Transforming our Money System – 6

By John BristowComments Off on Transforming our Money System – 6

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Transforming the Money System: (2) how to implement and embed alternatives       As stated already in part (1) of this section on transforming the system, Greco states clearly that design principles need to be applied both to the system itself and the strategies for changing it. These need to be based on an understanding of money and the money system and how it has developed historically, and also of social dynamics, markets and networks in relation to money. The elements of the solutions he is proposing are based on his understanding and on information about what has and has not worked in finding alternatives in the past, what look like promising ideas, and the market and social conditions or context that would enable them to work – or act as forces against them. All his solutions come from ideas, understandings and trial experiments that are already publicly available. He has put this all together in a new and compelling way. Here we are looking at some of the design principles he extracts from studies of societal change as well as his with others from attempts to establish alternatives to some or all functions of the money system. These principles are there to consider in designing strategies for implementing innovations, rather than the solution options themselves, and the contextual conditions that enable them to be integrated into society.

All societal change, based on an analysis of historical examples involves all key social actor groups, and both national and local initiatives, together with networking on different scales and in different ways for innovation and learning. Frank Geehls and his colleagues (to whom Greco does not refer) have attempted to see patterns in socio-technical innovation and change often over a 50 year period. (See for example  and which gives an overview of his work and  publications). They note that different transformations go through similar stages in different ways that may or may not modify or radically change the dominant current cultural and normative rules and formal institutions in a society (this mix of rules Geehls and his colleagues call “regimes”). There are often cycles on different timescales within these stages (like a wave form across time). How bottom up and top down change across social actor groups might work for the money system is an interesting question, given resistances and fears of different kinds.

Greco emphasises the importance of local bottom up change (community and business led) – stating that a political process by itself has not worked. He also sees the key to economic survival and environmental sustainability in the future to be local communities gaining more economic independence and having more control over how their material needs are met. At the same time the changes in the money system he suggests, especially use of mutual credit clearing, would fit well into the emerging global web-based trading platform, a major transformational change in itself. He focuses on creating the conditions for these changes both locally and globally and using the unexpected turn of events as an opportunity where this is possible.

 Greco alludes to what many people see as one of the key guiding ideas (zeitgeist) – though he does not use this concept as such – for the next step in human history and evolution: collaboration or synergy (at the start of chapter 18 on organisational forms). He describes how being different from each other in values, life styles and traditions can create both conflict (in protection or promotion of a group identity) or a rich diversity once differences are respected and transcended through connection with our common humanity. He also stresses how the current problems, opportunities and challenges we are facing can only be addressed through co-operation on much larger scales than in the past. In a complex, more inter-connected global economy, solutions to global problems or advances in human civilisation can only occur through greater collaboration and co-operation, more co-ordinated action. Our increasing connectivity can help here. In nature the forces and capabilities for co-operation are greater than those of competition. Even Dawkins, author of the selfish gene, says he would now rename the title of his book as the co-operative gene. Gregory Bateson said the Darwin’s book should have been called survival of species and habitat, as the one depends on the other. But Darwin too recognised the co-operation in nature. This co-operation Greco sees working at local levels especially, as well as globally at times. In discussing the Mondragon example of a co-operative economy (see below) he quotes Terry Mollner who described Mondragon as an example of the emerging “relationship age society”. See LovingSociety.html

 Major improvements in, and transformation of, the money system are more likely to come initially through the developing web-based trading platform and through private, voluntary and free market use of alternative exchange media – such as mutual credit clearing. These initiatives in innovation are more “bottom up”, applying new technology and forms of business and trade within the business sector or networks of local organisations  across all sectors – business, voluntary, NGO, public sector, research centres in or outside universities – rather than “top down” through new legislation and political initiatives – though these may follow, and Greco points out a role for central government. They also fit an age of synergy and relationship, with more democracy at local as well as national levels. Greco refers to two key authors on societal change – Christenson on disruptive technologies (relevant both to global and local change), and Gledhill on networking and other factors (as well as other authors on network theory).

 In discussing the evolution and development of a web-based trading platform around the world, Greco uses some of the ideas and analysis by Clayton Christensen in the Innovator’s Dilemma  (03 New Yk Collins) as well as quoting the management writer Peter Drucker. See for access to his key ideas and books, including the concept of  “disruptive technologies”.

