Creating Wealth Read online

  The homeless population grows along with it — before the economic crisis of 2008, the National Law Center on Homelessness and Poverty estimated that each year over 3.5 million people, 1.35 million of them children, experienced homelessness. Since that time, accurate statistics are hard to find, but Reuters reported that local and state homeless assistance groups have seen a 61% rise in homelessness since the foreclosure crisis began.5

  In response to the foreclosure crisis, the US Department of Housing and Urban Development created a new program — The Neighborhood Stabilization Program (NSP) — that is providing $4 billion to cities and towns.6 The money cannot be used to prevent more foreclosures, but it can be used to buy up foreclosed properties, pay the bank, renovate/ repair them and resell them. If public money is being used to purchase private homes from banks, this investment could be used to create new wealth by developing a means of exchange for housing that will create jobs while at the same time moving homeless people back into homes — all without spending more real taxpayer’s dollars.

  A model for doing this already exists — Habitat for Humanity routinely requires people to contribute sweat equity as part of their own housing development. Sweat equity could be mobilized on a larger level if the tax dollars are used to buy up groups of homes and sell them to nonprofit community and economic development organizations that provide job and skill training for unemployed workers.

  Home renovation involves a wide variety of marketable skills: carpentry, plumbing, electric, renewable energy, HVAC, interior design, gardening, sewing, painting, decorative arts, just to name some of the more obvious ones. Professionals engaged for the renovation could be required to provide skills training for people who need work, and on-the-job experience could be provided with the publicly purchased houses.

  The people being trained wouldn’t be eligible for very high wages in conventional dollars — job training programs usually pay a small stipend, if anything — but they could also be paid in supplemental vouchers based on a proportional division of the value of the renovated homes they helped to create. The vouchers could then be used as a down payment on one of the homes or traded with other people for things that the trainees need — forming the basis of a local complementary currency. This currency would not be based on debt (like our current dollars) but rather on the real value of a home. The equity produced by this substantial infusion of tax dollars would therefore be captured by the people who need it most — rather than going to gentrify neighborhoods and displace low-income residents.

  Community Land Trusts could play a vital role in this process — by owning the land or other real interests in the housing that tax dollars created, they can insure long-term affordability by having a role in the future resale of the properties.

  Saving Our Way Out of Poverty

  An improved savings instrument would need to produce long-term value from the original investment and be tangible enough to be readily understood and easily convertible into real goods and services people need. It also should ideally be based on actions that can be taken either in the private sector for individual benefit or in the public sector for public benefit.

  Our proposal is to introduce a savings currency that is fully backed by living trees. Their biological growth rate provides for the increased value over time. Trees offer us so many gifts we have come to take for granted. They are the lungs of the planet, inhaling CO2 and exhaling the oxygen we need to breathe. Their fruit and nuts were our earliest and arguably our best food. Their wood has provided us with material for homes, fire for heat and cooking, ship making, electricity, furniture and paper. If you contemplate where humanity would be without trees over the long sweep of history, you can start to see that people and trees have truly been partners all along, although the trees have been silent partners and overexploited ones.

  The tree savings system is simple. The key ingredients are land, water and seeds or tree saplings. A local government with underutilized land could make a parcel available to the community for tree planting. The people who do the work and the landowner — a local government or a private citizen — would receive shares in the final product, the trees that would grow over a period of time. The currency unit is simply a share in the value of a forest plantation.

  These shares in turn could be either used as an inflation-proof savings account or be exchanged in the local economy for other goods and services — the people who earned them in the first place would not be limited to holding them until maturity. They could be denominated in whatever values would be useful for people, so if the total value of the trees you had planted was worth $1,000 over time from your initial investment of $50 plus the labor of planting and watering them, you could receive the shares in notes of $1, $5, $10 or $100, whatever would be useful for you.

  Such tree notes would be based on an obvious value — the trees are very tangible, and ideally they are in the neighborhood where people live, strengthening the incentives to maintain them in good health and to harvest them at a sustainable rate over time.

  Not all complementary currencies need to have something physically tangible, like real estate or trees as explained in this chapter. There are other currencies that deal with intangible activities like learning or the arts, as will be shown next.

  CHAPTER 6

  Growing Intelligence

  [A] good education is another name for happiness.

  ANN PLATO1

  Educated Indentured Servants

  The student loans provided largely by private banks for college and university education are reminiscent of an historic practice. As the United States was settled, people often bought their passage to the new land of opportunity through a relationship known as indentured servitude. They would get a ticket on a ship from a wealthier customer in return for a contract to be their servants for a fixed period — usually seven years. The practice was also used for professional training — to gain the skills you needed to be a shoemaker, for example, you would sign a contract with an existing cobbler that would obligate you to work for him for a period of time — typically three to seven years, after which point you could hang up your own shingle and work for yourself.

