I recently came across economist Richard Duncan‘s idea of “Creditism.” His basic argument is that what we continue to call capitalism really isn’t capitalism anymore. Traditional capitalism depended upon accumulated capital. People saved money. Those savings became investment. Investment increased production. Production created more wealth.
Our modern economy works quite differently… we borrow.
Governments borrow. Corporations borrow. Families borrow. Students borrow. Homebuyers borrow. Sometimes we even borrow money to pay money we borrowed earlier. And through this enormous creation of credit, we pull tomorrow’s purchasing power into today.
Duncan argues that credit creation has become so central to economic growth that “capitalism” no longer adequately describes the system.
Hence, Creditism.
I think he has a point. But I also think there’s another question worth asking. What if credit itself isn’t the problem? What if the problem is what we did with it?
Credit is an extraordinarily useful invention. There’s nothing inherently wrong with credit. Imagine a small community where I need my car repaired but don’t have $500 sitting in my bank account. You know how to repair cars. Meanwhile, you need bookkeeping work done, and someone else in the community happens to be a bookkeeper. There’s plenty of ability available. There’s plenty of work that needs to be done. There’s simply not enough money moving between us.
Conventional economics looks at this situation and sees scarcity. We don’t have enough dollars. But that’s a peculiar way of looking at the problem because nothing we actually need is scarce. The mechanic exists. The bookkeeper exists. The broken car exists. The need exists. The capacity to meet the need exists. The only missing ingredient is permission to exchange. And credit can provide that permission.
This is the point where my head fills with all sorts of interesting ideas.
You see, mutual credit is the most fascinating thing I’ve come across a long time. In a mutual credit system, we don’t necessarily need somebody with a pile of money to finance the transaction. Suppose the mechanic repairs my car for 500 credits. My account becomes negative 500. The mechanic’s becomes positive 500. No one borrowed $500 from a bank. No investor supplied capital. No government printed currency. No wealthy benefactor established a fund. The community simply recorded that one person had received value and another had provided it. I now have an obligation to contribute approximately the same amount of value back into the community over time. The mechanic has a claim upon approximately the same amount of value from the community.
That’s real, honest-to-goodness, credit.
But it’s a very different kind of credit. There’s no outside creditor extracting interest. There doesn’t necessarily have to be collateral. There doesn’t have to be a bank deciding whether I’m worthy of participating in the economy. And perhaps most importantly, the credit doesn’t have to leave the community. It circulates.
Maybe Creditism isn’t actually the problem. The way it’s being done nowadays is certainly a problem… but it doesn’t have to be. Perhaps moving from capital toward credit wasn’t necessarily a mistake. Credit allows human beings to exchange with one another without requiring accumulated wealth to already exist. And that’s really cool.
The problem may have been that we centralized credit. Then we financialized it. Then we turned it into a commodity.
Instead of credit functioning primarily as a record of reciprocal obligation between human beings, it became an asset owned by someone else. A third party. A mortgage is somebody’s debt. But it is also somebody else’s investment. So is a credit card balance. So is a student loan. So is a corporate bond. Our promises to produce things in the future have themselves become things that can be bought, bundled, sold, leveraged and speculated upon. Credit stopped being primarily a relationship. It became property. And once that happened, the purpose of credit began to change.
I think there may be a useful distinction here. There’s extractive credit, and there’s reciprocal credit. Extractive credit is created primarily as a claim against future income. I lend you $100. You owe me $110. The relationship exists primarily to produce a return for the creditor. Scale that system across mortgages, credit cards, commercial loans, corporate debt and sovereign debt and you begin to get something resembling our present economy. More debt creates more purchasing power. More purchasing power creates more economic activity. So we need more credit. Which creates more debt. Which requires more future income.
And around and around we go.
Reciprocal credit works differently. I provide something useful to the community today. Someone else provides something useful to me tomorrow. Credit simply allows those exchanges to occur at different times and between different people. The purpose isn’t accumulation. The purpose is circulation. And that’s a remarkably important difference.