 Christensen’s two types of technology – disruptive or sustaining are relevant to both local and globally networked change, and their interconnection. Techonology can be disruptive of the current ways of seeing, thinking and acting – the informal cognitive or normative rules and those embedded in formal institutions and rules. This is similar to Kuhn’s distinction between “ordinary science” and “revolutionary” science (new fundamental mindset). It is also similar to Gregory Bateson, and later Chris Argyris’s, distinction between two levels of learning – change within a frame of reference or way of seeing and thinking, and change of  that frame or organising structure (and to Einstein’s saying that a major problem cannot be solved within the mindset that helped create it). The first is cumulative change through improvement; the second is transformational change (change of form for organising thinking and action), which can also have a build up of disconfirmation of current mental models guiding cognition, decision and action. Bateson built on the ideas of Russell and Whitehead – a category (organising concept) cannot be a member of itself; so there are two levels at play here. These sets of rules can form together a “regime” (that has both political and cultural connotations as the regime is embodied in the dominant culture and the institutions and groups of people who enact or follow it).

 Looking at the forces for change and against change (Kurt Lewin’s “Force Field Analysis” see ) is familiar to consultants and managers involved in organisational change (and to others). Greco looks at the strengths and vulnerabilities of the current system of political money and conventional banking (c.f. a SWOT analysis of strengths, weakness, opportunities and threats).

 Against change:

What has made the current political money system so dominant?

Greco sets this out:

Inertia – people are used to it, it is accepted across countries, with ease of foreign exchange.

Above all it is supported and protected by national governments and political privilege. Dominant companies generally can become unresponsive to developments in technology or markets; their focus is on improving current products more than transformational innovation. They can ignore or suppress the competition of disruptive technologies, or be very late in adopting them (Christensen makes this point too). With the money system the power of government has been used to suppress alternative credit systems or currencies. The entrenched position of the money and banking establishment exceeds that of any dominant group of companies in other sectors.

Alongside this there is a lack of awareness of the ill effects of the current system and of viable alternatives.

 For change:

The current money system is unstable, unsustainable, inequitable and over-expensive. Instability in a globalised finance system is shown in the credit crunch. Other destabilizing forces are rising or volatile oil and food prices. Bank-created debt-money drives the need for unsustainable economic growth, the effects of which are well documented in the form of getting out of balance with what can be supported by our natural habitat and resources, and at the same time polluting ecosystems or putting the climate system out of balance as well, potentially destroying more habitats and species, as well as reducing the human population, through drought, famine, and extremes of climate. Inequity shows in the poverty trap and greater income inequality that leads to unhealthy societies (see Richard Wilkinson and Kate Pickett (09) Spirit Level or the 2010 paperback of this Why Equality is better for Everyone see )

 Debit and credit cards are more expensive to users (buyers and sellers) than they need to be. Christensen points out that dominant companies often overshoot their markets, making them vunerable to displacement. They give their customers more than they need or are willing to pay for. The consortia of banks within the two major credit card companies have co-operated to raise interest rates and fees and make conditions more stringent. Those caught in the debt trap feel exploited.

 The technology is now there for a democratically structured global payment system with membership open to all, alongside a complete web-based trading platform; the blocks are political (see above) and vested interests, but this trading platform is emerging and will continue to grow with a greater functionality and range of services. This has what Christensen calls “innovative potential”.

 In summary, while the forces for change may be strong – so also is the resistance in the form of protection of the current system by governments.

 So Greco suggests focusing on niche markets where exchange alternatives are appreciated. In the grass roots, community sector the attraction is often initially ideological – social justice and equity, local self-determination and protection/restoration of the natural environment on which we depend. In the business and commercial sector the attraction has been to be able to have another medium of exchange for trading without recourse to the national currency, especially when it is unstable or scarce, and to be able to sell goods and services to other members of the exchange association. As the performance and reliability of these alternatives improves and they are more trustworthy, others will be attracted. The usefulness of credit clearing for exchange increases as more people and businesses up and down the supply chain are members, and more products and services are included. A “critical mass” needs to be arrived at in terms of scale and scope.

