Ethical Banking Systems

Banks should protect our money, not fleece us for their profit

Our money is loaned into existence and then must be paid back, plus interest. This interest can only come by earning (taking) money from other loans in the system, thereby installing inherit competition and scarcity in our society. Could you imagine a society in which we didn’t have to compete for a scarce amount of funds? How could this alter our communities or the way we treat each other?

An ethical banking system is one that upholds the value of the people who use it. Instead of a institution that values only profit, an ethical bank would value the people that support it. This really shouldn’t be too crazy of an idea, but our banks today do everything in their power to leverage greater profits. The recent economic crash being a prime example. We should support and create banks that support our societal and economic well being, not their CEO bonus checks.

The Reason We Need It

It seems like second nature to me that systems we create as a society should function with the ethics we value, but there is obvious room for improvement. When a lot of our organizations and industries started the room for growth seemed limitless, so it was much easier to gain advantage in the market and grow without sacrificing ethics. Like many things in this era, we’ve run out of that room and the only way to make a higher market share this year and next year is to start finding ethically gray (or black areas) for expansion (e.g. derivatives).

Paper exchanging for paper is now 20 times greater than exchanges of paper for real commodities. This distortion of value from real wealth to phantom wealth encourages a financially dependent system, driving up debt and down real value. Eventually those claims on wealth will be exchanged for actual wealth – even if there are no longer enough. An ethical banking system supports a more realistic approach to real wealth and the money that represents it – as well as environmental concerns with investment and social justice.

An Ethical Banking System is one that encourages stable and equal amounts of material wealth. If you haven’t clued into it yet, our current banking organizations do not function in an ethical way. Our banking system encourages debt, competition, scarcity, and unequal distributions of wealth. What if we created a bank in line with our values? One that supported the people, community, and real wealth?

An Ethical Banking System

A society is created by every part within it, big or small. In a democratic country we are supposed to each have an equal power in deciding the way our nation functions. Governments are no longer meant to rule over us (as in medieval times), but instead aid us in our development – protect us from harm and ensure we have the capability to flourish (remember our pursuit of life, liberty, and happiness?).

Part of our capability to flourish is encouraged or hampered by our material wealth (partnot all). If our society decides to give each of us the means to have more material wealth than necessary than we should each be able to flourish in this aspect of our lives with room to spare. If our society decides to create less than we need, or go a step further and saddle us with debt, then our ability to flourish is hampered. Obviously the Goldilocks spot is the desired goal.

Here are Herman Daly’s recommendations for creating more realistic banking, wealth, and monetary systems:

  1. Limit the range of inequality in income distribution—a minimum income and a maximum income. Without aggregate growth poverty reduction requires redistribution. Complete equality is unfair; unlimited inequality is unfair. Seek fair limits to inequality.
  2. Free up the length of the working day, week, and year—allow greater option for leisure or personal work. Full-time external employment for all is hard to provide without growth.
  3. Re-regulate international commerce—move away from free trade, free capital mobility and globalization, adopt compensating tariffs to protect efficient national policies of cost internalization from standards-lowering competition from other countries.
  4. Downgrade the IMF-WB-WTO to something like Keynes’ plan for a multilateral payments clearing union, charging penalty rates on surplus as well as deficit balances—seek balance on current account, avoid large capital transfers and foreign debts.
  5. Move to 100% reserve requirements instead of fractional reserve banking. Put control of money supply and seigniorage in hands of the government rather than private banks.

Common Good Finance

And here is another great idea, there are many different types of alternative banking systems, I like this one:

(For my feed readers who can’t view this video it is available here)

What do you think? Do you have any recommendations for a more realistic banking and monetary system?

Image Credit: Flickr Creative Commons

3 thoughts on “Ethical Banking Systems”

  1. The suggestions for an ethical banking system are merely band-aids for a hemmoraging wound. The whole system is corrupt, it is too large and complex to survive. What is possible (though not probable) is for humans to voluntarily reduce births/population, return to an agrarian lifestyle and abolish Nations. Each village shall be a State unto itself, trading with others. No banks, a Barter system instead. Cooperation, not competition. We will not see it however, Humans display too much selfishness and greed. The appetite for possessions and power has become unquenchable. It will be up to the survivors of a worldwide holocaust to re-build, our current state of affairs almost dictates a massive global war.

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