be a myth. But is it safer to assume they're myths, or that they're real? Rather than withholding money from today's economy to save for the future, we should use that money today to build for the future instead.

About the Author:
James Leroy Wilson blogs at Independent Country and writes for Views expressed here do not represent the views of

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