Skip to main content

Advertisement

SpringerLink
Log in

An overview of local credit systems and their implications for post-growth

  • Special Feature: Original Article
  • Socially Sustainable Degrowth as a Social-Ecological Transformation
  • Published:
Sustainability Science Aims and scope Submit manuscript

Abstract

Credit and debt are bound to play a central and challenging role in a post-growth economy, seen as an economy that seeks to stabilize or downscale production and consumption for more well-being and sustainability. This is so because on one hand the current credit system is widely seen as the major engine behind the unsustainable imperative of growth. On the other hand, access to credit is essential for the survival of countless low-income households worldwide. In this context, what kind of credit arrangement is compatible with a sustainable and equitable economy? This paper provides the first preliminary overview of the main types of local credit systems—classical as well as alternative—with an eye on their implications for post-growth. Traditional credit, bank credit, microcredit, credit unions, negative interest credit, social credit and mutual credit are in turn briefly examined with some historical examples. The interest rate, the kind of currency and the prospect for reciprocity between creditors and debtors all play a crucial role in the possibility of a post-growth economy. Alternative credit arrangements may develop through different stages and levels. Here and now, building and reinforcing local mutual-credit systems are a way forward provided that it is also adequately politicized. With the worsening of the debt crises and the increasing difficulties for further growth to occur, post-growth-friendly credit systems are likely to come back on the agenda of community economies.

This is a preview of subscription content, log in via an institution to check access.

Access this article

Log in via an institution

Price excludes VAT (USA)
Tax calculation will be finalised during checkout.

Instant access to the full article PDF.

Institutional subscriptions

Similar content being viewed by others

Notes

  1. In Western Europe, wage labour drastically expanded around the fifteenth and sixteenth century. Dyer (2005) estimates that in the sixteenth-century countryside of England, about half of the labour consisted of wage labour.

  2. A sister form of credit is the Accumulating Savings and Credit Association (ASCA). Unlike ROSCAs, ASCAs appoint one member to manage and fructify the fund. After a defined period, all the loans are called back and the fund, plus accumulated profit, is distributed to the members. In agreement with Geertz, ASCAs represent a clearer move towards market-oriented lending activities.

  3. Subcontracting credit can be seen as a modern variant—sometimes referred to as “disguised proletarianization”. It allows larger businesses not to hire labour nor purchase land. Such businesses-cum-creditors are often better able than banks to monitor and enforce credit contracts (Key and Runsten 1999).

  4. One could add that under existing communism, the state replaced private creditors as the main selecting engine behind growth. But in both cases, with some nuances, undemocratic and exponential growth is largely unquestioned.

  5. The problem of collateral explains why finance enthusiasts have constantly pushed for legal reforms easing contract enforcement and foreclosure procedures (e.g. de Soto 2000). A wider variety of collateral has also been suggested. It has for instance been proposed to enhance the use of livestock as collateral through implantation of microchips in the animals in combination with GPS technology (FAO 2003).

  6. A variety of side measures may be taken to that aim. For example, “moral pressure is exerted by publishing the names of defaulting borrowers, or announcing their names on the local radio network” (FAO 2003: 60).

  7. Popular US bumper sticker parodying a Walt Disney song.

  8. Gesell strongly believed in free market—the only system, he thought, in agreement with human nature—but such free market, in order to be real, had first to be freed from the rent and the interest. Only then would everyone start with equal opportunities.

  9. In 1933 in the United States, at least a hundred cities were preparing to launch stamped currencies of their own. But Roosevelt eventually banned all alternative currencies by executive decree when he launched the New Deal because it would mean a loss of central government power (Lietaer 2001).

  10. Another equivalent to negative interest rates is of course inflation. Inflation is similar in its effects to a depreciating currency in that it encourages the circulation of money, discourages hoarding and makes it easier to repay debts. However, in a decaying money system, it is the currency that depreciates, not prices that go up. It would therefore not impoverish people with constant income.

