Banking & Debt
Related section >> Alternative
Money is a fairly large part of life everywhere.
Whether or not we want to, many of us spend quite a lot of
time thinking about money: how to stretch it, how to increase
it, what to do with it, how to take care of it. Most of us
don't have to think very hard about what we'd do if more money
suddenly came our way. Money determines many aspects of our
lives from where we live, to what kinds of clothes we wear,
to what kind of car we drive (if we drive one at all), to
where we vacation, to what people think of us and what we
think of ourselves. Despite its prevalence in our lives, many
people have a hard time talking about money even with their
close friends and family.
Our society finds many ways to exclude
people without much money, many of whom are women. Those of
us with little money may also feel guilty and ashamed, believing
that if we had made better choices in life we would have more.
Much of this is a remnant of the early Protestant belief that
rich people were rewarded for their virtue, while poverty
was a punishment for sinfulness. Many poor people today are
made to believe they are poor because there is something wrong
with them or their behaviour. On the other hand, sometimes
rich people have a hard time dealing with their feelings about
money too. Sometimes people who have lots of money feel guilty
and don't necessarily know what to do with their money.
has become such an all-consuming and all-important part of
our lives that it is easy to forget that not all life decisions
can be made on the basis of money. As well, much of human
activity, such as women's work as providers and sustainers
of life, is not done for money. Money is simply a tool that
we use in our society to facilitate the trading of goods and
services. As 10-year-old Raya says (see Raya's
story), "Money is just some pieces of paper and chunks
of metal that you trade for food and clothes. It doesn't really
mean anything except that if you have a lot of it you supposedly
have a lot of power." So how have a few pieces of paper with
certain squiggles and lines on it, come to be so powerful?
Throughout history human beings have
desired things they could not produce
themselves. Similarly, sometimes people produced more of one
product than they themselves were able to use. And so they
traded or bartered.
Fisherpeople and farmers traded fish for grain and grain for
fish. Blacksmiths traded with cobblers and cobblers with seamstresses.
Some of us still trade things: a pair of pants for a shirt,
a book for a CD, a meal for a concert ticket. Robin (see Robin's
Story) talks about trading a cauliflower for a loaf of
bread when she was a teenager. Today Robin owns her own massage
therapy business and often trades her services for furniture,
building repairs, and other products or services.
Eventually people started to use natural
resources to measure value.
Cattle were the earliest form of "money" and they are still
used to set values in some parts of the world today. Cowrie
shells were another early form of money used in several parts
of the world including West Africa. These shells too were
used until quite recently. In early Canadian history the beaver
pelt was the most common value marker and was traded widely.
Perhaps the most common object used to represent value throughout
history is gold.
Eventually people started to use coins
and later bills (money) to represent value and to facilitate
economic transactions. Because coins and bills do not have
value but only represent value, their value changes frequently
according to the amount of money in circulation. For example,
a ten dollar bill is always worth ten dollars, but the buying
power of ten dollars can vary considerably.
Traditionally the value of money has
been set according to the product that it represents, which
is why value is so dependent upon environment. A cow is worth
much more in times of famine than of plenty. Silver is worth
more before the discovery of a silver mine than after. Value
is linked to how rare something is, or how great the demand
for the item is. In the Sahara Desert, salt was once so rare
and precious that it was traded weight for weight with gold.
In 1816, the Bank of England decided to
set the standard of money in gold. This measure became known
as the Gold Standard. Each coin and bill was worth a certain
weight of gold; until the 1950s, a notice was written on each
Canadian dollar saying that the bearer could trade the bill
in for a certain amount of gold. In this way money was tied
to the availability and thus the price of gold and it had
its base in a concrete substance of real value.
After the end of the Second World War,
Canada and the rest of the world went off the Gold Standard
and introduced a new system of 'legal tender.' According to
legal tender, money is no longer tied to any real product.
Its value is based simply on the strength of the economy itself.
Today's loonie is linked to nothing more than the rest of
the money in circulation in Canada. For more on how this strange
system works see Who Makes
Most of us store our money in banks.
While the first banks were simply places to safely deposit
money, today's banks function quite differently. Our banking
system is dependant on lots of money moving around a whole
lot. Banks reward people who move money through their accounts,
allowing them to borrow even more money to buy ever more expensive
cars, houses, and businesses. Because banking and so much
of the rest of life in our society is so dependant on large
stores of money moving around, those without money or those
with little money are kept out of the economic system. People
living on their own land, producing or trading for most of
their daily needs, are considered economically unproductive
for the most part, despite the material and social richness
of their lives. In contrast, business people who may be millions
of dollars in debt, are considered wealthy simply because
they are moving a lot of money through the system.
The influence of private banks on money and global economics is not to be undervalued. Indeed it is the interests of private banks that have influenced major policy shifts and, as a result, changes is the lives of people all over the world. See global debt. The role and power of financial institutions like banks are coming into question since the 2007-2010 global financial crisis. In the US, banks provided easy credit in multiple forms – credit cards, mortgages, car loans – and all over the world other banks and investors bought into the US housing market that was being strengthened by these “financial innovations.” When housing prices dropped, mortgages became worth more than the houses themselves. Borrowers foreclosed on mortgages in huge numbers and became unable to pay back other loans. Banks filed for bankruptcy, houses prices fell, homelessness rose. It is estimated that governments have provided up to 1.2 trillion dollars in bailouts. In mid-2009, Iceland and Ireland used up to 266% of their GDP to support the financial sector, in Canada the figure was 24.8%.
