An Interview with Bernard Lietaer
By Ravi Dykema
What is money? And how well does it work to solve society's
ills? Bernard Lietaer, author of the upcoming book Access
to Human Wealth: Money beyond Greed and Scarcity (Access
Books, 2003), has made a life's work of exploring these questions.
Lietaer has been involved in the world of money systems for
more than 25 years, and his experience in monetary matters
ranges from multinational corporations to developing countries.
He co-designed and implemented the convergence mechanism to
the single European currency system (the Euro), and served
as president of the Electronic Payment System in his native
Belgium. He also co-founded one of the largest and most successful
Lietaer is the author of nine books on money and finances,
including The Future of Money (Random House, 2001), The Mystery of Money (Riemann Verlag, 2000) and a book for kids,
called The World of
Money (Arena Verlag, 2001). Formerly professor of international
finance at the University of Louvain, Lietaer is currently
a fellow at the Center for Sustainable Resources at the University
of California, Berkeley. Beginning this fall, he will be a
professor at Naropa University. Here, Lietaer shares his views
on the shortcomings of our conventional currency system, the
benefits of creating a complementary currency, and ways to
effect lasting social change.
RD: You're very experienced on the world stage with currencies
and money-it's the world you've moved in much of your life,
BL: Yes, both in the area of
conventional money such as the Euro and more recently with
less conventional money systems. Below the radar beams of
official thought, there has been a resurgence all over the
world for the last 15 to 20 years of what I call complementary
currencies, currencies that are operating on a smaller scale
than the national level, and that can solve social, environmental
and education problems.
RD: People think of someone who works with currencies as
being a materialist. Yet it sounds as if your interests are
towards social change through complementary currencies. How
did you come to be interested in this other dimension?
BL: The reason I went to the
Central Bank in the first place was to check whether it was
possible to improve the conventional money system from within.
I had been working for a number of years in South America,
and I had seen the damage that the existing money system has
created on a huge scale in Latin America.
RD: You thought it was the money system and not just the
BL: It's a chicken and egg story:
unstable currency equals unstable government. There is practically
no way today for a developing country to have a reasonable
monetary policy within the current rules of the game. Joseph
Stiglitz, Nobel laureate in economics and formerly head economist
at the World Bank, makes the same claims in his book Globalization
and Its Discontents (Penguin, 2002). Whether you fix your
currency to the dollar or let it float, you end up with an
unmanageable monetary problem, like Brazil, Russia or Argentina
have experienced. Eighty-seven countries have gone through
a major currency crisis in the last 25 years. Their fiscal
policies are imposed by an International Monetary Fund (IMF).
I am afraid that if the United States had to live by the rules
that are imposed on, say, Brazil, the United States of America
would become a developing country in one generation. It's
the system that is currently unstable, unfair and not working.
The majority of humanity has gone through a recent
monetary crisis at least once already. We're living here,
in America, in an island of perceived stability. And even
that is an illusion. We could have a run on the dollar under
the current rules.
We are dealing with an unstable system, an ailing system.
Back in 1975, I had come to the conclusion that there would
be a systemic series of monetary crashes, starting with Latin
America. And that's why I wrote my book on how the money system
was not working and its impact on Latin American development,
Europe, Latin America and the Multinationals (Praeger, 1979).
I predicted that the first crash in Latin America would be
in the early 1980s. It actually happened in 1981 in Mexico.
Since then we have had more than 80 other countries undergoing
similar monetary crises.
RD: So someone's not connecting the dots-or are they?
BL: Let me put it this way. The
powers that be have no interest in connecting the dots. If
a new international monetary meeting like Breton Woods were
held, the first point on the agenda would be the role of the
dollar. So the United States has no interest in such a meeting.
The dollar is in a very privileged position.
RD: But it would be anyway, wouldn't it, because we're
a dominant economic player?
BL: I don't want to spend a lot
of time and energy attacking the existing system. It is an
obvious fact that America is the sole super power. But when
people say, "Well, there are fiscal crises in other countries
because the governments are less stable," my question is,
"How long would any government last in a country if you had
to repeatedly cut back on education programs, social programs,
building roads and all other programs?" How could that make
a stable democratic government possible? Like I said, it's
a chicken and an egg sequence.