  11. The Swiss WIR Bank is often presented as an example of a mutual-credit system (i.e. with no central issuer). This however is not the case in WIR where all credit is booked against the bank’s central account. Created in 1934, WIR boasts today tens of thousands of individuals and small businesses all over the country—large businesses cannot join. Originally not-for-profit and following Gesell’s ideas, the bank changed its status when expanding. It has a remarkably stable history and remained fully operational during times of general economic crisis (Arnsperger 2011). WIR “lubricates” rather than “obstructs” the wheels of the capitalist system, thereby not representing a big step towards a post-growth economy.

  12. I was able to participate in some anti-foreclosure actions in the Boston area in 2011–2012.

References

  • Arnsperger C (2011) Monetary federalism and the recovery of Swiss sovereignty. Paper prepared for the ECSA-Switzerland Conference, Europainstitut, Basel

  • Bateman M (2010) Why doesn’t microfinance work?. Zed Books, London

    Google Scholar 

  • Bhaduri A (1986) Forced commerce and agrarian growth. World Dev 14:267–272

    Article  Google Scholar 

  • Binswanger HC (2006) Die Wachstumsspirale. Metropolis, Marburg

    Google Scholar 

  • Boeke JH (1946) Oosterse economie. Servire, Den Haag

    Google Scholar 

  • Bouman FJA (1995) Rotating and accumulating savings and credit associations. World Dev 23:371–384

    Article  Google Scholar 

  • Bouman FJA, Hospes O (eds) (1994) Financial landscapes reconstructed. Westview Press, Boulder

    Google Scholar 

  • Brass T (1999) Towards a comparative political economy of unfree labour. Frank Cass, London

    Google Scholar 

  • Caillé A (2000) Anthropologie du don. Desclée de Brouwer, Paris

    Google Scholar 

  • Cohen GA (2009) Why not socialism?. Princeton University Press, Princeton

    Google Scholar 

  • Daly HE (1996) Beyond growth. Beacon Press, Boston

    Google Scholar 

  • Daly HE (2012) Moving from a failed growth economy to a steady-state economy. In: Gerber JF, Steppacher R (eds) Towards an integrated paradigm in heterodox economics. Palgrave, Basingstoke, pp 176–189

    Google Scholar 

  • de Soto H (2000) The mystery of capital. Bantam Press, London

    Google Scholar 

  • Dittmer K (2013) Local currencies for purposive degrowth? J Clean Prod 54:3–13

    Article  Google Scholar 

  • Dittmer K (2014) 100 percent reserve banking: a critical review of green perspectives. Ecol Econ 109:9–16

    Article  Google Scholar 

  • Douglas CH (1920) Economic democracy. Palmer, London

    Google Scholar 

  • Douglas CH (1936) The approach to reality. KRP Publications, London

    Google Scholar 

  • Douthwaite R (1996) Short circuit: strengthening local economies for security in an unstable world. Lilliput Press, Dublin

    Google Scholar 

  • Douthwaite R (2000) The growth illusion. Lilliput Press, Dublin

    Google Scholar 

  • Douthwaite R (2012) Degrowth and the supply of money in an energy-scarce world. Ecol Econ 84:187–193

    Article  Google Scholar 

  • Duby G (1998) Rural economy and country life in the medieval West. University of Pennsylvania Press, Philadelphia

    Google Scholar 

  • Dudley KM (2002) Debt and dispossession: farm loss in America’s heartland. University of Chicago Press, Chicago

    Google Scholar 

  • Dyer C (2005) An age of transition?. Clarendon Press, Oxford

    Google Scholar 

  • Eisenstein C (2011) Sacred economics. North Atlantic Books, Berkeley

    Google Scholar 

  • Evans A, Ford C (2003) A technical guide to rural finance. World Council of Credit Unions, Madison

    Google Scholar 

  • Fontaine L (2008) L’économie morale. Gallimard, Paris

    Google Scholar 

  • Food and Agriculture Organization (FAO) (2003) Term financing in agriculture. FAO, Rome

