My response grew ‘like Topsy‘, to the point where it seemed most appropriate to post it here.
Indeed, the problem of scale is serious. Some people in the Low Impact community are all for a ‘de-scaled’ civilisation – one of small towns, small global population, low-tech, believing that living in this way would be more sustainable and harmonious with nature.
I am not one of these. Everything I can see about life, over its three and a half billion year history, is that it tends towards growth and increasing complexity: from a few cubic centimetres then to a global biosphere now, the domain of life has expanded by an order of at least 10^25.
The idea that ‘nature’ is ‘harmonious’ seems also indefensible. When blue-green algae evolved, they produced oxygen as a by-product of photosynthesis. Oxygen is an extremely dangerous chemical, toxic to all previous life-forms. There was a global ecological crisis as oxygen levels rose relentlessly – an enormous disharmony, to the extent that one name for this period is “The Oxygen Holocaust“. Oxygen tolerant, then oxygen-breathing life evolved, but this didn’t make for harmony – instead it set the stage for life to invade the land, utterly transforming the planet.
The only natural nuclear fission on the planet exists because of life (oxygen again). Life is not harmonious, it is a dynamic process of difference creation through ‘symmetry breaking‘ – a constant becoming, which transforms, sometimes violently, as it becomes.
We can find this condition disturbing, and reject it, of course. Humans are not as tightly bound to reality as other species by virtue of our uniquely well developed, self-reflexive consciousness
Our consciousness ascribes the label ‘reality’ to the constant hallucination which is our only window onto the world. Our cognition of this hallucination is largely conditioned by our culture. We can see a lightning bolt as a rapid discharge of an enormous quantity of static electricity, or as an instance of Zeus’ anger. Both views are as ‘real’ as each other, inside the mind. Sometimes the coherence of our cultural model with aspects of the underlying reality is highly important to our prospering, sometimes not. Indeed, I contend that having access to a wide variety of cultural modes (call them metaphysics) in relation to the hallucination we experience is hugely beneficial. An example being Freud’s theories of the subconscious. Mostly hogwash they may be in terms of science, but they have allowed billions of people to have helpful conversations about their inner lives which were simply unimaginable a century previously.
What we call civilisation has come to be through a series of re-imaginings of reality on the basis of cultural change alone – from this accumulation of metaphysical diversity.
This means that, of course, it is perfectly possible to imagine a cultural choice that takes us to small-scale, low population, low-tech civilisation. It is, though, hard for me to imagine this as a stable condition, based on what I know.
It is also certain that I know very little. On the basis of having worked hard to know more, and investigate reality, all I can do is the best I can with what I have.
This takes me to my starting point – I want to imagine, and work toward, a transcendence of our current situation – our current culture – that supports a diverse (and increasingly diverse) civilisation. This means a global culture within which ever deepening specialisation is possible. This is one measure of civilisation, I suggest – the diversity of ways of living that are supported.
All of the above simply underlines my deep commitment to a global economy – because as it says in the original post:
Economy is NOT money. Economy is the management of social resources and sufficiency for well-being.
Economy is what makes all these diverse ways of living supportable.
So, to scale then: let’s start with money.
“Money is a promise” says Thom Greco. This means that money requires trust – you don’t take a promise seriously if you think you will be let down.
But it’s not a person-to-person promise. It’s a social promise. That’s one difference between barter and money. A barter is a one-to-one promise; “I’ll give you this if you’ll give me that”.
The other difference is that money is a promise over time. Barter is over at the point of exchange. That’s it, done.
Money always has an implicit assessment of value over time. Think about it. If you were about to use a time machine to go five years into the future, would you take dollars or gold? Fifty years into the future? If you were going five hundred years into the future, would you take either?
[These differences reinforce the understanding that barter was not the precursor of money – that money is not an ‘evolution’ from barter, but something different. This myth is in many economics textbooks, but it is a myth, and the text books are wrong; invented without evidence as an explanation by Carl Menger in 1892, the story seems so neat and logical that it was simply copied into many other works. This is well documented in many places – Nigel Dodd’s ‘The Social Life of Money’ (2014), and David Graeber’s fantastic ‘Debt’ (2011) both cover it well.]
