Most of us have overlooked a fundamental problem that is currently causing an insurmountable obstacle to building a fairer and more sustainable world. We are very familiar with the thing in question, but its problematic nature has been hidden from us by a powerful illusion. We think the problem is capitalism, but capitalism is just the logical outcome of aggregate human decisions about how to manage money. The fundamental problem is money itself, or more specifically general purpose money and the international free market which allows you to sell a chunk of rainforest and use the money to buy a soft drink factory. (You can use the same sort of money to sell anything and buy anything, anywhere in the world, and until recently there was no alternative at all. Bitcoin is now an alternative, but is not quite what we are looking for.) The illusion is that because market prices are free, and nobody is forced into a transaction, those prices must be fair – that the exchange is equitable. The truth is that the way the general money globalised free market system works means that even though the prices are freely determined, there is still an unequal flow of natural resources from poor parts of the world to rich parts. This means the poor parts will always remain poor, and resources will continue to accumulate in the large, unsustainable cities in rich countries. In other words, unless we re-invent money, we cannot overturn capitalism, and that means we can't build a sustainable civilisation.
Why does this matter? What use is it realising that general purpose money is at the root of our problems when we know that the rich and powerful people who run this world will do everything in their power to prevent the existing world system being reformed? They aren't just going to agree to get rid of general purpose money and economic globalisation. It's like asking them to stop pursuing growth: they can't even imagine how to do it, and don't want to. So how does this offer us a way forwards?
Answer: because the two things in question – our monetary system and globalisation – look like being among the first casualties of collapse. Globalisation is already going into reverse (see brexit, Trump's protectionism) and our fiat money system is heading towards a debt/inflation implosion.
It looks highly likely that the scenario going forwards will be of increasing monetary and economic chaos. Fiat money systems have collapsed many times before, but never a global system of fiat currencies floating against each other. But regardless of how may fiat currencies collapse, or how high the price of gold goes in dollars, it is not clear what the system would be replaced with. Can we just go back to the gold standard? It is possible, but people will be desperately looking for other solutions, and the people in power might also be getting desperate.
So what could replace it? What is needed is a new sort of money system which both
(a) addresses the immediate economic problems of people suffering from symptoms of economic and general collapse and
(b) provides a long-term framework around which a new sort of economy can emerge – an economy which is adapted to deglobalisation and degrowth.
I have been searching for answers to this question for some time, and have now found what I was looking for. It is explained in this recently published academic book, and this paper by the same professor of economic anthropology (Alf Hornborg). The answer is the creation of a new sort of money, but it is critically important exactly how this is done. Local currencies like the Bristol Pound do not challenge globalisation. What we need is a new sort of national currency. This currency would be issued as a UBI, but only usable to buy products and services originating within an adjustable radius. This would enable a new economy to emerge. It actually resists globalisation and promotes the growth of a new sort of economy where sustainability is built on local resources and local economic activity. It would also reverse the trend of population moving from poor rural areas and towns, to cities. It would revitalise the “left behind” parts of the western world, and put the brakes on the relentless flow of natural resources and “embodied cheap labour” from the poor parts of the world to the rich parts. It would set the whole system moving towards a more sustainable and fairer state.
This may sound unrealistic, but please give it a chance. I believe it offers a way forwards that can
(a) unite disparate factions trying to provoke systemic change, including eco-marxists, greens, posthumanists and anti-globalist supporters of “populist nationalism”. The only people who really stand to lose are the supporters of global big business and the 1%.
(b) offers a realistic alternative to a money system heading towards collapse, and to which currently no other realistic alternative is being proposed.
In other words, this offers a realistic way forwards not just right now but through much of the early stages of collapse. It is likely to become both politically and economically viable within the forseeable future. It does, though, require some elements of the left to abandon its globalist ideals. It will have to embrace a new sort of nationalism. And it will require various groups who are doing very well out of the current economic system to realise that it is doomed.
Here is an FAQ (from the paper).
What is a complementary currency? It is a form of money that can be used alongside regular money.
What is the fundamental goal of this proposal? The two most fundamental goals motivating thisproposal are to insulate local human subsistence and livelihood from the vicissitudes of nationaland international economic cycles and financial speculation, and to provide tangible and attractiveincentives for people to live and consume more sustainably. It also seeks to provide authoritieswith a means to employ social security expenditures to channel consumption in sustainabledirections and encourage economic diversity and community resilience at the local level.
Why should the state administrate the reform? The nation is currently the most encompassingpolitical entity capable of administrating an economic reform of this nature. Ideally it is alsosubservient to the democratic decisions of its population. The current proposal is envisaged as anoption for European nations, but would seem equally advantageous for countries anywhere. Ifsuccessfully implemented within a particular nation or set of nations, the system can be expectedto be emulated by others. Whereas earlier experiments with alternative currencies have generallybeen local, bottom-up initiatives, a state-supported program offers advantages for long-termsuccess. Rather than an informal, marginal movement connected to particular identities andtransient social networks, persisting only as long as the enthusiasm of its founders, thecomplementary currency advocated here is formalized, efficacious, and lastingly fundamental toeveryone's economy.