    Google Scholar 

  • Ford J (1988) The indebted society. Routledge, London

    Google Scholar 

  • Fuller D, Jonas A, Lee R (eds) (2010) Interrogating alterity: alternative economic and political spaces. Ashgate, Farnham

    Google Scholar 

  • Geertz C (1962) The rotating credit association. Econ Dev Cult Chang 10:241–263

    Article  Google Scholar 

  • Gerber JF (2013) The hidden consequences of credit: an illustration from rural Indonesia. Dev Chang 44:839–860

    Article  Google Scholar 

  • Gerber JF (2014) The role of rural indebtedness in the evolution of capitalism. J Peasant Stud 41:729–747

    Article  Google Scholar 

  • Gesell S (1958) The natural economic order. Peter Owen, London

    Google Scholar 

  • Gibson-Graham JK (2006) A postcapitalist politics. University of Minnesota Press, Minneapolis

    Google Scholar 

  • Goglio S, Leonardi A (2010) The roots of cooperative credit from a theoretical and historical perspective. ERICSE, Trento

    Google Scholar 

  • Graeber D (2011) Debt: the first 5000 years. Melville House, New York

    Google Scholar 

  • Grinevald J (1976) La révolution carnotienne. Rev Eur des Sci Soc 36:39–79

    Google Scholar 

  • Healy S, Graham J (2008) Building community economies: a postcapitalist project of sustainable development. In: Ruccio D, Cullenberg S (eds) Economic representations: academic and everyday. Routledge, New York, pp 291–314

    Google Scholar 

  • Heinsohn G, Steiger O (2013) Ownership economics. Routledge, London

    Google Scholar 

  • Hutchinson F, Burkitt B (1997) The political economy of social credit and guild socialism. Routledge, London

    Google Scholar 

  • Hutchinson F, Mellor M, Olsen W (2002) The politics of money. Pluto Press, London

    Google Scholar 

  • Jackson T (2009) Prosperity without growth. Earthscan, London

    Google Scholar 

  • Jackson A, Dyson B (2012) Modernising money: why our monetary system is broken and how it can be fixed. Positive Money, London

    Google Scholar 

  • Jones NL (1989) God and the moneylenders. Basil Blackwell, Cambridge

    Google Scholar 

  • Kallis G (2011) In defence of degrowth. Ecol Econ 70:873–880

    Article  Google Scholar 

  • Kennedy M, Lietaer B, Rogers J (2012) People money: the promise of regional currencies. Triarchy Press, Axminster

    Google Scholar 

  • Key N, Runsten D (1999) Contract farming, smallholders, and rural development in Latin America. World Dev 27:381–401

    Article  Google Scholar 

  • Kriedte P, Medick H, Schlumbohm J (1981) Industrialization before industrialization. Cambridge University Press, Cambridge

    Google Scholar 

  • Latouche S (2007) Petit traité de la décroissance sereine. Mille et une Nuits, Paris

    Google Scholar 

  • Lietaer B (2001) The future of money. Random House, London

    Google Scholar 

  • Lietaer B, Arnsperger C, Goerner S, Brunnhuber S (2012) Money and sustainability. Report from the Club of Rome. Triarchy Press, Axminster

  • Loehr D (2012) The euthanasia of the rentier—a way toward a steady-state economy? Ecol Econ 84:232–239

    Article  Google Scholar 

  • Martínez-Alier J, Pascual U, Vivien FD, Zaccai E (2010) Sustainable degrowth: mapping the context, criticisms and future prospects of an emergent paradigm. Ecol Econ 69:1741–1747

    Article  Google Scholar 

  • Marx K (2009) The Eighteenth Brumaire of Louis Bonaparte (1852). Serenity Publishers, Rockville

    Google Scholar 

  • Mauss M (1925) The gift. Cohen & West, London

    Google Scholar 

  • McLeay M, Radia A, Thomas R (2014) Money creation in the modern economy. Bank Engl Q Bull 1:1–14