  Indentured servants were only one small step removed from slavery, another common practice of the time. They could be bought and sold and did not have any of the rights under the law that freemen did. Regardless of how their employers treated them, or their health or the needs of their families, their obligation to work for their masters was enforced by the courts.

  College loans have replicated this relationship, only now the service is in the form of debt. Indentured servitude was actually less constraining. The modern equivalent of indentured servitude lasts a lot longer than three to seven years. In the US, young people today leave college and professional school with indebtedness that will haunt them for most of their professional lives. The fact that their debt is guaranteed by the government makes it impossible for them to get out from under the burden regardless of their ability to find jobs that pay the salaries they need to make loan payments — student loans are the one form of debt that is exempt from the protections offered by US bankruptcy laws.

  If we trace the history of education back in time, it began as a life process where young people worked alongside their parents and extended family to further the well-being of the group, learn critical survival skills and practice the customs of social exchange, all of which would have been seamlessly integrated with the spiritual traditions and values of the culture. While some members of the community or tribe might have more skill than others, the level of specialization tended to remain low compared to modern societies, and the general socialization and training people received to enable them to participate fully in the community needed to be equitable to insure the group’s survival.

  The earliest forms of a practice we might recognize as being similar to the educational system we have today were in sacred and spiritual matters — training for the priesthood, as healers, as ceremonial
leaders and then later as scribes of sacred texts. Throughout the early history of Western civilization, the church and the learning institutions established by the church provided the majority of the formal education available in society. The trades also had systems of apprenticeship and training, but these did not resemble the college and university education we have today.

  Today in North America, education makes a big financial impact on later earnings. As of the 2000 US census, those adults over 18 who had a high school diploma earned an average of $27,915 per year. Adults with bachelor’s degrees earned an average of $51,206, while those with an advanced degree earned $74,602. Individuals who did not have a high school diploma only earned $18,734.2 Only four states reported that over 90% of their young people earned a diploma. The Northeast region of the country had the highest number of college graduates — 30% of the population — whereas in the South the number of high school graduates dwindled to 25%.3

  In the 21st century, the vast majority of people do not work on farms anymore. In 1800, over 90% of the US population was rural, with only 6% living in cities. At the turn of the 20th century, approximately 40% of the population lived and worked on a farm, but in 2009 this figure had decreased to only 2% of the US population.4 Agricultural surplus has been supplemented with creative, technological and intellectual surplus as a basis for non-subsistence life, and the level of technological skill required to make a meaningful contribution to society has increased exponentially.

  A form of education that systematically marginalizes the majority of the population can be seen in this light as a trend that will lead to our collective destruction if it is not reversed. Further, if those who do manage to navigate the barriers to learning are saddled with debts that prevent them from choosing the kind of creative endeavors that would utilize their knowledge to its fullest, this also works against our future.

  The structure of college debt also plays a role in marginalizing the students who don’t manage to climb to the top of the increasingly narrow hill of employment possibilities after college. If you finish college in debt, with average monthly payments on the debt (that ranged from $500 to $1,200 per month in 2009) and don’t find a job right away, you don’t have a lot of choices. Most student loans are guaranteed by the federal government, and so they are treated like obligations to the IRS — filing bankruptcy does not lift the ongoing obligation. Courts only grant forgiveness of college debt in cases where the person has a permanent disability that will prevent them from working. If you default on the loan, your wages through life can be garnished, your tax returns withheld, collection fees and possibly even legal fees imposed if the US Department of Education takes you to court. There are deferments, forbearance and consolidation programs available, but the bottom line is that the debt never goes away.

  Contrast these practices to other countries where a higher tax rate insures that most students can attend college and university for little or no cost. Sweden, Venezuela, Qatar, Kuwait and many of the Eastern European countries subsidize college so that it’s free to citizens. Canada, the UK and most of Western Europe offer subsidies so that college education costs little enough so that neither the students themselves nor their parents have to risk losing their homes, good credit or livelihoods to send their children to college.

  Unfortunately, sometimes schools themselves can’t resist usurious profit, extracting lifetime debt from young people who often don’t know better than to sign loan agreements. In 2007, for example, the Attorney General of the State of Connecticut uncovered a scheme that involved over 50 colleges and universities. The schools were giving preferred status to lenders who provided the school faculty with benefits like cash, gifts and free trips to college staff, and yet these same banks were charging students higher rates of interest on their student loans than the going market.5 There are even some for-profit colleges that cash in on the easy money represented by student loans through deceptive advertising. They claim that lucrative job opportunities wait for graduates, when no such opportunities exist.

