On the ae-exchange, as elsewhere, there has been discussion of current banking practices. The normal suggestion is that a thoroughgoing reform of the 'financial sector' is needed that will lead to 'more ethical', 'sustainable', 'less risky', and 'traditional' banking.

From an associative perspective a crucial question to ask, however, is whether, if we were able to manage our finances without the existence of banks, we would in fact invent them. Are they so mysterious or necessary? The notion of a separate 'financial sector' overlooks the fact that financing is implicit in any activity, whether it is consciously managed or not. If not, then the financing aspect gets hived off to 'specialist' entities which are then described together as a 'sector', allowing them to make a special case for their continued existence. The subtle point is that what matters economically is the continued healthy functioning of finance, hence financial literacy, not the existence financial institutions.Do those 'in charge of the banking system' really understand and feel responsible for it? Just as, when the priests leave the temple the administrators keep the show running, so too when true banking is no longer practiced (investing in initiative) functionaries will go through the motions (lending against security). The whole process appears to work as long as the music never stops, but then, when it does, it quickly becomes clear with how much insight banking was being practiced. Instead of asking 'what are banks for?', therefore, it would be more interesting to ask 'what is banking?' In that way the assumption that a bank as an entity needs to exist can be addressed. In essence, 'banking' consists of three main distinct functions:

1. The settlement of accounts through a payment system
2. Intermediation between those with surpluses and those seeking capital
3. Economic oversight (ensuring the integrity of the whole process through 'sound' judgement)

However all these functions can be exercised without reference to banks. In fact, one could ask whether the very existence of banks really helps humanity to better understand its economic interrelationships. By occupying the central ground, banks effectively obscure what is taking place by maintaining the illusion of 'undifferentiated' money. Rudolf Steiner's economic analysis does not make the case for a 'banking sector'. Indeed, his version of a bank was simply an association of what in the West we would call for-profits and not-for-profits, which linked their finances. Clearly, Steiner had in mind the need to manage economic life through the medium of three kinds of money, which look not dissimilar to the three banking functions described above. It may be too great a shift in understanding for some to make, habituated as they are to the idea of money as a thing, subject to the control of the banking community (or the state). The challenge of radical reform, however, may consist in being prepared to revisit one's assumptions in this area and strike new ground, rather than raking over the old.

Arthur Edwards

• Making Credit Less Crunchy: 19 Mar / Rudolf Steiner House, London
• The Colours of Money: 3-5 April / Stroud, England
• Inner and Outer Aspects of Associative Economics: 17 May & 21 June / Rudolf Steiner House, London

A report by Daniel Osmer of The Colors of Money Seminar. Wisconsin, February 20-22, 2009. The seminar is designed to introduce some basic ideas, their place in the history of economic thought and policy, and thus how they can be applied in today's world.

Read the report