    Google Scholar 

  • Merricks L (1996) Frederick Soddy. Capital Nat Social 7:59–78

    Article  Google Scholar 

  • Muldrew C (1998) The economy of obligation. Macmillan, London

    Google Scholar 

  • North P (2007) Money and liberation: the micropolitics of alternative currency movements. University of Minnesota Press, Minneapolis

    Google Scholar 

  • Perfecto I, Vandermeer J, Wright A (2009) Nature’s matrix. Earthscan, London

    Google Scholar 

  • Postel-Vinay G (1998) La terre et l’argent. Albin Michel, Paris

    Google Scholar 

  • Rahman A (1999) Women and microcredit in rural Bangladesh. Westview Press, Boulder

    Google Scholar 

  • Robertson J (2012) Future money: breakdown or breakthrough?. Green Books, Cambridge

    Google Scholar 

  • Roseveare H (1991) The financial revolution, 1660–1760. Longman, London

    Google Scholar 

  • Rowbotham M (1998) The grip of death: a study of modern money, debt slavery and destructive economics. Jon Carpenter, Charlbury

    Google Scholar 

  • Roy A (2010) Poverty capital: microfinance and the making of development. Routledge, New York

    Google Scholar 

  • Sahlins M (1972) Stone age economics. Aldine-Atherton, Chicago

    Google Scholar 

  • Schrader H (1997) Changing financial landscapes in India and Indonesia. LIT, Hamburg

    Google Scholar 

  • Schweickart D (2002) After capitalism. Rowman & Littlefield, Oxford

    Google Scholar 

  • Scott JC (1972) The erosion of patron–client bonds and social change in rural Southeast Asia. J Asian Stud 33:5–37

    Article  Google Scholar 

  • Scott JC (1976) The moral economy of the peasant. Yale University Press, New Haven

    Google Scholar 

  • Seyfang G (2010) Time banking: a new economics alternative. In: Fuller D, Jonas A, Lee R (eds) Interrogating alterity. Ashgate, Farnham, pp 193–205

    Google Scholar 

  • Soddy F (1926) Wealth, virtual wealth and debt. George Allen and Unwin, London

    Google Scholar 

  • Steppacher R (2008) Property, mineral resources and “sustainable development”. In: Steiger O (ed) Property economics. Metropolis, Marburg, pp 217–241

    Google Scholar 

  • van Griethuysen P (2012) Bona diagnosis, bona curatio: how property economics clarifies the degrowth debate. Ecol Econ 84:262–269

    Article  Google Scholar 

  • Victor P (2009) Managing without growth: slower by design, not disaster. Edward Elgar, Cheltenham

    Google Scholar 

  • Wray RL (2012) Introduction: an overview of heterodox approaches to money and financial institutions. In: Wray RL (ed) Theories of money and banking. Edward Elgar, Cheltenham

    Chapter  Google Scholar 

Download references

Acknowledgments

Four anonymous reviewers are gratefully acknowledged. All errors are mine.

Author information

Authors and Affiliations

  1. TERI University, New Delhi, 110070, India

    Julien-François Gerber

Authors
  1. Julien-François Gerber
    View author publications

    You can also search for this author in PubMed Google Scholar

Corresponding author

Correspondence to Julien-François Gerber.

Additional information

Handled by Viviana Asara, Institut de Ciència i Tecnologia Ambientals, Universitat Autònoma de Barcelona, Spain and Research & Degrowth, Spain.

Rights and permissions

Reprints and permissions

About this article

Check for updates. Verify currency and authenticity via CrossMark

Cite this article

Gerber, JF. An overview of local credit systems and their implications for post-growth. Sustain Sci 10, 413–423 (2015). https://doi.org/10.1007/s11625-015-0298-4

Download citation

  • Received:

  • Accepted:

  • Published:

  • Issue Date:

  • DOI: https://doi.org/10.1007/s11625-015-0298-4

Keywords

Search

Navigation