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.
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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.
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.
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).
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.
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).
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).
Popular US bumper sticker parodying a Walt Disney song.
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.
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).
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.
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.
I was able to participate in some anti-foreclosure actions in the Boston area in 2011–2012.
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Four anonymous reviewers are gratefully acknowledged. All errors are mine.
Handled by Viviana Asara, Institut de Ciència i Tecnologia Ambientals, Universitat Autònoma de Barcelona, Spain and Research & Degrowth, Spain.
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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