There is no way of winning in the current monetary
game, particularly for the less developed countries. It's
not accidental that investments in the Third World have dropped
proportionally by a third since 1975. Currently, investments
happen mainly between developed countries, and that trend
isn't going to create a sustainable world anytime soon.
RD: So the Third World is just being abandoned?
BL: Yes. Entire continents. Africa
for instance has been dropped off the world economic map for
most practical purposes.
RD: And re-envisioning and re-engineering money itself
could change this?
BL: Correct. And the good news
is that such re-engineering of money has started to happen
if one knows where to look.
RD: Do a lot of other people share your views?
BL: Most people haven't looked
at what's happening in monetary innovations today. What do
you think a frequent flyer mile is, but a currency issued
by an airline? In Britain, you can go to J. Sainsbury, the
largest supermarket chain, and use British Airway miles to
buy your goods. Initially, it was only designed as a loyalty
scheme for people taking planes. Today, you can earn this
currency without ever taking a plane. On Visa cards you get
miles. And you can use them to pay long-distance telephone
calls, taxis, restaurants, hotels.
First, let's define what a currency is, because most
textbooks don't teach what money is. They only explain its
functions, that is, what money does. I define money, or currency,
as an agreement within a community to use something as a medium
of exchange. It's therefore not a thing, it's only an agreement-like
a marriage, like a political party, like a business deal.
And most of the time, it's done unconsciously. Nobody's polled
about whether you want to use dollars. We're living in this
money world like fish in water, taking it completely for granted.
Now the point is: there are many new agreements being
made within communities as to the kind of medium of exchange
they are willing to accept. As I said, in Britain, you can
use frequent flier miles as currency. It's not a universal
currency, it's not legal tender, but you can go to the supermarket
and buy stuff. And in the United States, it's just a question
of time before privately issued currencies will be used to
make purchases. Even Alan Greenspan, the governor of the Federal
Reserve and the official guardian of the conventional money
system, says, "We will see a return of private currencies
in the 21st century."
RD: In other words, private currencies are coming back.
How would that change the circumstances for poor people, for
the Third World?
BL: I gave you that first example-a
commercial loyalty currency-only because it would be familiar
to most of your readers. But in addition to those commercial
private currencies, there are now more than 4,000 communities
around the world that have started their own currency for
social purposes as well.
For example, there are about 300 or 400 private currency
systems in Japan to pay for any care for the elderly that
isn't covered by the national health insurance. They are called
"fureai kippu" (caring relationship tickets). Here's how they
work: let's say that on my street lives an elderly gentleman
who is handicapped and cannot go shopping for himself. I do
the shopping for him. I help him with food preparation. I
help him with the ritual bath, which is very important in
Japan. For this help, I get credits. I put those credits in
a savings account, and when I'm sick, I can have other people
provide such services for me. Or I can electronically send
my credits to my mother, who lives on the other side of the
country, and somebody takes care of her.
Here is an agreement within a community to use as medium
of payment something other than national currencies, to solve
a social problem. And it makes it possible for hundreds of
thousands of people to stay in their homes much longer than
they otherwise could. Otherwise, you'd have to put most of
these people into a home for seniors, which costs an arm and
a leg to society, and they're unhappy there. So nobody's winning.
In contrast, Japan has created a currency for elderly care.
In the United States, Florida is the only state that
has the same density of elderly people as Japan does-18 percent
of the population is more than 65 years old. But Florida is
a model for our collective future. Colorado will be there
in 2020. Germany will be there in 2006, France in 2008, Britain
in 2012. Partly because of the baby boom generation, and partly
because of the fact that health care has improved and people
live longer. If you put all of these elderly in homes for
seniors, you'd go bankrupt. Japan has been looking for another
way, and has found it by introducing a monetary innovation.
Let me give you other examples, already operational
here in America today. There are now several hundred "time
dollar" operational systems in the United States. The unit
of account is the hour. I do something for you. I have a credit
for an hour, while you have a debit for an hour. If I can
use my credit with someone else, this creates a currency between
us. For those people who are willing to give some of their
time, the money manifests automatically. It doesn't quite
work that way with dollars, does it? One of the two of us
has to get dollars by competing for them somewhere outside
of our community.
Time dollars are helping in a lot of communities where
conventional money is scarce: in ghettos, retirement communities,
high unemployment zones, student communities. There are 31
states in America that are paying employees to start such
time dollar systems, because it solves social problems. There
are some operating in Chicago, fairly big ones in Florida.
