World Bank Chief: It's Time to Restore Balance
In our world of 6 billion people, one billion own 80 percent of global GDP, while another billion struggle to survive on less than a dollar a day. This is a world out of balance.
When James Wolfensohn, president of the World Bank, addressed the Board of Governors of the Bank at a meeting in Dubai, United Arab Emirates, on September 23, he concluded his talk with an appeal to re-balance the economy on a world wide scale.
Wolfensohn said: "It is time to take a cold, hard look at the future. Our planet is not balanced. Too few control too much, and too many have too little to hope for. Too much turmoil, too many wars. Too much suffering." He continued, saying that, acting together, "we must rebalance our world to give everyone the chance for life that is secure - with a right to expression. Equal rights for women. Rights for the disabled and disadvantaged. The right to a clean environment. The right to learn. The right to development... These are not exotic objectives. All of us want the same, rich and poor alike."
The World Bank and specially the Board of Governors Wolfensohn was addressing at the occasion, hold the key to ending the economic imbalance of this world, but don't hold your breath that they will actually do so. Drumming up donations for poor countries is all they can come up with, when what's needed would be deep reforms of the very monetary system this planet runs under.
When, in conclusion, Wolfensohn states: "we all share one planet. It is time to restore balance to the way we use it. Let us move forward to fight poverty, to establish equity, and assure peace for the next generation", he does not tell us that it is the economic policies pursued by the institution he heads and whose owners he addresses, which are the underlying cause of poverty. He does not tell us that World Bank loans come with conditions to gut social programs in poor countries - it's called tightening the belt - and that most of the money they loan never even arrives in the countries who need the money but goes straight to the "creditor banks" to pay for ... interest. He does not tell us that instead of favouring a debt free economy world wide, the Bank's policies are driving us deeper and deeper into the hole day by day.
Contrast that with the experience of a group of small islands in the English Channel. Their misery seemed endless and their debt was a burden without hope - until they happened upon a trick that allowed them to slip out from underneath the yoke of the international banking system's destructive debt based economic straitjacket.
Countries all over the world should look into the experience of Jersey and Guernsey and take heart: There IS a way out of economic misery. But it does imply re-thinking the basics of monetary policy.
Channel Islands model of debt-free money
Patricia Knox
Adapted extract from a submission to the Institute.The British government, like most other governments, has delegated money-creation to the central bank. Money is therefore loaned at interest to the government by the central bank, instead of being issued debt-free by the government. Increasing amounts of tax revenue are therefore being used to repay the debt to the Bank of England. Since there is no mechanism for writing off any government debt, present day tax money is being used to pay interest on the accumulated debt of the past 300 years. High interest rates only aggravate the situation.
The banks should pay governments for a licence to create money. Governments should not pay interest.
As each year goes by, an increased percentage of tax revenue is swallowed up by the Bank of England, and social services are withdrawn as there is not enough money left to fund them.
Debt is like a cancer in society. It causes the ills of unemployment, bankruptcy, poverty and destitution, which lead, in turn, to crime and ill health. At some point in the future, at least in some countries, the rate of money-creation, increasing at an exponential rate, will be overtaken by the size of the government debt, increasing at an even faster exponential rate.
At that point, all wealth will go to pay an unrepayable loan, and there will be no social services. This is already the case in Third World countries, where the real wealth of those countries is exported to pay an unrepayable debt, and where every newborn baby is already in debt to foreign banks.
In the Channel Islands it is different. There, the government has not delegated the money-creating powers to the banks. There, the government creates debt-free money and spends it into the economy, rather than lending it into the economy, so that the government has no debt to the banks. Partly as a result, Jersey and Guernsey experience prosperity unknown in many countries. Income tax is only 20%. There is no VAT, inheritance tax or capital gains tax.
Governments everywhere should take back their power to create interest-free money, and nations would thus reach a new level of prosperity. An essential first step would be to make all loans unenforceable, like gambling debts are now, and then money lenders would become more responsible in their lending. Equity finance, where the investor shares in either profit or loss, rather than loans on fixed interest, would become the approved method of finance.
Patricia Knox, Pen Llywenan, Bodedern, Holyhead, Gwynedd, Wales LL65 4TS (tel 01407 740767).
THE ISLE OF GUERNSEYIt's perfectly reasonable for anyone to ask if there is any nation in the world today smart enough to use interest-free money. And, if so, what have been the consequences. Canada's Finance Minister, who claims (on the previous page) that governments "printing money ... leads to hyperinflation" obviously hasn't heard of the success of interest-free money on the Isle of Guernsey, or if he has, he must surely claim that Guernsey defies reason ... his reason. Because, not only has "inflation" never been evident on the island of Guernsey, but it has had a stable and prosperous economy for over one hundred and fifty years.
Now, how do you suppose a Finance Minister, such as Canada's, would account for that? Would he say that it's because the Channel Islands are tax havens? Indeed they are, but it should also be pointed out to the Honourable Finance Minister, that Guernsey only became a tax haven this century ... whereas the citizens of Guernsey were long out of debt and well on the road to prosperity way back in the eighteenhundreds.
