Once upon a time people used to swap things. It was called trade. Some people were better at swapping things than others. Some people were able to make more things and store more food than others. They had more than they needed so they did more swapping, that is, they traded surplus. This was great but people wanted to be able to swap with people they might only meet once, or might never meet at all. This was made possible by a substitute from of exchange called “money”.
The creation of currency led to a great leap forward in human development. People began to trust money so much that they would give goods to someone who promised to pay them what the goods were worth plus some more, if they didn’t have to pay until later. That was called credit. If they couldn’t pay, they had to return the goods. These kinds of arrangements gradually kept getting more and more complicated. Governments started issuing sovereign bond for example, someone invented insurance, and people could invest in enterprises for a share of the profit.
As complicated as these developments became they had something in common with our very first swappers. There were two parties, an agreement, and a good or service was provided. Money was generated from surplus wealth and then re-invested. Money was simply a way of helping us honour our agreements between ourselves to exchange goods and services.
Because credit was based on the lender having a surplus it encouraged enterprise, thrift, saving, and productivity in order to generate a surplus. You either did this yourself, or you owned the means of production, such as land, slaves, serfs etc. In Biblical times this was how money was understood. The main issues of controversy were providing for the poor (through gleanings for example), allowing fair (though not always equal) wages, not extorting, respecting private property and inheritance, and not charging excessive interest or taxation. The Biblical prophets were quick to condemn what trade law today calls ‘unconscionable conduct’ with respect to the vulnerable – widows and orphans. This is what might broadly be termed ‘Biblical capitalism’. It was as fair as it could be in pre-literate societies, and it worked. The church however never established a clear set of economic rules that could give modern expression to ancient principles so things drifted along.
Now we have a fractional reserve lending system which allows private bodies to create money out of thin air and lend at interest. Agreements between two parties can be bought and sold electronically in seconds. Money and certain contracts have become tradeable commodities in themselves. In this way the financial system has become de-linked from the real economy. Money no longer serves us, the economy, or the community, we serve it - except the Amish and their Mennonite cousins don’t.
They continue to trade and bank as they have done for three hundred years based on what they consider to be Biblical principles. None of them is spectacularly wealthy but their communities are prosperous and no one is hungry. It’s pretty simple:
· You work hard from a young age;
· You don’t buy stuff you don’t need (no consumerism);
· You don’t try and keep up with anyone (no marketing propaganda);
· You look after your family first (they are your cause and your security);
· You generate a surplus through saving (no credit cards);
· You use that surplus to invest in the means of production: land, plant and equipment etc. (No parties and drinking saves a lot of money);
· You make more money;
· You have more children;
· You leave an inheritance (like your parents did for you, rather than having to borrow to get a start in life, then pay for your family, then fund your parent’s retirement, then fund yours);
· You don’t owe much (because you don’t spend much), you pay what you owe fast, and to delay payment of any debt is stealing;
· You sleep well at night and everyone goes to your funeral. Chances are you or a close friend builds your coffin.
There are now a plethora of books about the Amish, some of them quite misty eyed. I don’t think I could be Amish. I like art, music, travel and science too much, but I have to give them credit. The Amish/Mennonite have never had a financial crisis, a great depression, a war, austerity, or handed over control of their lives to the State. Banks that mostly lend to the Amish have weathered the GFC just fine. If nothing else the Amish are living proof that credit driven consumerism and highly leveraged debts are choices, not as it were, ‘acts of God’, and there are other ways of living.
On a personal note I have not used a credit card since 2001 when I had to use one to travel on our honeymoon. We are a middle income single income family. We have a home mortgage but apart from that if I can’t afford stuff I don’t buy it. We have the same television we were given in 2001 and I have never bought one. I ride the same bicycle I had when I was 17 but I am now considering electric bike options as an alternative to driving. I’m a consumer to be sure but I like to save and I hate debt…
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Tag line: GFC, Global Financial Crisis, Amish, Amish Banking, Amish Businesss, Mennonite, alternative economics, Biblical capitalism, monetarism, fractional lending, investment