So, we have money as an expression of trust in a social promise, over time. Once a society has become suffused with money – once money is involved with some high proportion of all value exchanges, we can say that money is operationalised trust. Operationalised in that it acquires qualities not obvious at its origin as a means of exchange. The currency becomes reified – comes in itself to embody some of the trust that properly belongs to the society that uses the currency.
If we look at the historical development of money, it is possible to trace a relationship between culture, technology and trust.
(the following is, of course, highly approximate and oversimplified!)
Early money systems operated within small spheres, in fairly homogenous settings. Trust was operationalised on the basis that you shared a physical location, a basis for sustenance, probably a religion and a lack of options for any other modes, with the people you traded with. You trusted them because they were basically you, and they had to be basically you because the low level of technology constrained them to be.
Later, with the advent of monotheism, religions and cultures gained the capacity to span physical and political spaces. Money networks like the Islamic Hawala system and the Knights Templar became possible – international networks of people who trusted each other on the basis of shared cultural values grew up. In the context of the technology of the day, this trust was the only thing that could work when it could take a year to get a message from Syria to Timbuktu, or Norway to Jerusalem. Ordinary people didn’t much trust money, largely subsisting without it, but bankers and merchants did – often even when rulers tried to intervene.
With the coming of railways, fossil fuels and the telegraph, all things began to centralise, and it became possible to centralise trust as well, in order to operationalise it still more intensely. But with centralisation comes inability to respond to local needs. When central banks become the locus of trust, trust is weakened in specific places and regions – particularly those far from the centre. And central authorities find it impossible to respond to local conditions – they are focused on broad statistical understandings. Elephants, no matter how well-intentioned, cannot look after ants.
Notice that at each stage of this story, the quality of trust changes – from trust in humans, to trust in cultural norms, to trust in centralised power. Each of these trust modes is weaker than the previous one – there is less trust, but more power.
How, then does it come about that the money has more power, if money really is operationalised trust, and trust has declined? The answer to this is to do with the commodity nature of all money until the very recent past. A commodity currency – any specific token at all (and this includes bitcoin), once it gains momentum, begins to have a power of its own. Consider the almost mystical way in which people talk about gold, as if it has some special property. This power, though is not in the least mystical. It grows for a specific reason – one which finds myths useful.
It works like this: commodity currencies can be hoarded, and their cultural power increases alongside the size of the pile. People who have piles of money have a vested interest in that pile remaining valuable. They will work hard, sometimes even kill, to enforce the social promise it represents.
Commodity money implies accumulation and, following from that, implies exertion of the power that accumulation provides to enforce continued validity of that money. This dependence is enforced through a variety of means, like interest payments and deliberate scarcity on the supply side, and enforcement of taxation on the demand side (look up the introduction of hut taxes to see this at its naked worst).
The reduction in trust is offset by the insistence and enforcement of power.
And this is, broadly, where we were at with money in 2009 – ever increasing hegemony and financialisation designed by and for the hegemony. We can moralise about this if we wish, but we can also see the structural reality of technology and culture that makes such a system of money highly likely.
The advent of digital technology into money itself could be said to kick off with the Bitcoin whitepaper. Unfortunately, the crypto technologists had very poor economic understanding. They were largely using technology to reinstate money in the existing, commodity-framed form, but with a different trust model. Instead of a trusted institution like a central bank, we were supposed to trust the algorithm. This was supposed to remove the corruption of issuance power from the money thus produced. There are all sorts of things that are interesting and potentially useful about crypto, but one thing it fails to do, at least as initially formulated, is to understand the potential for digital technology to re-decentralise money as trust.
Instead, the crypto algorithm, by taking as a base assumption that people are rational, self-interested automatons who cannot be trusted, reduced the capacity of the money system it proposed to operationalise trust. Hence the wild speculative swings, despite the robustness of the algorithm. Attempts to mitigate this by pegging crypto to assets of various kinds is once again missing the point. The system is condemned to a continuous arms-race of nailing down interfaces with reality, in the attempt to make those as trustworthy as the algorithm. This can never be finally achieved – as witness the succession of major failings at crypto exchanges. To become a currency, a crypto token must be adopted ‘in the wild’ – match some sufficiently large subset of the extraordinary diversity of value-exchange conditions that humans participate in, and this will expose it to an ever increasing set of interfaces with messy reality where the algorithm has no power.