 Money as an exchange medium is nothing more than credit, and credit can be organised more effectively, efficiently and equitably (the 3 “E’s”); and in a way that does not drive unsustainable growth through over-extended debt obligations. Mutual credit clearing associations, supported by the appropriate constitutional rules and agreements and technology (such as mobile phones), is the way forward proposed by Greco, and these associations can also issue their own currency for use by non-members in their economic region, backed by their exchange of core goods and services that are in demand in so far as they cover basic needs. Local businesses, community groups, NGOs and Councils can work together to establish this in a region of a country. This would be a transformational change.

 But alongside these local developments, the progress of a global web-based trading platform since 2000 is the other line of development and potential transformation in the money system. More commerce is being transacted on the internet, and functionality and the range of services continue to improve. Greco lists some disruptive technologies – using Christensen’s definition of technology. Technology in Christensen’s terms is a general term to cover any new ways of using labour, capital, materials and information to transform them into products and services of greater value. So this can include innovative technologies in investment, distribution or marketing and managerial/organisational processes as well as the narrower sense of design and production.  For example: web-based market places on the internet (including consumer to consumer lending and borrowing ( and see Rachel Botsman and Boo Rogers’ book on collaborative consumption in general – What’s mine is yours ), transparency in web-based accounting and exchange systems, strong identity verification, secure encryption of information over the internet, updated reputation rating of suppliers and buyers (e.g. using to find tradesmen in the UK), re-emergence of mutual companies alongside co-responsibility and local web-based markets – and direct credit clearing between buyer’s and seller’s that bypasses the national currency and brings the definition or form of money as exchange up to date. Greco sees a combination of these being able to provide the structures that can mediate the establishment of more effective and equitable exchange processes that enhance more sustainable economic activity.

 Greco quotes the management writer Peter Drucker: profits migrate to the suppliers of the missing component that completes an (evolving) system. The four key components that Greco sees for a completed web based trading platform are: a market place, a social network, a means of exchange or payment, and a measure of value or pricing unit. Market places are where sellers and buyers can communicate what they offer and need and negotiate. These can be business to end-customer (B2C) or business to business (B2B). Social network enables people to become known to each other, personally or professionally; and establish identity, credentials and reputation, and, through supporting and tracking exchange or co-ordination, to build trust and valued co-operation between network members. Amazon and eBay are well known examples of marketplaces, and Facebook or Linkedin or MySpace of social networks.

 The gaps are in the last two, and ways of addressing these are described and discussed in this book, and elsewhere by Greco – mutual credit clearing using an information system (possibly accompanied by local currencies previously used when the national currency and economy is in distress), and a basket of regularly exchanged commodities as a unit of value. PayPal is a trusted intermediary for payments but it uses bank-created debt money. PayPal could set up a mutual credit clearing network amongst some its account holders if it extended lines of credit to them in expectation of return of income from other account holders. National currencies are unstable and “political money” in the sense that their value is determined by the policies of their governments and central bank issuers. Greco sees legal tender laws being abolished at some time in the future. These laws make these currencies the measure of value as well as a means of payment that must be accepted. This will require standard commodities (not just gold or silver as in the past) being used again to create a unit of value. In the meantime buyer’s and seller’s can adopt a non-political measure of value based on a basket of commodities (see Appendix B of this book). This can be deferred as a missing component until first a network of mutual credit clearing systems for exchange is set up.

These two missing components need to be integrated with the market places and social networks of the global web-based trading platform that is emerging. This can take over some of the functions of the physical market place and banks.

Commercial trade exchanges have developed over the last 30 years and provide proof of concept, a key step in the innovation journey. Optimising their internal processes and design and taking the networks to scale will be the next step. Will these be bold enough to develop new markets and extend their membership, up and down the supply chain, business to customer (e.g. employees of members initially) as well as business to business)? Will the small ones be taken over by the big ones, or by market place web-based businesses such as Amazon, for some markets? Or by web-enabled payment intermediaries like PayPal?

 A “bottom up”, locally developed, internationally networked, evolutionary change with a new Role for Governments, national and local is explored by Greco. Using the political process to change the dominant money system has failed in the past. But it might form part of the solution – in raising awareness of issues and needs (e.g. Ron Paul’s candidacy for the US presidency in 2008, and some groups of politicians in the UK, and in national and international policy forming networks such as those reflected in the World Future Council), and then supporting well managed and designed local or regional trials. Attention needs to be given to relations with governments, and often this is best done through some kind of national association (c.f. the IRTA for commercial trade exchanges). Locally initiated alternatives more often fail too – as described in the section on these above. So the learning from this needs to be used for designing both the system and implementation and learning processes.