  60 Minutes, a popular US television news magazine, did an exposé of Brooks College in Long Beach, CA and Katherine Gibbs School, two of the holdings of the Career Education Corporation (CEC). Taking in more than $1 billion in annual revenue, with 100,000 students at 82 different campuses, CEC could be a poster child for what should be called an education racket.

  Brooks College advertised a 98% job placement rate with salaries of $30,000 or more, when in fact for the much lower percentage (38%) of students who finish the program, the starting salary was less than $11 per hour. Katherine Gibbs advertised an 89% graduation rate, when in fact it was 29%. The admissions officers of these schools promised young people unattainable results, while at the same time extracting loan agreements that put them in debt for life. One admissions officer interviewed by 60 Minutes said this:

  In that way, the job was a lot like a used-car lot, because if I couldn’t close you, my boss would come in, try to close you. . . [The enrollment fee was $50.] You need three things . . . You need $50, a pulse and you’ve got to be able to sign your name. That’s about it.6

  The reason prospective students needed to sign their name is to commit themselves to indebtedness — many students amassed over $80,000 in debt at these schools. The government-backed debt cannot be forgiven when the highly paid job prospects turn out to be a myth. The result? Lifetime impoverishment on the part of the student, while the for-profit schools were clearly misleading their charges.

  While this is an extreme example, it illustrates that there is a massive intergenerational transfer of wealth from the younger to the older members of society with the current education financing system we have in the United States. There must be a better way.

  The Learning Currency

  Human beings are born to learn. Learning is the common denominator of our species, the foundation of all other human needs. As infants and young children, we delight in figuring things out. A bit of the sparkle gets taken out of learning when we are pushed through an education system designed more for compliance than creativity. But for most of us, the need to learn enough to be productive and contributing members of society drives us on.

  One of the few certainties we have about our future is that it will require a massive amount of learning by just about everybody, everywhere. In addition, it has been observed that learning — and even more importantly, learning retention — depends less on the person or the topics involved than on the delivery system of the knowledge. Indeed, average learning retention rates of children or adults are dramatically different depending on the process through which learning happens. In its simplest form, the result is Figure 1 below.7

  What is striking is that our formal education system intently uses the two least effective learning methods available: lecturing and reading, processes through which respectively only 5% and 10% of what is being taught will be remembered. At the other end of the spectrum, a whopping 90% retention rate applies to whatever one teaches to others!

  What would become possible if we reversed our entry into the learning pyramid by designing an incentive system that would encourage chains of learning through teaching? Such a system could operate in parallel with official schooling, as a special kind of extracurricular intergenerational game. Furthermore, it wouldn’t have to deal with teachers’ unions or ordinary school procedures and constraints. Although the model which follows was initially designed for Brazil, there is no reason to believe it couldn’t be applied elsewhere.

  FIGURE 6.1. The Learning Pyramid.

  Source: National Training Laboratories, Bethel, Maine

  The Brazilian Saber

  When Brazil privatized its mobile telephone industry, it introduced a 1% special tax earmarked for higher educational purposes. By 2004, this education fund had grown to more than us$1 billion. A conventional way to use the fund would be to copy the GI Bill approach used in the United States after World War II, through which government funds were used directly for studen
t scholarships. However, by introducing a complementary education currency, Bernard proposed that a substantial learning multiplier could be set in motion, so that a given amount of money could facilitate substantially more learning for a greater number of students. And a currency would fuel this learning multiplier without creating any new financial pressure on the economy.8

  The proposal made to Brazil envisioned a project initiator called the Saber Administrator, which could be a nonprofit organization or the Ministry of Education itself. This Saber Administrator would issue a specialized paper currency, the Saber (pronounced saa-bear, meaning “knowledge” in Portuguese), which could only be redeemed to pay for tuition fees at participating universities for the academic year printed on the Saber itself — for example, year 2010. If the notes were not used to pay for tuition during that year, they could be exchanged for Sabers dated the following year — the year 2011 — but with a penalty of 20%, giving a strong incentive to use the currency on or before the 2010 date.9

  Let’s assume that the additional enrollment capacity at participating universities is estimated at 10,000 students per year and that the average tuition amounts to 3,000 national money units per trimester. The Saber administrator would then make available 30 million Sabers per trimester, earmarked for each specific year concerned.

  These Sabers would be allocated to primary schools in economically depressed areas where funding typically is not available for higher education. They would be given to the youngest students (seven-year-olds) on the condition that they choose a mentor from an older class (a ten-year-old) to work with the younger student on his or her weakest school subjects. The Sabers would be transferred to the older student in compensation for the hours spent mentoring. The 10-year-old could then do the same thing with a 12-year-old, and the latter with a 15-year-old, and so forth.