How is local use defined and monitored? The complementary currency (CC) can only be used topurchase goods and services that are produced within a given geographical radius of the point ofpurchase. This radius can be defined in terms of kilometers of transport, and it can vary betweendifferent nations and regions depending on circumstances. A fairly simple way of distinguishinglocal from non-local commodities would be to label them according to transport distance, much asis currently done regarding, for instance, organic production methods or "fair trade." Suchtransport certification would of course imply different labelling in different locales.
How is the complementary currency distributed? A practical way of organizing distribution wouldbe to provide each citizen with a plastic card which is electronically charged each month with thesum of CC allotted to him or her.
Who are included in the category of citizens? A monthly CC is provided to all inhabitants of anation who have received official residence permits.
What does basic income mean? Basic income is distributed without any requirements or duties tobe fulfilled by the recipients. The sum of CC paid to an individual each month can be determinedin relation to the currency's purchasing power and to the individual's age. The guiding principleshould be that the sum provided to each adult should be sufficient to enable basic existence, andthat the sum provided for each child should correspond to the additional household expenses itrepresents.
Why would people want to use their CC rather than regular money? As the sum of CC providedeach month would correspond to purchases representing a claim on his or her regular budget, thebasic income would liberate a part of each person's regular income and thus amount to substantialpurchasing power, albeit restricted only to local purchases. The basic income in CC would reducea person's dependence on wage labor and the risks currently associated with unemployment. Itwould encourage social cooperation and a vitalization of community.
Why would businesses want to accept payment in CC? Business entrepreneurs can be expected torespond rapidly to the radically expanded demand for local products and services, which wouldprovide opportunities for a diverse range of local niche markets. Whether they receive all or onlya part of their income in the form of CC, they can choose to use some of it to purchase tax-freelocal labor or other inputs, and to request to have some of it converted by the authorities to regularcurrency (see next point).
How is conversion of CC into regular currency organized? Entrepreneurs would be granted theright to convert some of their CC into regular currency at exchange rates set by the authorities.The exchange rate between the two currencies can be calibrated so as to compensate theauthorities for loss of tax revenue and to balance the in- and outflows of CC to the state. The ratewould thus amount to a tool for determining the extent to which the CC is recirculated in the localeconomy, or returned to the state. This is important in order to avoid inflation in the CC sector.
Would there be interest on sums of CC owned or loaned? There would be no interest accruing ona sum of CC, whether a surplus accumulating in an account or a loan extended.
How would saving and loaning of CC be organized? The formal granting of credit in CC wouldbe managed by state authorities and follow the principle of full reserve banking, so that quantitiesof CC loaned would never exceed the quantities saved by the population as a whole.
Would the circulation of CC be subjected to taxation? No.
Why would authorities want to encourage tax-free local economies? Given the beneficial socialand ecological consequences of this reform, it is assumed that nation states will represent thegeneral interests of their electorates and thus promote it. Particularly in a situation with risingfiscal deficits, unemployment, health care, and social security expenditures, the proposed reformwould alleviate financial pressure on governments. It would also reduce the rising costs oftransport infrastructure, environmental protection, carbon offsetting, and climate changeadaptation. In short, the rising costs and diminishing returns on current strategies for economicgrowth can be expected to encourage politicians to consider proposals such as this, as a means ofavoiding escalating debt or even bankruptcy.
How would the state's expenditures in CC be financed? As suggested above, much of theseexpenditures would be balanced by the reduced costs for social security, health care, transportinfrastructure, environmental protection, carbon offsetting, and climate change adaptation. Asthese savings may take time to materialize, however, states can choose to make a proportion oftheir social security payments (pensions, unemployment insurance, family allowance, etc.) in theform of CC. As between a third and half of some nations' annual budgets are committed to socialsecurity, this represents a significant option for financing the reform, requiring no correspondingtax levies.
What are the differences between this CC and the many experiments with local currencies? Thisproposal should not be confused with the notion, or with the practical operation, of localcurrencies, as it does not imply different currencies in different locales but one national,complementary currency for local use. Nor is it locally initiated and promoted in opposition to theregular currency, but centrally endorsed and administrated as an accepted complement to it. Mostimportantly, the alternative currency can only be used to purchase products and servicesoriginating from within a given geographical range, a restriction which is not implemented inexperiments with Local Exchange Trading Systems (LETS). Finally, the CC is provided as a basicincome to all residents of a nation, rather than only earned in proportion to the extent to which aperson has made him- or herself useful in the local economy.
