Money in the making of a human economy: beyond national capitalism

By | June 18, 2013

 

  1. LETS and me
  2. The euro crisis
  3. The collapse of national capitalism
  4. A human economy approach
  5. Harnessing bureaucracy to grassroots democracy

 

LETS and me

All my life money has been an obsession. I have always been keener to understand it than to have a lot of it. When I was 5, I was bewildered by the relationship between rationing coupons and pocket money (Hart 2000:176). When I was 12, I took up betting on the horses. Gambling saw me through university (Hart 2013). I even became an entrepreneur in the slums of a West African city as part of my doctoral fieldwork. I put together a small real estate fortune during the 70s and then lost it when I was divorced. So, when I was asked to give a public lecture to my fellow anthropologists in the mid-80s, it was not surprising that I hit upon the topic of money. I brought plenty of personal experience to my subject, none of which showed in my official presentation. I called this ‘Heads or tails?’, referring to the two sides of a coin, one representing money as an aspect of political society, the other its value as a commodity in exchange. My argument was that both sides, state and market, were indispensable to money, but for much of the 20th century we had been subjected to ruinous swings between theories emphasizing one side to the exclusion of the other. The lecture was published in Man (Hart 1986).

In the course of my analysis, I drew attention to the invention of LETS in British Columbia. I am told that this was the first reference to LETS in an academic journal. I subsequently took a closer interest in LETS and then I met Michael Linton in a Manchester pub during 1994. Until then, I had thought of LETS as a stand-alone alternative trading circuit, in full flight from the mainstream capitalist economy, sometimes harassed by government agencies, but embodying the spirit of utopian socialism in small local communities. Over a couple of pints, Michael quickly sketched a very different vision of the potential of LETS. He saw their operation in cities like Manchester (my home town) as linking individuals to numerous exchange circuits reflecting their different interests. These in turn would be fully integrated with normal commerce and tax regimes. Breakthroughs in communications technology (this was the time when the internet went public and the World Wide Web was invented) would bring the plastic revolution to LETS. We could make our own money and markets inside capitalism, but on a very different ethical basis.

For much of the 90s, I was Director of Cambridge University’s African Studies Centre. This brought me into an engagement with some of that continent’s most pressing problems, in Nigeria, Angola, South Africa and elsewhere. Of these by far the most dramatic was Angola. This country had suffered a million war deaths in three decades; its people lived perpetually on the brink of disaster. Yet the rest of the world was largely indifferent. I organized a conference and a book (Why Angola Matters, Hart and Lewis 1995). But the sheer scale of the poverty, violence and dislocation then afflicting Africa drew me into a deeper reflection on the nature of our unequal world and what to do about it. I studied the history of movements to end slavery, colonialism and apartheid, drawing especially on the writings of anti-colonial revolutionaries, such as M.K. Gandhi, Frantz Fanon and C.L.R. James. I was convinced that we face an acute crisis for world civilization and that the universities, with their specialist disciplines, cannot help us to understand it, even less to overcome it.

So I left Cambridge to try out a new life as a writer in Paris. The first outcome was a book on — you’ve guessed it — money (The Memory Bank: Money in an Unequal World, Hart 2000). Unlike in my academic work, I drew on my wide personal experience in writing this. I asked what future generations would be interested in about our times; and at the height of the dot com boom that seemed obviously enough our stumbling efforts to launch a digital revolution in communications. So my theme was the relationship between that revolution and changing forms of money and exchange. I proposed that markets and money have redemptive features, especially if organized on a non-capitalist basis. Reflecting the neoliberalism and techno-utopianism of the age, I was even more opposed to states than to capitalism and forecast their imminent demise. This contradicted my earlier conclusion that states and markets are equally indispensable to money. My argument was that electronic money enables a shift of power from its producers to users (see Dodd 2005:401-4006). I drew heavily on the example of LETS in all this. But I was still concerned that there was a large gap between the world’s economic problems and the scale of community currencies which affected only a few people mainly in the rich countries.

Soon afterwards, I went to see Michael Linton and Ernie Yacub on Vancouver Island. We agreed to start writing a book together on LETS. I wanted to have closer access to their theoretical and practical experience of “open money” (http://openmoney.org) and they imagined I might bring some skills and perspective as a writer on money. For much of 2001-2002, we exchanged ideas and material in preparation of the book, Common Wealth: Building Community and Economic Democracy with Open Money. We became involved in the Japan Open Money Project and Kohkoku magazine (“Future Open Design”) which was linked to Japan’s second largest advertising agency. I was impressed by the combination of several corporate enterprises and grassroots democratic organizations. This led me to wonder if the liberal revolutions that inaugurated the modern world, combining capitalist firms with popular movements of many kinds in England, America, France and Italy, might be revived in our day. If so, Japan would be a leading candidate for such a revolution. I was thrilled that LETS might play a part in this. I interacted with members of Japan’s New Association Movement (NAM) and formed a relationship with Makoto Nishibe whose work on LETS, labour money and use of the internet for community currencies I still find inspiring (Nishibe 2005).

