Monday, 13 August 2012

How the Swiss reinvented banking in the 1930s and still show us the way forward

Confidence in the banking industry is at an all-time low since the Depression of the 1930s, when people started hoarding money at home rather than trusting it to banks, thereby unintentionally accelerating the downturn by slowing down the vital circulation of money even more.

But in parts of the US and German-speaking world, most notably Switzerland, which is arguably the greatest bastion of banking on earth, the response to economic crisis in the 1930s was to reinvent the core mechanisms of currency transactions themselves, and above all reinvent the way that people related to one another through money. They created a quantum shift in the fiscal culture by moving from competitive "me" to cooperative "us" thinking (from Ich to Wir in German). The WIR cooperative was born.

But whereas in the US and in Germany these crisis-led fiscal experiments in interest-free banking and alternative complementary currencies were ruthlessly stamped out by governments and the banking establishment, who saw in them a profound threat to their centralized control, in Switzerland the WIR cooperative soldiered on, weathering various further crises. Now, 75 years later, the cooperative is a fully-fledged universal bank trading in both its own currency and Swiss francs, a multi-billion banking giant, still run on cooperative principles.

The indisputable connection between economic crisis and war cannot be overestimated. It has been suggested that if cooperative banking and complementary currencies had not been ruthlessly stamped out in Germany in the 1930s, Hitler might never have come to power and World War II might never have happened. In the light of the current Eurozone crisis one wonders how things would have panned out if the Euro had been initially conceived as a complementary currency to operate parallel to the national currencies of Europe. Have we really forgotten that all currencies only really have a borrowed value, generated from a deeper "currency" of mutual trust and confidence? If we devalue those currencies, we ultimately devalue them all. This is an inescapable reality.

This article about the story of the WIR bank makes both inspiring and sobering reading.