Poor in money. Rich in capacity. This becomes especially interesting when we think about poor communities. We routinely describe communities as economically deficient because there isn’t much money circulating through them. But walk through almost any low-income neighborhood and you will find extraordinary amounts of unused capacity. Someone knows how to repair an air conditioner. Someone can cook. Someone watches children. Someone knows construction. Someone understands computers. Someone cuts hair. Someone can teach English. Someone knows how to navigate government programs. Someone has a truck. Someone has tools. Someone simply has three free hours on Tuesday afternoon. None of those things appear in a bank account. And yet every one of them represents economic capacity.
The strange thing about our monetary system is that people can simultaneously have enormous unmet needs and enormous unused productive capacity because they lack the medium required to connect the two. People have things they need. People have things they can give… But nobody has twenty dollars.
So nothing happens.
We call that poverty. Perhaps sometimes it is. But sometimes it is simply a failure of circulation.
This is where relational wealth comes in. I’ve been thinking a great deal lately about relational wealth. We’ve been socialized to think of wealth primarily as something we possess. Money. Property. Investments. Assets. But much of what actually makes human beings secure doesn’t sit inside an investment account. It exists between people. Trust. Reciprocity. Reputation. Belonging. The ability to ask someone for help. The willingness to help someone else. The expectation that contribution will eventually be reciprocated.
Mutual credit takes those things seriously because a mutual credit system ultimately rests upon them. If I allow your account to go negative, I am making a statement. I believe you will eventually contribute something of value back into this community. Credit suddenly begins to look less like finance and more like trust. Which shouldn’t surprise us.
The word credit itself comes from the idea of believing or trusting. We’ve simply managed to build a financial system so complicated that we sometimes forget what the word meant in the first place.
Relationships becoming infrastructure. This leads to an intriguing possibility. In conventional finance, financial capital creates economic power. In mutual credit, relational wealth can create economic capacity. The progression might look something like this:
relationships → trust → credit → exchange → stronger relationships
That’s an entirely different economic feedback loop. A community with high levels of trust can potentially support more exchange because people are more comfortable extending reciprocal obligations to one another.
- More exchange creates more interaction.
- More interaction can create more trust.
- More trust permits more exchange.
Relational wealth becomes infrastructure. And once you begin looking at communities this way, our normal definition of poverty starts looking rather incomplete. A neighborhood might be financially poor while possessing enormous relational and productive wealth. Our conventional economy simply doesn’t know how to mobilize it.
Of course, mutual credit can go wrong. None of this means that putting the words “community” and “mutual” in front of something magically makes it good. Communities can be unfair too. Someone could continually consume without contributing. Someone else could accumulate huge positive balances and refuse to spend them. Popular people could receive more credit than unpopular people. Informal hierarchies could develop. The same power dynamics that infect every other human institution could infect this one.
So mutual credit requires boundaries. Reasonable positive and negative limits. Transparent rules. Shared governance. Ways to address genuine hardship. Expectations that large positive balances eventually circulate back into the community. The objective should never be to see who can accumulate the most credits. If that happens, we’ve simply rebuilt capitalism using different tokens. The objective is circulation. Contribution. Reciprocity. Participation.
Perhaps we’ve been asking the wrong question. The usual debate is capitalism versus socialism. Private ownership versus public ownership. Markets versus governments. And those are important questions. But perhaps another axis deserves much more attention. Centralized versus distributed. Who has permission to create economic capacity? A bank? A government? A corporation? Or can communities create some of it themselves? Because if human beings possess useful skills, unmet needs and relationships of sufficient trust, there is no natural law saying every exchange between them must first be authorized by the availability of dollars.
Money is a tool. Credit is a tool. We’ve simply become accustomed to particular institutions controlling those tools.
Creditism may correctly describe much of our current economy. But perhaps the problem isn’t that our economy became dependent upon credit. Perhaps the problem is that we allowed credit to become centralized, monetized and extractive.
Localize it. Make it reciprocal. Tie it back to contribution. Tie contribution back to relationship… and something wonderful happens. Credit stops being primarily a mechanism for extracting wealth from tomorrow and it becomes a way of allowing people to help one another today.
Maybe Creditism wasn’t the mistake. Maybe forgetting that credit begins with trust was.
I have no affiliation with these platforms. I just find it an interesting idea.
