a growing number of people believe that the disaster we are creating at the moment is a fundamental consequence of interest - the thing that islam prohibits just like christianity in the past. complementary currencies and barter systems are arising around the world as an answer.
i do not believe this. i will explain why using a simple model, moreover i believe that the problem lies in our notion of property.
first: interest is not the problem
one argument explaining the interest-trap is this one:
suppose a banker lends humanity 1 euro and he charges 1 euro interst for that. this means that humanity will have to pay back to the banker 1+1=2 euro. now the argument is that in the totality of the market there only is 1 euro available so paying back the second euro is in principle impossible.
this argument flaws in two (interconnected) ways:
a. the money flows
b. the banker is part of humanity aswell, he is an economic actor
with a small model i hope to explain this:
suppose humantiy consists of 3 persons:
suppose the farmer grows grain to bake 3 breads
the baker wants to buy the grain so he can bake these 3 breads
to buy the grain the baker lends 1 euro from the banker at an interest of 1 euro
now the baker buys the grain from the farmer for the price of 1 euro
next the baker bakes 3 breads
now the baker starts selling the breads at the price of 1 euro per bread
first he sells 1 bread to the farmer and gets 1 euro
now the baker can pay back his loan to the banker but he still has to pay the interest
now the banker also buys 1 bread and the baker gets another euro
finally the baker can pay the interest to the banker
at the end of this story
- the farmer has grown his grain
- the baker has baked his bread
- the banker has facilitated all the transactions
- and everybody has 1 bread to live on
what we see in this model is that there is only one fysical coin of 1 euro with which all transactions are done. so although in the totality of the market only 1 euro is available, transactions totalling to the amount of 4 euro have been processed.
but the reason of our problems is even much simpler than interest, it is property.
thinking about setting up my own business for the good of this world i realise that i never experience interest as a bottleneck for my new company, instead it is scarcity: will there be place for me on the market and if so will others come copy and squat my place?
i simply can not walk around in this world and live from the fruits hanging of the trees. this is because the trees belong to somebody. and this owner decides i am not allowed to to live from his fruits, even when i'm dying. there are no laws in our country that force the owner to take my concerns into account when deciding what to do with his fruits.
i believe the root of our problems is that we have disconnected the concept of property from the concept of responsibility. a still better way of seeing this is realising that the two were never connected in the first place - at least from a biological/evolutionary aspect where distrust and fear rule and power and territory-craving are the answers.