Our efforts were not limited to Japan. Michael and I attended a “Wizards of OS” conference in Berlin where we explored the relationship between open money and the free software/open source movement. And he pursued an amazing range of links from international electronic payments at the European Commission to schools in London and the fast-growing barter club scene in Argentina (this was the time of the peso crisis and the rise of trueque, Hart 2002). I advised on a research programme on the informal economy in France including several projects on LETS which the French call SEL. Le Monde argued in an editorial that SEL was the most promising face of social democracy in France at the time. So the movement towards open money seemed to be gathering pace in the years following the millennium. The gap was narrowing between the problems we face as human civilization and our attempts to approach these problems through LETS-based initiatives.

Michael, Ernie and I aimed to promote greater equality and freedom by showing people how to organize in thousands of closed exchange circuits on the model of LETSystems. We express our desires democratically whenever we spend money; but this kind of voting is massively unequal. The vast majority of people alive have hardly any money to spend at all. How much better if we made our own money and voted with that. A new approach to money, offering individuals and communities more effective control of their own economic decision-making, was the most direct way to restore democracy to our participation in society. Harnessing the potential of the internet was essential if these efforts were to succeed; and Michael, with collaborators around the world, devoted much effort to developing the software and technology to make this happen. The urgent task was to link community currencies into wider interactive systems. Ideally the banks could do this, but for now we had to go it alone.

A proper currency service provider would enable users to create their own systems in the space available and give them access to other similar systems. A stand-alone community currency is like a radio or TV that can only tune to one station, a computer with just one programme. Supporting trade between people who keep their accounts in different currencies requires that the registries can communicate with each other through a cross-clearing network. This would be operated primarily through the internet, using its own money domain naming system (MDNS).  This would start with national top-level domains responsible for the registration of regional sub-domains, which would be in turn responsible for local registration. This facility would be further enhanced by ‘multi-cc’ smart-card systems. The cards could carry up to 15 different currencies at a time, off-line and anonymous, and were designed to make community money systems easily adopted in the retail sector. The combination of the cross-registry clearing and smart card systems would create a platform for virtually any form of open money. When the software achieved a kernel of cross-platform protocols capable of defining the integrated platform of any application, it would become open source software, open money in the fullest sense. Of course, co-ordination in this area is difficult when there is no one body concerned with establishing standards.

There is a paradox in using the terms open and closed in this context. For the majority of community currencies such as LETS the definitive principle is that the exchange circuits they sustain are closed. In contrast, the markets sustained by conventional money are open-ended networks of limitless extent, so that money seems to drain away to unseen centres of power that are invariably located elsewhere, leaving us powerless to prevent its passing. The whole point of LETS was that the purchasing power generated by trade comes round again to nourish the participating community; and it promotes internal production rather than the import/export pattern that predominates in mainstream markets. This is particularly so when the circuits are small and the community is a well-defined local area. But open money circuits may be scaled up to a much larger membership dispersed around the internet. The greater control afforded by closed circuit networks needs to be offset by an open source approach to the software needed to operate community money. This dialectic of local community and global network, reflected in a combination of closed circuits of exchange and open distribution methods, has been a constant feature of Michael Linton’s approach to LETSystems.

The book stalled, however, and was eventually abandoned. I have had time since to reflect on the reasons for this. The main one was that I lacked Michael and Ernie’s hands-on knowledge of the systems we were promoting and, as an anthropologist, I was used to writing about things I had first-hand experience of, even if only as a lecturer on books I had read. We seemed to have incompatible views on the historical character of money. Michael usually promoted LETS as the opposite of normal money, representing local closure as a virtue and money’s unbounded circulation as a threat. I have always seen money and markets as the way we extend the reach of our local societies to make more inclusive trading communities, drawing on Simmel (1900), Mauss (1925) and Polanyi (1944) in support of this idea. Clearly the explosion of money, markets and communications in the age of the internet was deeply dangerous; but it also brought closer the possibility of forming a world society based on universal human principles expressed through universal media.

I became aware of some unsettling contrasts in the rhetoric we each brought to persuading people that “open money” could benefit them (Hart 2009). We are all deeply socialized to treat the money system we know as natural. So, if one of the obstacles to disseminating community currencies is the difficulty of persuading people consciously to adopt new ideas, another is their unconscious use of old models when designing new forms of association. The nation-state has enjoyed tremendous success as the dominant form of society over the last century or two, so that we have internalized its principles and reproduce them whenever we seek to construct new forms of community. To my mind, Michael Linton’s commitment to extending the social range and interaction of community currencies was offset by the emphasis on local closure which others in the movement emphasized more strongly. As Simmel (1900) put it, money is the concrete symbol of our human ability to make universal society and the logic of community currencies fights that possibility. A federation of limited currencies is clearly the way to go, but the resources needed for effective coordination on a large scale were then simply unavailable to scattered activists.