Greco emphasises the importance of awareness raising as part of getting people to consider alternatives to their existing patterns of behaviour and to systems they have trusted till now, particularly in bottom up initiatives and creating the enabling context.

 Most countries have not experienced serious inflation for long or have reasons to question the current money system. Generally there is little knowledge of what money is for and how it is created and used, with perhaps financial journalists and economists making it sound more complicated than it is by using technical terms.

 These changes will require people to realise how they can empower themselves regarding the money system, and assert that power, reclaiming the “credit commons”. Educating and informing people about the current money system, and the risks and effects of it, in a way can create a felt need; and ideas of solutions to adapt to their conditions, give them the confidence to be part of a growing network of people wanting to do something about it  – without unduly threatening current vested interests (and those who support or only feel secure with a centralised money system rather than a more decentralised, egalitarian, empowering, equitable, resilient and sustainable one).

Greco agrees with Riegel who suggests a “freedom of association” approach to setting these changes going, based on information and education, with government support.

These changes could best come about through private voluntary initiative, in an environment of freedom of association and the right of contract are protected and preserved. Local communities can reduce their dependence on political currencies and on bank-created credit. They can take control of their own credit and organise ways of allocating it directly to people and businesses they can trust. As Riegel says there is no legal barrier to a private enterprise, non-debt, non-interest, mutual money system. As Ulrich von Beckerath stated in the 1930’s: “The extension of exchange transactions without state money is in reality the beginning of a new system of settling accounts and ..  a new economic order”. Any local credit unit or currency would be open to acceptance (and so also rejection or discounting) in a local market or network of markets. Only the issuer of the credit unit would be obliged to accept it. These changes would be developed locally with “local” meaning a viable socio-economic area in which the day to day trading of goods and services that meet common basic needs occurs.

Awareness raising and continuous learning from local initiatives can build local or sub-regional social and economic networks of suppliers of key goods and services and their customers, both citizens and other businesses, a network that sees and feels the need to innovate and try out new forms of exchange, investment and measures of value (the functions of money). Trust and credibility will need to be established within this network and a form of organisation, ownership and control set up that maintains and protects this.

Any learning from action and experience in developing and using a system that works can then be shared in national and international networks, facilitated by the internet.

Through numerous success stories, examples and role models, linked through learning networks and wider multi-local socio-economic exchange, building up trust in alternative money systems that can stand alongside the traditional, and if seen to be successful and secure, supplant it over time.  More and more people can be weaned off the current system, including the key groups in a society – citizens, business, government, science and education and the media.

 This would end a system that forces perpetual growth to one which is more steady and fulfils people’s material needs in a way that respects the human dignity and the need for a fulfilling life, and at the same time nurtures the systems of nature that support all life on this planet. The measures of success would be aspects of the quality of (all) life, rather than the quantity of output and consumption.

 Local trials of alternative ways of fulfilling the functions of money will need to be supported widely to counteract those with vested interests in the current system and threatened by competition from alternative associations. Central and local government can give some initial support while having their concerns addressed, and then when there is wider support from businesses and individual customers, ensure there are the regulatory frameworks and other support mechanisms needed for them to work and to be protected from sabotage.

 In discussing networks and enabling conditions Greco mentions 3 key factors described by M. Gladwell (in his book The Tipping Point 2000 – see also ). Gladwell draws analogies between nature, epidemics and social change processes.

The Law of the Few: a few salient people can make a big difference and help an idea, practice or product spread like a virus. They take on 3 types of role: those who know all about it and want to share what they know (“mavens” he calls them), The connectors who “know everyone” and can bridge the gaps in social networks, sharing the news, and the sales people who can persuade people to adopt, use or buy it.

The Stickiness Factor: characteristics of the alternative (i.e. the design of the money system or a part of it rather than the implementation process) that can make it attract and stick.

The Power of Context: the enabling conditions or factors that create a strong felt need. The Swiss WIR bank he gives as an example of this.

Greco also mentions other studies of social change, particularly of networks such as L. Barabasi’s Linked: the new science of networks (02). He gives an example of the spread of Hotmail which used ease of adoption and signing up (low cost) together with users advertising it by default; there was an offer to the recipient to set up their own free account at the end of each email sent by a user, in this way using their networks.

Economics, Money System
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