For example, in Chicago, there are entire neighborhoods that
used time dollar systems to create a neighborhood watch system
that got rid of drugs and gangs. It's working, it doesn't
cost anything to the taxpayer, it doesn't create a huge bureaucracy,
and it encourages the solution of the local problems by and
with the very people who know most about them.
RD: What do they use their time-dollar credits for?
BL: Well, it's a closed circle.
If I do something for you, I have a credit, which I can use
with any member of the community that is part of the system.
I can't buy cars or pay my telephone bill with this system
because the suppliers of such items don't participate now
in such systems; but I can obtain services-so I could have
my car repaired, my house painted, my kids mentored.
of the time dollar system is Edgar Cahn, who's the author
of No More Throw-Away
People (Essential Works Ltd, 2000). He claims that if
you can't compete in the dollar economy, you're thrown away.
He shows how a time dollars system provides a solution to
this process, because it operates in parallel with the conventional
competitive economy, and it creates an environment where everybody
RD: So you envision a world where there are a lot of these
BL: I don't call them alternative,
because they aren't intending to abolish or replace the national
currency. I'm not claiming that we could or should abandon
national currencies or the competitive economy. This is a
complementary currency system. It facilitates exchanges additional
to the normal system. It makes it possible to match unmet
needs with unused resources.
RD: I can't see how you'd be able to pay your rent with
BL: Well, in Ithaca, New York,
there is a currency called Ithaca hours, and some people pay
part of their rent with it. Not all of it: for some it is
50/50, for others it is 80/20. And the landlord or lady can
go to the farmer's market and buy his vegetables and his eggs.
RD: So the big things-transportation, housing, food-are
those covered in the concept of complementary currency?
BL: It all depends on the agreement
you're making, and whom you are succeeding in including in
that agreement. Let me give you a real-life example. In Curitiba,
the capital city of the State of Paran in Brazil, if you bring
pre-sorted garbage, you are given bus tokens. So in Curitiba,
public transport is clearly part of their complementary currency
It depends on the agreements you have with your landlord,
with the transportation company, with the university, with
the business community. It just depends on who wants or is
willing to participate. You can't force anybody to accept
this currency. They are not what is technically called "legal
tender." I call them "common tender": commonly accepted as
payment for debts without coercion of legal means.
RD: I understand that the government wants to get its chunk
out of barter transactions, just as if they were a cash transaction.
BL: Yes, and those taxes will
need to be paid in "legal tender", i.e. dollars. The tax issue
has nothing to do with the currency you use in an exchange,
but with the kind of transaction you're performing.
Say I'm a plumber. I come to your house and fix the
plumbing. And you give me a nice cake in payment. I'm supposed
to declare the value of that cake and pay taxes on it, because
I'm in the plumbing business. Now say I am a professor at
a university. I come to your house. I fix your faucet. You
give me a $100 bill. I'm not obliged to declare it because
I'm not in the plumbing business. As I said: it is not the
currency used that determines whether a transaction is taxable
or not, but the nature of that transaction.
Interestingly, there is one complementary currency,
the time-dollar system that we talked about earlier, that
is officially tax-free in the United States. It's used only
to resolve social problems, and the IRS has ruled that time-dollar
systems are tax-free.
RD: I think complementary currencies, barter included,
should be tax-free, because they offer solutions to a social
BL: Then I suggest you go and
lobby for passing such a law. Currently that's not what the
law says in the United States.
The use of complementary currencies is fairly recent.
It took off only in the last 15 years. Even in 1990 there
were less than one hundred complementary currency systems
worldwide. Today there are over 4,000. It's definitely catching
RD: And you would like to see it continue to expand?
BL: I think it is a useful tool
to solve a number of our problems. It makes it possible to
truly create a more gentle society.
I spent last summer in Bali. People are remarkably
artistic in that island. Their communities are unusually strong.
They have festivals that are totally mind-blowing, and can
last a month. They're having a good time. It's a comparatively
non-violent society. And what I found is that it isn't a simple
coincidence that they have been using a dual currency system
for many centuries. All these unusual characteristics of Bali
turn out directly to be nurtured by their dual money system.
