Successful Mutual Credit System Thrived in Irish Pubs

During a time of financial crisis in the 1960s, Ireland developed a mutual credit system that benefitted the people and not the big banks.

| February 2013

In Rethinking Money (Berrett-Koehler Publishers, 2013), authors Bernard Lietaer and Jacqui Dunne explore the origins of our current monetary system — built on bank debt and scarcity — revealing the surprising and sometimes shocking ways its unconscious limitations give rise to so many serious problems. But there is hope. The authors present stories of ordinary people and their communities using new money, working in cooperation with national currencies, to strengthen local economies, create work and so much more. Find out how Ireland initiated a mutual credit system to their advantage during a financial crises in the 1960s to 1970s in this excerpt from chapter 6, “Strategies for Banking.” 

Of all the many ways of organizing banking, the worst is the one we have today. Change is, I believe, inevitable. The question is only whether we can think our way through to a better outcome before the next generation is damaged by a future and bigger crisis. — Sir Mervyn King, Governor of the Bank of England

Ordinary people all over the world have been rethinking money in an effort to resolve their pressing cash problems. Rethinking money leads us to reconsider the entire banking sector as the source of money and loans. This has generated some interesting and provocative innovations, some by clear intent, others by happenstance.

Dissatisfaction with the banking sector is at an all-time high. The Facebook movement Move Your Money materialized when Bank of America announced plans to increase its bank fees. Within 90 days, 5.6 million U.S. adults changed banks. “Of those switchers, 610,000 U.S. adults (or 11 percent of the 5.6 million) cited Bank Transfer Day as their reason and actually moved their accounts from a large to a small institution.”



Community Bankers of America said a poll of its 5,000 members found that nearly 60 percent of community banks are gaining customers who “are sick and tired” of the big financial institutions.

In functioning systems, nature leans more to resilience than efficiency. Ironically, whenever a banking crisis unfolds, governments invariably help the larger banks absorb the smaller ones, believing that the efficiency of the system is thereby increased. Instead, when a bank has proven to be “too big to fail,” why not consider the option of breaking it up into smaller units that compete with each other? This has been done in the United States before; for instance, the Bell Telephone monopoly was broken into competing “Baby Bells.” But more often, what tends to happen is that banks that are too big to fail are made into still bigger ones, until they become “too big to bail.”