No, Guernsey's secret of success is the fact that it has been a "protectorate" of the British Isles for centuries and, as such, is able to make its own laws and thereby determine its own destiny. By controlling its own money supply from 1816 onwards, Guernsey was able to avoid the century old trap of borrowing when it didn't have to.
The following brief account of the history of Guernsey is largely taken from The Guernsey Experiment by Olive & Jan Grubiak and The Debt Virus by Dr. Jacques S. Jaikaran
As Olive & Jan Grubiak describe, Guernsey in 1960 was ... a small but beautiful island ... well favoured by nature ... occupying an area of only 24 square miles .... having a population of fifty to sixty thousand ... and where resides that most uncommon of human attributes ... common sense. It is the second largest of the Channel Islands in the United Kingdom, next to Jersey.
In 1815, Guernsey was nothing like it is today. They only had a rudimentary marketplace and the roads were only cart-tracks 4 feet wide. Even though there were many able-bodied men and women to repair the roads and fix the dykes, they were leaving the island in great numbers because of the high level of unemployment.
To be sure there was lots of work to be done, but no way to pay for it. The sea walls and dykes were crumbling, the coast was eroding and the English Channel was fast making claim to what little there was left of the island. The Island Accounts in 1816 looked something like this:
Island Debt 19,000 Pounds
Annual Income: 3,000 Pounds
Interest Expense on the Debt 2,470 Pounds
(@ 13% interest; compounded)
______
Net Revenue 530 Pounds
But repairing the sea walls was estimated to be Pounds 10,000. So, the island was not only impoverished ... it was literally sinking ... in a sea of debt.What could they do? They couldn't increase taxation. The islanders were already taxed to the limit. Nor could they afford to borrow any more money from the banks. Whatever more they borrowed could never be repaid.
It just so happened, though, that in 1815, those concerned gathered together to try to figure out a way to improve their decrepit Public Market ... the hub of their local economy. During that meeting someone came up with the brilliant idea of issuing their own "interest-free money" ... more money which the Island Government could print at little cost, spend into circulation and eventually retire, if need be ... money on which they would not have to pay any interest.
In 1816, they decided to issue Pounds 6,000 of their own "interest-free" Guernsey State Notes. This was in addition to the current supply of English pounds which two main banks were circulating on the island already.
By 1837, Pounds 50,000 had been spent into circulation by the government for the primary purpose of local projects such as the sea walls, the roads, a new marketplace, a church and a college. This £50,000 more than doubled the money supply. But there was no inflation.
In 1914, while the British restricted their own money supply, Guernsey issued more ... another Pounds 140,000 over the next four years. By 1958, over Pounds 500,000 of interest-free money was in circulation on Guernsey and still no inflation.
By 1990, there was a total of Pounds 6.5 million in circulation issued interest-free. There was no public debt as in the rest of Britain which was still paying for its war debts. And yet on Guernsey, prosperity was very much evident everywhere.
When Dr. Jacques Jaikaran visited Guernsey in 1990, he reported on the state of the Guernsey economy in his book The Debt Virus: "There were about 60,000 permanent residents; the average family owned 3.3 cars; their unemployment rate was zero and their standard of living was very high. Also, there was no public debt and a surplus of public funds was earning them interest. The Guernsey Treasury increased the money supply by 50% over a 3 year period and this increase did not cause any inflation. The price for a gallon of gas in the UK was about $5, but the price in Guernsey was about $2. Contrary to the teachings of economics in all higher institutions, inflation, it was claimed, was not related to the volume of money, but rather to the size of the commercial debt."
Dr. Jaikaran also mentioned that Guernsey's income tax was only a "flat" 20%. Not bad, compared to the rest of the world.
See also related:Articles on innovative economic ideas in the Economy section of this site
My older articles on Silvio Gesell and the problem of interest in debt-based currencies
Communities create own currency to help their small businesses
Here is a more recent statement by the World Bank's president:"Madness is running over our planet."
- World Bank President James Wolfensohn addressing students at Stanford University, in California, ticking off statistics on development assistance and defense budgets. World development help is running at about $56 billion a year, he said, while military expenditures are almost 20 times higher at more than $900 billion. Subsidies and tariff protections for world agriculture, including large commercial interests, reach about $350 billion a year. "This is a huge frustration. We have to find a way to focus on poverty and development ... but the big issue is indifference. People don't care. Money is not flowing to where it is needed," Wolfensohn told the students.
Global Development Briefing -- Madness
March 11, 2004
See also:David Korten - When Corporations Rule the World and other books.
posted by Sepp Hasslberger on Wednesday December 17 2003
updated on Thursday December 9 2010URL of this article:
http://www.newmediaexplorer.org/sepp/2003/12/17/world_bank_chief_its_time_to_restore_balance.htm
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