I am publishing a detailed paper on how this mechanism works
in the forthcoming issue of Reflections, the journal of the Society of Organizational Learning
RD: How does the money system lead to those outcomes?
BL: Practically all Balinese
participate in a dual currency system. The first is the conventional
national currency (the Indonesian Rupiah); the second is a
time currency where the unit of account is a block of time
of approximately three hours. This second currency is created
and used within the "banjar"-this is a community entity consisting
of between 50 and 500 families. It is in each banjar that
the decisions are made democratically to launch any big community
project. It could be to put on a festival or build a school.
For each project, they always make two complementary budgets:
one in the national currency, and one in time. That second
currency-called "narayan banjar" (meaning work for the common
good of the community)-is created by the people themselves.
They don't have to compete in the outside world to obtain
that second currency, and it fosters cooperation between the
members of the community. I call it a yin currency-it's more
feminine in nature. And it complements the national currency,
which is a competitive currency and therefore of a yang, or
Here's why it works: poor communities don't have a
lot of national currency, but they tend to have a lot of time.
In rich communities, the opposite tends to be the case-people
have more national currency, but less time. In either case,
each banjar is capable of creating extraordinary events just
by budgeting and using more of the kind of currency-national
or time-in which they are rich. This balance is a key contribution
to the unusually strong community spirit that prevails in
Bali. And it's not just because they're Hindus. There are
almost a billion Hindus in India, and they don't behave that
way. Here is an example of how a currency can make a difference.
RD: We have a strong emotional attachment to money, and
we worry about it. So how we relate to money influences who
we are and how we think of ourselves.
BL: Yes, you're right. But it
is interesting that societies that are using different kinds
of currency have also very different collective emotions concerning
money. The generally accepted theory-dating back to Adam Smith-is
that money is value neutral. Money is supposed to be just
a passive medium of exchange. It supposedly doesn't affect
the kind of transactions we make, or the kind of relations
we establish while making those exchanges. But the evidence
is now in: this hypothesis turns out to be incorrect. Money
is not value neutral.
Let's return to the example of the fureai kippu that
I was mentioning earlier, the elderly care currency in Japan.
A survey among the elderly asked them what they prefer: the
services provided by people who are paid in yen, the national
currency; or the services provided by the people paid in fureai
kippu. The universal answer: those paid in fureai kippu, "because
the relationships are different." This is one example of evidence
that currency is not neutral.
Another example: there is typically a reluctance among
friends to pay for help provided by using national currency.
If a friend is helping you move or paint and you pay him with
national currency, it just doesn't feel right. Interesting
RD: So people feel
differently about complementary currencies than national currencies?
BL: Yes, there have been surveys
in several countries that prove this to be the case. Conventional
currencies are built to create competition, and complementary
currencies are built to create cooperation and community,
and it's important to be aware that both can be available
to make our exchanges.
According to Paul Ray's (author of The
Cultural Creatives, Harmony Books, 2000) study, 83 percent
of Americans believe that the top priority should be to re-build
community, and yet the kind of currency we use in our transactions
is precisely one that eliminates community. The word "community"
comes from Latin, "cum munere." "Munere" is "to give," and
"cum" is "among each other"-so, community means "to give among
each other." In short, it turns out that dollar exchanges
tend to be incompatible with a gift economy. Complementary
RD: Are you saying that you can't have community if you're
using dollar exchanges?
BL: I'm saying that exclusive
use of a competitive programmed currency in a community tends
to be destructive for the community fabric. This isn't theory.
We've seen this happen at the tribe level, with the collapses
of traditional societies. I've seen one happen myself in Peru
among the Chipibo in the Amazon. That tribe had been in existence
for thousands of years. When they started using the national
currency among themselves, the whole community fabric collapsed
in five years' time.
The same thing happened here during the 19th century
in the Northwestern United States and Canada, in the traditional
indigenous societies. The moment they started using white
man's currency among themselves, the community collapsed,
the traditional fabric broke down.
RD: Do you think complementary currencies really can transform
BL: Yes. Bali is a perfect example
that long-term use of a dual yin-yang currency system creates
a different society. Thirty percent of a Balinese adult's
life happens in the space of the yin, feminine currency, which
is the time currency. In contrast, we spend close to 100 percent
of our time in the masculine, yang, competitive currency.