Mutual credit is not about tech – it is fundamentally a proposition about re-basing trust in locality – going back to the roots of money, when the utility of money was derived principally from the trust which could be placed in the social promise it represented – when the coercive and institutional power structures that now account for a large part of money’s utility were not needed.
The history of local, stand-alone, person-to-person mutual credit schemes, though, is one of repeated failure, limited sustainability and negligible impact on the real economy, notwithstanding that many hundreds of them persist globally. Even the most committed people are today wildly diverse in cultural outlook, have enormous ranges of choice, and are unlikely to be able even to subsist (let alone prosper) on the products of a single locality. The other members of a local LETS scheme are not you.
The attempt by a VC funded startup called Simbi to roll out a global Mutual Credit network is also failing, having attempted to build trust without either human scale or power dynamics.
The history of business-to-business Mutual Credit is more hopeful, with WirBank and Sardex having impressive track records and development. The operationalisation of trust here is typically strongest in times of economic hardship, when small businesses face existential threats. In these situations, coming together to share a trusted money has worthwhile benefits. However, it must be accepted that these schemes remain localised and isolated, and have not grown yet to a point where they have significant economic impact- the businesses involved still do the majority of their trade outside the Mutual Credit system. Sardex has a throughput in the order of tens of millions, while the island of Sardinia has a GDP in the tens of billions – meaning that mutual credit in Sardinia is around one tenth of a percent of the economy.
What galvanises my efforts in respect of Mutual Credit now is the prospect, prefigured in Greco’s ‘The End of Money’ and more specifically clearly articulated in the Credit Commons whitepaper, of a technical protocol whereby local Mutual Credit networks are federated together through digital connections that are fast and reliable, with low transaction costs.
This, it seems to me, is a significant step change towards a trifecta of: maximised human-scale trust (local networks), money as pure accounting information (not a hoardable commodity), and global markets that are democratically governed from the grass roots (power is maintained at the local networks, which are voting members of the connecting tiers. Any local network can join any set of interconnecting federated networks it wishes).
Thus money can be sufficient – neither artificially scarce, nor dangerously abundant. The value of money in society can diminish a little and the value of the exchanges it facilitates can go up a little. This should move us toward an economy which is much more effective: freed from a shoal of perverse incentives which flow from the commoditisation of money and the consequential power games that are played to maintain the value of accumulated hoards, it should be able to grow in the direction of satisfaction of human desires (ultimately where we perceive value). And if those human desires include the capacity of the biosphere to produce food, clean air, clean water, beautiful landscapes populated with fascinating wildlife, it should at the very least help us step back from the brink of climate chaos.
A globally federated mutual credit system of this kind operationalises trust most effectively on the basis of the available technology. but this is the easy part – the part that a few money geeks and coders can come up with.
What is lagging, what is lacking, is the cultural understanding of this opportunity. Commodity money on the current model has been dominant for so long that its shape has entered the culture as if it were a fact of nature. This condition has been exacerbated by economists, who have largely ignored the reality of money in favour of documenting the elaborations of one particular money system.
Our work in Mutual Credit must thus be largely cultural – the trust and technology models are proven – our job is to build real-life markets within which the natural effectiveness of this Credit Commons structure can demonstrate itself.
Here, you can see what the Open Credit Network is up to.
Here, you can read the Credit Commons whitepaper.
Here, you can see how we’re developing the technical underpinnings.
We’re beginning to see that this cultural work will best be started through ‘co-design’ circles: short series of time limited video call sessions on specific topics. We have already begun the first of these, on what it means to be a business network convener. But we will be running more: on how to raise investment (without selling equity or incurring debt), how to build good governance, micro-economics, and more. Please, if you would be interested in participating in any of these (or wish to propose another), get in touch here.
NB: This post has had a number of minor edits during its first 48 hours. No arguments or claims have been changed.