The FINANCIAL — One of my best experiences in life was working for IFC/World Bank in the South Pacific region.
It was, for me, a time not merely to talk to the heads of states and their ministers on how to develop the micro economies of small island nations from Cook Islands to Papua New Guinea, but to experience the simplicity, strength and beauty of life in all its forms, from nature to people. Here was a region living and breathing the purest air, the seas, the water falls, the hills, valleys and the music of a people who were just happy with a fish snatched by hand from the seas and the simple meals they enjoyed with their vast family members sharing them across the table. Crime was almost unheard of. Each village, each clan, knew each other. The Republic of Vanuatu, for example, adopted the theme “ the untouched paradise” in its campaign to promote eco tourism and it symbolised the life and people of the South Pacific.
I was in Honiara, Solomon Islands, during one of my very frequent missions to the South Pacific. One beautiful evening, I met with a Member of Parliament from the Malaita Province at perhaps the only Japanese-owned Mendana Hotel. He had travelled by a small boat across some 50 nautical miles to meet with me. He had one major issue to discuss. A very religious, value-laden man, deeply committed to his province and his people, had wished very much to convince the World Bank that the currency – the Solomon Dollars – should be taken out of circulation and that the “shell money” should be re-introduced to the country.
But what was “shell money”. I was intrigued. He explained in detail. Shell money was simply sea shells, collected from the sea shore, polished and with a hole in the centre which villagers could string together and count the wealth they had. They could use them to buy chicken, vegetables, rice and whatever they wished. It was a currency in the villages and all respected it. The village chief, acting as the Central Banker for shell money knew how much was in circulation. The villagers too knew how much was in circulation. I told him: “ this cannot work and what happens if some villagers decided to make mountains of shell money by simply collecting the seas shells, put holes in the centre and decided that they could buy anything they wanted”. His response was emphatic and passionate. He said that it is the question of trust. If there is no trust, no amount of minted coins or printed money will work. There will be chaos without trust. At that time, it all seemed completely out of line, out of any reality. Now it seems to me that the man from Malaita was saying what in fact is the truth. If there is no trust in the instrument of transaction, no currency can hold its own.
Sea shells obviously cannot be a global currency and it is impossible to think of this world as a place where we carry sea shells with us. The essence of his belief however is valid: if there is no trust in your instrument of exchange, whether it be currency or bonds, the basis of transaction is not valid and it can only descend into chaos.
The world has moved from shell money and barter where people traded one good for the other. If you have the courage to drive from the North West of Pakistan to China by the Karakhoram highway, built by the Chinese, you would come across villages where no one has seen currency. People still barter one good for the other: you sell 50 chicken and buy a lamb or sell 200 eggs to get a warm coat made of Yak fleece. And it seems, there is a perfect balance of value and there is greater certainty that no one is cheated. The fundamental principle is trust in the goods and their value and the economic paradigm is not based on speculation or perceptions but on real time goods, services and value. Most will view this state of existence either as primitive or simply romantic. The fact is that it seems to have worked and it seems to work in most primitive societies. In a strange sense, it all seems more valid than the chaos we currently face.
The crisis we have on our hands now, from the Occupy Wall Street to all the protests in the Middle East and elsewhere is based on the belief that most people have been taken for a ride by a very complex financial world where printed money and its electronic form in trillions seem to have a total disconnect with the ordinary people everywhere – whether they be in the United States and Europe or in some of the poorer countries.
What is significant is that some key economists, policy makers and financial pundits are coming out and calling the current economic and financial system that governs people lives false, fraudulent and economically unsound. Almost in total unison, most critical thinkers are beginning to ask whether we have put in place a financial system that is inherently flawed, and over which, the average man on the street has no say or control.
I have often wondered whether the free market economy, the levels of competition for resources, the appetite for wealth and the planned control of economies and nations would deliver peace and stability. I am beginning to doubt whether the economic growth of the last 40 years, the seeming wealth and power of nations are really essential pursuits of humanity and whether they can sustain human growth and civilisation. My doubt is even greater that, despite the most dramatic advances in technology and the use of natural resources, some eighty percent of the world has no hope in hell of waking up to a brighter day. For most of them, sunrise is no more romantic. It is the beginning of yet another day of despair.
Karl Marx did attempt to resolve the same issue, but communism has been a catastrophic failure. The free market philosophies have taught us to believe that strategic management of resources, stifling competition and growing nations to greater wealth are the essentials of happy lives. The riots and protests in many pockets around the globe make us now think that free market – free foxes among free chicken – have not helped either.
What we have today is the erosion of trust capital. Banks, the custodians of other people’s money are not trusted. Bankers are not trusted. Governments are not trusted. Stock markets are not trusted. The current financial system and their gate keepers are not trusted. It is as a very tragic stage of affairs and the challenge for the present and future generation is to build systems and institutions that can be trusted. Trust, in all its form, is the essence of life and without it, there will be dissent, wars and chaos.
Discussion about this post