That 30 percent of time spent on community activities creates
another society, where everybody can become an artist, where
the community fabric is stronger, where the social safety
net is reliable, where abandonment is unknown. It nurtures
an extraordinary feeling of trust and a higher quality of
RD: And you think this kind of culture and community can
exist in other places, with completely different religions
BL: The short answer is yes.
We have evidence from Japan, Germany, Mexico, Brazil and the
United States to show that complementary currencies make a
difference in the way people relate to each other.
RD: In a really transformed world, would a community be
using multiple complementary currencies as well as the national
BL: Not necessarily. What has
started to happen recently is an integration-many of these
services that were using highly specialized complementary
currencies are beginning to integrate into a single, local
social-purpose currency. For example, youngsters who are taking
care of the elderly in Japan using their credits in partial
payment for tuition at the university, so we're solving two
problems at the same time. It provides an additional way of
making things happen that otherwise is not available when
national currency is scarce. Remember, complementary currencies
simply enable additional matches between unmet needs and unused
RD: Does the internet and electronic transfer systems offer
a means for the creation of complementary currencies?
BL: I am convinced that the reason
complementary currencies are developing now because of cheap
computing. Do you really think American Airlines would have
frequent flyer miles if they needed an army of clerks trying
to keep track of your miles? I don't think so. But today anybody
with access to a PC can start a currency system. It isn't
a coincidence that about 95 percent of the social purpose
complementary currencies are electronic.
RD: So can we buy an off-the-shelf program for creating
BL: Sure. There are even different
freewares already available. One of them is for operating
a LETS (Local Exchange Trading System). Another one that is
free of charge is to start a time dollar system. We are in
the process of incorporating a non-profit foundation in Boulder,
the Access Foundation, whose purpose is to provide independent
information on all the different complementary currency systems
that are available worldwide, and on its website one will
be able to download the corresponding softwares. This website
is planned to be operational early this fall.
Currently, our biggest problem with money and currencies
is unconsciousness. We are not aware of what we are doing
around money. We haven't really thought about what money does
to us-we believe it's neutral, so it doesn't matter. But it's
not neutral: it deeply shapes us and our societies. The first
thing that has to happen before complementary currency systems
can effect real change on a larger scale is a shift in consciousness
RD: You mean, we need to be aware of how money works?
BL: Let me ask you this. Have
you taken an inventory of the number of days you spend in
life getting ready to make money? And when you have money,
to manage the money or spend it? But then, think about how
many hours you've thought about what money is. I suspect not
very much. We are spending a huge amount of energy to get
something about which we have surprisingly little understanding.
RD: Well, it's like the rain. It's something you adapt
BL: Yes, except that rain is
not man-made. That's precisely the difference. We're treating
money as if it is God-given, like rain or the number of planets
in the solar system. But it isn't. If you don't like the quality
of rain, there's not much you can do about it. If you don't
like your money system, maybe you can do something about it.
Assume that a Martian lands in Denver on the wrong
side of the tracks. He ends up in one of the ghettos and finds
that the houses are run down, the kids not taken care of,
the elderly in trouble, and the trees dying. He sees all these
things, and discovers that there are people and organizations
absolutely equipped and ready to solve every one of those
problems. So this Martian asks, "What are you waiting for?"
The answer: "We're waiting for money." "What is money?" the
Martian inquires. "It's an agreement in a community to use
something as a medium of exchange." Don't you think he may
leave the planet believing there is no intelligent life here?
The point is: if money is an agreement within the community
to use something as a medium of exchange, we can create new
agreements, can't we? That is exactly what people are already
doing all over the world. So why don't we do it here? If we're
waiting for conventional currency to solve all our problems,
aren't we waiting for Godot?
RD: Is this your whole campaign now? Are you through with
Belgian Central Banks?
BL: I'm trying to contribute
to a consciousness shift regarding money. I believe that by
a small change in the money system, we can unleash huge improvements
in our social system. It's the highest leverage point for
change in our society, and surprisingly few people are looking
at it. If you start a new complementary currency system, it
can become self-perpetuating and facilitate additional transactions
You know the saying, if you want to feed someone, give
him a fish. If you want to really help him, teach him how
to fish. This is just a fishing lesson-what you do with it
is up to you. You can take big fish or small fish, or you
can choose not to fish at all. You decide what issues you
want to deal with in your community, and there is a currency
system that can help you with it.