Banks that don't charge interest ... like the sound of that? Haydn Shaughnessy meets a radical economist.
The Lebensgarten project in Steyerberg in Germany is an ecological community designed and founded by, among others, an Irish professor, Declan Kennedy and his German wife Margrit. Margrit, with Declan's support, is also in the process of redesigning the world's currencies. And the European system of banking. A tall order and, on the face of it, a putative case of fantasy running wild. But not at all.
These remarkable ambitions are the outcome of 20 years theoretical research and analysis by Margrit and colleagues such as Bernard Lietaer, formerly with the Belgian central bank, on the arcane subject of the world's different currencies and the banks that hoard, loan and exchange them.
A former architect and teacher at the University of Hanover, Margrit is about to realise the power of dreams. She is working with Anthroposophic Memberbank in Bochum on plans for an interest-free German retail bank. The Delitzsch-Eilenburg savings bank in Leipzig and Austrian Raiffeisenbank are also on the cusp of implementing radical changes, based on the ideas she advocates.
According to Margrit, national (or EU) currencies compound regional economic problems. And, she argues, charging interest on bank loans is the least efficient way for capitalist economies to operate. So she advocates regional currencies and, without a trace of irony or paradox, interest-free loans.
The notion that bank loans could come without those hefty interest charges is a counter-intuitive but attractive idea to us, the customers. Banks exist because they charge interest on the money they borrow from Jack to lend to Jill. But Margrit is convinced that interest charges are definitively bad, not just for customers but for the economy as a whole.
Two years ago, she retired from her university position and now tours the world proselytising the twin notions of regional alternative currencies and banks that don't charge a cent of interest.
The use of interest, and government control over currencies, Margrit and her colleagues argue, lead to a financial system whose rationale is to make money out of money. Margrit says this perverts the way people produce goods and services. Instead of making decisions based on what is a sustainable economic activity, entrepreneurs are driven by necessity to fashion and shape their businesses in order to create more money. In the process, their goods and services are constantly increasing in price, not just because hiking prices is an addictive part of the money-making impulse, but also because it is necessary to pay banks their interest charges.
An alternative currency is one that takes people, retail customers and businesses, back to the principle of exchanging goods and services through a paper medium. That paper medium might be called a euro or a Wir (the Swiss name for their alternative currency) or for that matter, a Munster or Leinster punt. The objective of a regional currency is not to create more Munster or Leinster punts, but to facilitate the exchange of goods within a region.
A regional currency is a way of taking back full control of a region's destiny. Used alongside a national or European currency, it allows decisions to be made about regional economic policy by local entrepreneurs and business people. For example, a new building project in Galway could be awarded locally and paid for in Connemara dollars, redeemable later for euro or to be used in exchange for goods and services in the Connemara region. What would be the benefit of using Connemara dollars for local goods and services? Money spent regionally stimulates the regional economy. Money spent outside the region deprives it of growth potential.
Is it really relevant to Ireland? Not while the economy is on a hot burn, says Margrit. Then again, there's time now to do a bit of planning for the day when the Celtic Tiger or the Leinster Lion finally run out of gas.