Embedded Files
Helpful prior knowledge and learning objectives
Helpful prior knowledge and learning objectives
Helpful prior learning:
Section 1.1.1 The economy and you, which explains what an economy is and how it is relevant to students’ lives
Section 1.1.2 The embedded economy, which explains the relationship between the economy and society and Earth’s systems
Section 6.1.1 Money systems, which describes the parts, relationships and functions of money systems
Section 6.1.2 History of money systems, which outlines the historical origins of different money systems and their functions
Section 6.1.3 Modern money creation, which explains how forms of money are created in modern money systems
Section 6.1.4 Social relationships of money, which explains how money systems can both strengthen and weaken human relationships
Section 6.1.5 Ecological relationships of money, which explains how money is connected to Earth systems, often invisibly, and creates unequal access to resources
Section S.1 What are systems?, which explains what a system is, the importance of systems boundaries, the difference between open and closed systems and the importance of systems thinking
Section S.2 Systems thinking patterns, which outlines the core components of systems thinking: distinctions (thing/other), systems (part/whole), relationships (action/reaction), and perspectives (point/view)
Learning objectives:
outline narratives that reinforce current money systems including: money is scarce, money is neutral, and we can’t change the money system
In 2017, British prime minister Theresa May made headlines by saying, ‘There is no magic money tree.’ She meant that the government didn’t have enough money to pay for things like schools, nurses, or pensions.
May’s quote revealed a deep problem. Most people, including many in powerful political positions, think of money as a thing that can run out, like coins in a jar. But this is not how the money system works. ‘Money is scarce’ is one of several narratives, stories that shape how we think about the world (Section 1.3.11), that keep our current money systems in place.
The organisation Positive Money made a short video to call out Prime Minister May for her misrepresentation of money in the short video below.
What are the narratives that hold the current money system in place?
What are the narratives that hold the current money system in place?
Narrative 1: Money is scarce
We are often told by political leaders that there is a limited amount of money to go around. This is a powerful story. It makes people believe we can’t afford to invest in clean energy, good schools, or decent housing. But this narrative hides how money actually works.
As you may have learned in Section 6.1.3, most money is created by commercial banks when they issue loans. This means that money is not a limited resource.
But money often feels scarce to people because of the way we create money. When a bank gives someone a loan of $20,000, that money is created in the banking system. But the borrower has to repay more than $20,000 because of the interest on the loan. That extra money doesn’t yet exist. It has to come from someone else’s loan (Section 6.1.3).
So although money doesn’t need to be scarce, the way we design the system creates artificial scarcity. There is never quite enough money in circulation for everyone to repay their debts at the same time. This creates pressure to compete and grow the economy, even when that harms people or nature.
Figure 1. We often hear that ‘there’s no money’ for the things that improve people’s lives.
(Credit: bluedesign, licensed from Adobe Stock)
Narrative 2: Money is just a neutral tool for measuring and exchanging
Another common story is that money is simply a neutral way to measure value as a ‘unit of account’. And money just helps people trade as a ‘medium of exchange’ (Section 6.1.1). Framed this way, money seems harmless, like a ruler for measuring length. But money isn’t neutral, since there is someone who decides who gets loans (the main way money is created) and for what. Thus, the way money is created influences what kinds of activities are rewarded, and what kinds are ignored.
Banks often lend to people who already own property or to large businesses that can make profits. These loans are often used to fund activities that can extract value from others by charging high prices, reducing labour costs by firing workers or suppressing wages, or using up natural resources (Section 3.2.2). This value extraction is how loans are repaid with interest. As a result, money tends to flow toward activities that generate profits by people and businesses in a position of power over others in society.
This means projects that support care work, climate action, or other activities that distribute, add and share value rather than extract value may receive little or no funding. Banks are less likely to lend to small local businesses, care workers, or community projects. Money reflects the choices and values of those who control it.
Figure 2. Some say money is just a way to measure value, a ‘unit of account’, and is therefore a neutral tool in the economy.
(Credit: gorkol_ter, licensed from Adobe Stock)
Narrative 3: We can’t change the money system
Many people believe that we just have to accept the way money works. This story says the money system is fixed and unchangeable. But this is not true. The rules of money creation, lending, and spending are made by people. They can be changed.
Still, most people don’t know how money is created, or who decides how it flows. Talking about money is often seen as private, even impolite. Economics classes may teach about how people use money, but not how the money system itself works. Some economists are even trained to treat money as an unchangeable part of economic systems.
This makes it harder for people to imagine alternatives.
Figure 3. Many believe that we can’t change our monetary systems.
(Credit: alexkich, licensed from Adobe Stock)
What do these narratives mean for regenerative economies?