Because debt is necessary to create money in the first place (see Who Makes Money? for more on this), we are regularly assaulted by advertisements encouraging us to get in debt. Furniture and car stores advertise sales requiring no down-payments and even 'cash-back.' Credit card offers arrive in our mailboxes each week, especially to those of us who are in debt to other credit cards. After all, the credit card companies would soon go out of business if we all paid our bills on time. Banks and credit unions offer mortgages and other loans. And everywhere we are encouraged to 'Buy, buy, buy!' This cry was most jarring in the wake of the events of September 11, 2001. As one History and International Affairs professor in the US stated; “In the aftermath of the terrorist attacks of September 11, 2001, President George W. Bush advised Americans that they should not allow the trauma of the attacks to interfere with their ordinary shopping, and implied that buying had become a patriotic duty and virtue.”2This valuing of consumerism, coupled with the fact that people with low incomes often have to rely on credit cards to pay bills and buy groceries, means that the vast majority of Canadians are in debt. In fact, Statistics Canada recently reported that the average debt load of Canadians is over 98% of their annual income. In other words Canadians owe about as much as they make in a year. It's not surprising then that in 2009, Canadians charged $267 billion dollars on their credit cards, $78 billion dollars of which was still outstanding by September 2009.3
To hear one woman's story of debt visit Beatrice's
It is not only individuals who are
encouraged to contribute to the economy through indebtedness.
During the 1970s Canadian banks were awash with the profits
of the oil boom in the Middle East. Since the system grinds
to a halt when money is just sitting in the bank, bankers
actively sought borrowers for this money. Developing countries
in Africa, Asia, and Central and South America seemed like
good targets; billions of dollars were lent for health care,
and social programs. At the time interest
rates were low. However, in the 1980s interest rates soared. In 1982 Mexico stopped foreign debt payments, devalued the peso and nationalized the banks. Private international banks reacted, fearing that they would be ruined by other deeply indebted countries following the same pattern. As a result of pressure by the US government, the IMF and World Bank bailed out governments, thus saving the private banks. However, debts kept growing. By the 1990s, borrowing countries were so far in debt that their indebtedness started to have devastating effects on citizens. The Brady plan was established, shifting the economic policy making to IMF and World Bank. These policies, known as structural adjustment and later poverty reduction imposed free-market economics on the borrowing countries. Among many changes, these policies forced cuts to social programs and made money for health and education all but disappear. As a result many of these countries' citizens experience a much lower standard of living today than they did in the 1960s. And as interest payments started
to exceed the amount of the actual loans, countries were caught
in a devastating cycle. Between 1981 and 1997 indebted countries
paid over US$2.9 trillion in interest and principal payments.
While countries like Canada pride themselves in the charity
and aid they provide to the third world, what most people
do not know is that aid-receiving countries pay back more
in repayments and interest to industrialized countries than
they receive in foreign aid. For every $1 that Northern countries
provide in aid, over $3 comes back in the form of debt servicing.4
The place that money has in our current
system is not only strange, it's also terribly unhealthy both
for people and for our earth. Because poverty and richness
are so intricately connected with money, many of us have become
blind to all kinds of wealth, and ignorant of most poverty.
The system we use has often led to exploitation. In Canada,
the economic system has been particularly hard on Aboriginal
peoples and their lands. The fully-functioning and wealthy
economies of Aboriginal peoples who were the original inhabitants
on this land, have been almost completely destroyed in exchange
for the betterment of immigrants' economies. (See Aboriginal
Women and the Economy for more information.) Billions
of dollars of petroleum, forestry, mining, and hydroelectric
benefits flow off of Aboriginal lands to the dominant system
but the benefits by-pass those whose lands and livelihoods
are destroyed in exploiting the land. Not only has the imposed
arrangement ruined the economies of these First Peoples, it
has excluded these same peoples from the new system.
economic system also creates poverty by encouraging citizens
to make decisions solely on the basis of economics. Anti-poverty
activist Josephine Grey believes that there is a tremendous
poverty within our culture, namely the poverty of time. Many
of us rush through our days with little time to stop and consider
what we would call the truly valuable things in life. We live
with a poverty of relationships and community, as well as
mental and emotional health.
And finally this economic system has created
a world where unpaid work does not count. The work of nurturing
earth and humanity that women have done for centuries, has
little place in this economy.
Many people are working hard to challenge
our current money system and create economies that are truly
beneficial to all peoples, communities, and the earth. To
read about efforts like LETS (a local exchange and trading
system), the Grameen Bank (a microfinance system founded in
Bangladesh that benefits mostly women), Women's World Banking,
and local currencies see Alternative
For an excellent synopsis of global financial crises since the 1970’s see the New Internationalist March 2010 “Crisis, Crash, Crunch – the lowlights.”
Many thanks to Ross Dobson for his
insight and assistance.