What would the ecological benefits be? The reform would radically reduce the demand for long-distance transport, the production of greenhouse gas emissions, consumption of energy andmaterials, and losses of foodstuffs through overproduction, storage, and transport. It wouldincrease recycling of nutrients and packaging materials, which means decreasing leakage ofnutrients and less garbage. It would reduce agricultural intensification, increase biodiversity, anddecrease ecological degradation and vulnerability.
What would the societal benefits be? The reform would increase local cooperation, decreasesocial marginalization and addiction problems, provide more physical exercise, improve psycho-social and physical health, and increase food security and general community resilience. It woulddecrease the number of traffic accidents, provide fresher and healthier food with lesspreservatives, and improved contact between producers and consumers.
What would the long-term consequences be for the economy? The reform would no doubtgenerate radical transformations of the economy, as is precisely the intention. There would be asignificant shift of dominance from transnational corporations founded on financial speculationand trade in industrially produced foodstuffs, fuels, and other internationally transported goods tolocally diverse producers and services geared to sustainable livelihoods. This would be ademocratic consequence of consumer power, rather than of legislation. Through a relativelysimple transformation of the conditions for market rationality, governments can encourage newand more sustainable patterns of consumer behavior. In contrast to much of the drastic and oftentraumatic economic change of the past two centuries, these changes would be democratic andsustainable and would improve local and national resilience.
Why should society want to encourage people to refrain from formal employment? It isincreasingly recognized that full or high employment cannot be a goal in itself, particularly if itimplies escalating environmental degradation and energy and material throughput. Well-foundedcalls are thus currently made for degrowth, i.e. a reduction in the rate of production of goods andservices that are conventionally quantified by economists as constitutive of GDP. Whether formalunemployment is the result of financial decline, technological development, or intentional policyfor sustainability, no modern nation can be expected to leave its citizens economically unsupported. To subsist on basic income is undoubtedly more edifying than receiving unemployment insurance; the CC system encourages useful community cooperation and creative activities rather than destructive behavior that may damage a person's health.
Why should people receive an income without working? As observed above, modern nations willprovide for their citizens whether they are formally employed or not. The incentive to findemployment should ideally not be propelled only by economic imperatives, but more by the desireto maintain a given identity and to contribute creatively to society. Personal liberty would beenhanced by a reform which makes it possible for people to choose to spend (some of) their timeon creative activities that are not remunerated on the formal market, and to accept the tradeoffimplied by a somewhat lower economic standard. People can also be expected to devote a greaterproportion of their time to community cooperation, earning additional CC, which means that theywill contribute more to society – and experience less marginalization – than the currentlyunemployed.
Would savings in CC be inheritable? No.
How would transport distances of products and services be controlled? It is reasonable to expectthe authorities to establish a special agency for monitoring and controlling transport distances. Itseems unlikely that entrepreneurs would attempt to cheat the system by presenting distantlyproduced goods as locally produced, as we can expect income in regular currency generally to bepreferable to income in CC. Such attempts would also entail transport costs which should makethe cargo less competitive in relation to genuinely local produce, suggesting that the logic of localmarket mechanisms would by and large obviate the problem.
How would differences in local conditions (such as climate, soils, and urbanism) be dealt with?It is unavoidable that there would be significant variation between different locales in terms of theconditions for producing different kinds of goods. This means that relative local prices in CC for agiven product can be expected to vary from place to place. This may in turn mean thatconsumption patterns will vary somewhat between locales, which is predictable and notnecessarily a problem. Generally speaking, a localization of resource flows can be expected toresult in a more diverse pattern of calibration to local resource endowments, as in premoderncontexts. The proposed system allows for considerable flexibility in terms of the geographicaldefinition of what is categorized as local, depending on such conditions. In a fertile agriculturalregion, the radius for local produce may be defined, for instance, as 20 km, whereas in a lessfertile or urban area, it may be 50 km. People living in urban centers are faced with a particularchallenge. The reform would encourage an increased production of foodstuffs within and in thevicinity of urban areas, which in the long run may also affect urban planning. People might alsochoose to move to the countryside, where the range of subsistence goods that can be purchasedwith CC will tend to be greater. In the long run, the reform can be expected to encourage a betterfit between the distribution of resources (such as agricultural land) and demography. This is fullyin line with the intention of reducing long-distance transports of necessities.
What would the consequences be if people converted resources from one currency sphere intoproducts or services sold in another? It seems unfeasible to monitor and regulate the use ofdistant imports (such as machinery and fuels) in producing produce for local markets, but asproduction for local markets is remunerated in CC, this should constitute a disincentive to investregular money in such production processes. Production for local consumption can thus beexpected to rely mostly – and increasingly – on local labor and other resource inputs.
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