What do these narratives mean for regenerative economies?
These three stories support each other. If people believe money is naturally scarce, they may stop asking why or how it is created in the first place. If they believe money is neutral, they may not question who benefits most from the system. And if they believe nothing can be changed, they may give up on trying to imagine a better system at all.
Together, these narratives protect the current money system and those who benefit from it, even if the system increases economic inequality and harms the planet. These narratives make it harder to see the power behind money systems. They also shape how people relate to one another. Money systems built on debt and competition make it harder to trust and cooperate.
A regenerative economy focuses on creating the conditions for life, aiming to meet people’s needs within planetary boundaries. Doing this requires large coordinated investments in care, clean energy, food, public transport and ecological regeneration. To do this, we need to mobilise money and finance for the public good, and that means exposing these damaging money narratives that hold us back.
When we understand that we can redesign money, we can begin to ask better questions: Who controls money? What should it be used for? How could we design it differently? Subtopic 6.3 (coming soon!) will explore these design questions.
Figure 4. Narratives shape the way we think about money and the economy, so exposing false narratives can free us to think about alternatives to our current systems.
(Credit: Suzy Hazelwood, Pexels license)
Activity 6.1.6
Activity 6.1.6
Concept: Systems, Power
Skills: Thinking skills (critical thinking)
Time: 30 minutes
Type: Individual, pairs, or small group
The following are a list of statements about money and monetary systems that you might hear or read in the media or political or business speeches. Individually, in pairs or small groups:
a. decide which narrative the statement reflects? Scarcity / Neutrality / Powerlessness
b. rewrite the quote to challenge or reframe the message, using your own words.
c. discuss how your new version changes the meaning or assumptions behind the original; share with other students if you have time.
If you click the arrow you can see ideas for rephrasing, but have a go yourself first!
“Raising wages for public workers would mean cuts somewhere else.”
“Money doesn’t choose sides—it just helps buyers and sellers find each other.”
“The government’s budget works like a household—we can’t spend what we don’t have.”
“Interest rates are just technical decisions. They shouldn’t be political.”
“Banks just follow the numbers. If a project doesn’t make profit, they won’t fund it.”
“The financial markets will panic if we change how public spending works.”
“We simply can’t afford to fund both pensions and climate action.”
“If we don’t follow global financial rules, we’ll scare off investors.”
These are ideas about rephrasing the narrative. Your's will look different and that's fine!
“Paying public workers fairly is a choice. We can design money systems to support social priorities, not pit them against each other.”
“How money is created and who gets access is shaped by rules and power, not just fair exchange.”
“Governments create and manage money systems differently from households. They can choose to invest in what people and the planet need.”
“Interest rate decisions affect people’s lives. It’s fair to ask who benefits and whether other choices are possible.”
“Banks use profit as a filter, but this means valuable projects for care and the planet are often ignored.”
“We should weigh the risks to markets against the risks of underinvesting in people and the planet.”
“We need to look at how money is created and allocated to meet essential needs like pensions and climate action together.”
“Global rules can be rewritten to support fairness and stability, not just protect investors.”
Optional extension:
Keep your eyes and ears open for examples of these narratives in the ‘wild’. When you spot them, share with your teacher and/or classmates. You can access some sample rewrites by clicking on the arrow, but don’t do this until you’ve had a go, because there are a wide range of ways to do this.
Ideas for longer activities and projects are listed in Subtopic 6.5
Checking for understanding
Checking for understanding
Further exploration
Further exploration
Interview with Bernard Lietaer - towards the start of this ca. 65 minute interview with money system expert Bernard Lietaer explores what money is, and discusses the neutrality and scarcity narratives of money. Difficulty level: medium
Positive Money - the website of a non-profit organisation that works to reform money systems to support human and wider ecological wellbeing. Difficulty level: medium
Sources
Sources
Jakab, Z., & Kumhof, M. (2018, October 26). Banks are not intermediaries of loanable funds: Facts, theory, and evidence (Staff Working Paper No. 761). Bank of England. https://www.bankofengland.co.uk/working-paper/2018/banks-are-not-intermediaries-of-loanable-funds-facts-theory-and-evidence
Monneta. (2016, May 4). Last extensive Interview with Bernard Lietaer [Video]. YouTube. https://youtu.be/B_7hVfZIiQo
Raworth, K. (2017). Doughnut economics: seven ways to think like a 21st century economist. London: Penguin Random House.
Wray, L. R. (2022). Making money work for us: How MMT can save America. Polity Press.
van Staveren, I. (2015). Economics after the crisis: An introduction to economics from a pluralist and global perspective. Routledge.
Terminology (in order of appearance)
Terminology (in order of appearance)
coming soon!
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