First Published May 16, 2017
Updated June 6, 2017
Positive Money is a not-for-profit based in London that seeks to change the UK banking and monetary system to be (in their words) democratic and sustainable. There are some major differences between PositiveMoney and Global 4C, and in this blogpost the major differences between the two initiatives are explained.
Firstly, the aims of PositiveMoney has a social focus and covers a number of issues, including house affordability, money creation, debt control, improved equality and finance for clean energy. This broad agenda differs from Global 4C, because Global 4C is focused on mitigating global warming as a policy objective, given that a stable climate is the fundamental underpinning of our civilisation. Without a stable climate we cannot expect to have reliable agriculture and prosperity, moreover, we are facing a climate change crisis that may become a climate emergency within decades. Global 4C is a policy for new international finance for a wide spectrum climate mitigation services and social and ecological co-benefits. PositiveMoney, by seeking a modified national fiat system, are planning to retain the existing unit-of-account of money, which is a virtual unit and is created ex nihilo. This unit-of-account is disconnected from the physical world. Global 4C will introduce a new parallel currency with a carbon unit-of-account that will link the currency supply to essential climate mitigation services, which may be described as ecosystem services.
The climate crisis is an existential risk to civilisation, and this is the focus of Global 4C.
Given that unabated global warming threatens us with dangerous to catastrophic impacts, it is a false hope that we could expect to have affordable housing or improved equality if greenhouse emissions are allowed to drive global warming beyond 1.5-2 ºC and into the range of 3-4ºC this century. Under such levels of global warming, societies in the UK and elsewhere will experience problems in trying to adapt to the abrupt changes, and societies will realise that the alternatives of public and commercial banking are much less important than the need to urgently decarbonised the economy. The challenges of rapid decarbonisation are enormous, and achieving the 1.5-2ºC ambition of the Paris Agreement will be extremely difficult according to leading experts, and so a new economic approach is urgently needed.
So what are the major differences between PositiveMoney and Global 4C? Let’s address this question by looking at the three major aims of Positive Money:
1. Take the power to create money away from the banks, and return it to a democratic transparent and accountable process
2. Create money free of debt
3. Put new money into the real economy rather than financial markets and property bubbles
Addressing these one at a time, here is a brief summary of what is most different:
1. Commercial Banking
A major difference between Global 4C and PositiveMoney, is that the Global 4C policy does not require that commercial banking be replaced with public banking, although public banking offers benefits and may be supported. Global 4C is a policy to introduce a parallel world currency and a new macro-economic model that will complement the existing financial system and will synergy with the banking sector. The idea that commercial banking licenses should be revoked appears unwieldily because the commercial banking sector is an integral part of the existing economy by providing various services, and it also seems impractical to replace the commercial banking sector with a single centralised system of money issuance and political governance. Another key reason, is that our major environmental problems still need to be addressed, and a debt-free parallel world currency that complements the existing monetary system has the potential to fill this role by complementing national fiat currencies issued by commercial banks and central banks.
A major challenge for PositiveMoney is to convince society that commercial banking should be replaced with public banking. Global 4C advocates an alternative approach of introducing a new currency, and this difference likely explains why the PositiveMoney does not seek a collaboration with Global 4C. Global 4C takes a ‘systems’ perspective, by linking the purchasing power of money to carbon, the thermodynamics of the economy, and to the planetary ecosystem.
If the aim of PositiveMoney is to revoke commercial banking licenses, then this could become a ‘ball and chain’ for this movement if the movement fails to address the fundamental issues of market pricing and good governance. For example, how will PositiveMoney expect to address environmental issues if it has no specific environmental policy and no price signal that can be managed in markets? The PositiveMoney approach may attract political problems when disagreements over the issuance of money are debated within a centralised authority. The central authority will be politicised and probably cannot be fully ‘democratised’. Democracy can be used to reform and improve the monetary system, but the next major innovation in the monetary system should consider the economy in relationship to the planetary climate and ecosystem. Global 4C is a policy for a parallel currency for planetary regeneration. The new currency is called Complementary Currencies for Climate Change, or 4C.
2. Debt-Free Money
Under Global 4C, the 4C parallel currency will be issued debt-free, however the existing monetary system will stay largely intact and will evolve with regulations that emerge over time. The Global 4C policy offers extremely important macro-economic advantages over the PositiveMoney approach, by facilitating a transfer of purchasing power and a new currency with a predictable price. PositiveMoney is seeking a step-change by converting a national fiat into a debt-free currency, which leaves open the question on how to handle political conflict, resource sharing, defaulting, debts and repayment? The introduction of 4C, as a parallel currency, allows purchasing power from national fiat to be transferred gradually into 4C, and this is key to a global climate risk management plan and to establishing financial certainty. The financial mechanism of Global 4C is explained in this journal paper:
Chen, D.B., van der Beek, J. and Cloud, J., 2017. Climate mitigation policy as a system solution: addressing the risk cost of carbon. Journal of Sustainable Finance & Investment, 7 (3): 1-42.
A critical feature of Global 4C is that the issuance of 4C will be managed as a reward for greenhouse mitigation services and co-benefits (abatement and sequestration). Hence, the 4C currency is supply limited, and is coupled to the physical world through an administrative system. This approach is critically important for reforming the world economy and bringing the world economy into balance with the climate. By focusing on public banking and debt-free money as their primary goal, PositiveMoney are unable to address the world’s unsustainable growth pattern and man-made climate change.
3. The Real Economy
Global 4C and PositiveMoney both seek to bypass financial intermediaries and to place more finance into the real economy. In this respect, both approaches are similar however Global 4C does this through a parallel digital currency, and not through a politically contentious overhaul of the entire monetary and banking system. Certain economists, such as Richard Werner, have argued for green quantitative easing for issuing new finance directly into the low carbon projects. This is exactly what Global 4C will do. Global 4C is more sophisticated than PositiveMoney in this respect, because the new parallel currency, called 4C, will have the qualities of a highly liquid currency-bond, and the yield on this currency will be advertised internationally, and will attract a global influx of private equity into the currency via the Forex. Global 4C will encourage long term investment into clean renewable energy, and it will create new green jobs and will incentivise social and ecological co-benefits.