It is perhaps predictable that the early development of community currencies took the form of defensive particularistic units offering a temporary refuge from the ravages of capitalism. Such groups normally emphasize relations of personal trust between members, shared morality in contrast with the ruthless impersonality of the world outside. Harking back to the labour theory of value, some have based their measure of money on time (time dollars, Ithaca hours), thereby putting some distance between their exchanges and the national economy. These communities have usually been local and police the boundaries of face-to-face communities. This is what most people imagine community currencies to imply; and indeed a substantial part of the movement will retain this character indefinitely. But virtual relations at distance and face-to-face communication reinforce each other in a complementary way and should not be posed as stark alternatives.

The euro crisis

After a period when the euro was just a virtual currency and depreciated heavily against the US dollar, coins and notes were introduced on 1 January 2002, with mildly euphoric expectations of a new era for Europe. The national currencies of twelve countries, which had been linked together for some time, now ceased to be legal tender, being replaced by what is in effect a federal state currency like the dollar. By contrast, at the other end of the world in Argentina, the crisis of the peso, which was linked to the dollar, provoked a proposal for a parallel currency, the argentino, based on a federation of currencies issued by provincial governments. This lasted no longer than Adolfo Rodriguez Saa, one of five presidents in less than two weeks, who announced it. Then the peso itself was made new, this time at a dollar price 30% lower than before.

I published a comparison of these events (Hart 2002, “A tale of two currencies” – it was the best of times, it was the worst of times). Both cases were an admission of the failure of national currencies and involved coining new currencies to remedy this. The eventual failure of national monopoly currencies is inevitable in my view and I believed then that this opened avenues for ordinary citizens to take initiatives in their own hands through community currencies. What were the options besides joining ever larger currency blocs? Might the deficiencies of central bank money improve prospects for the take-up of community currencies?

The French press celebrated a European unity more complete than any known since the Roman Empire. The euro was to lead to a United States of Europe and offered the best chance yet of limiting the excesses of national governments. The banks did their best to slow the change down; but then the habit of supping copiously at the trough of national monopoly money dies hard. The television news had shots of bemused but happy punters fingering their euros in supermarket lines. There was no economic analysis. The birth of the euro was a practical matter of handling change; but above all it was a political symbol — apparently some people made a display with their starter kit it on the living room table.

I wrote of the euro then:

The euro’s management is likely to be less democratically accountable to the public even than its national precursors. The twelve central bank governors of the participating countries represent what is in effect a league of states. The euro may not be a national currency, but it does aim to be a federal state currency, like the dollar…The legacy of Maastricht is that the economic destiny of 300 million Europeans is now tied to the fortunes of a single currency whose management cannot possibly meet their varied needs and interests. The euro is in principle a throwback to the Bretton Woods era of fixed parity exchange rates and it does not take much imagination to figure out that the deflationary consequences for some parts of the European economy could be unpleasant. The constituent governments of Euroland will come under pressure from their own people for more flexible instruments of economic management. The euro cannot do the job all by itself (Hart 2002:21).

In Argentina, ordinary citizens floated their own ‘social money’ in the 1990s, forming an association, Red Global de Trueque Solidario, which issued 15 million currency units (creditos) and then split into a more money-minded organization, Red Global de Trueque, and one stressing egalitarian community, Red del Trueque Solidario. The credits were a single-issuer scrip like the national currencies that they aimed to complement. They were given away or bought cheaply as tokens of exchange within a closed circuit. These and provincial government experiments in local currency were a response to the rigidity of the fixed peso/dollar exchange rate which squeezed the life out of the domestic economy, when profligate debt and capital flight made devaluation inevitable. After flourishing for a few years, this “barter club” network crashed when rival powers (the government, criminal mafias?) flooded the market with counterfeit notes.

Europeans were not yet reduced to the desperate measures of the Argentinians, but they too could not afford to rest content with the money forms at their disposal. The member states of the Eurozone and the Argentinians were both acutely aware of the inadequacies of national currencies. Both took extreme measures to address thes; but, whereas they were forced upon Argentina, the Europeans were proactive in anticipating them. Becoming a member of a larger currency bloc is a way of trying to cope with ‘the markets’ — the global tide of virtual money which threatens to swamp the independence of national economies. I drew on my work with Michael Linton to suggest that his vision of many community currencies hooked up through multiple domain name systems and smart cards was relevant. A combination of improved technology and economic failure might be the stimulus they needed to gain wider acceptance. I concluded that the most important forms of money are social and, after several thousand years of only two kinds (commodity money and state money in various combinations), it might now be time to embrace another, people’s money.

The euro involved only a limited break with the territorial principle. Its logic was still that of a central bank monopoly within an expanded territory. There are other democratic possibilities, I claimed. We could make our own money rather than pay for the privilege of receiving it from our rulers. Europeans may not yet have been reduced to the desperate measures of the Argentinians, but they too had some way to go before they could rest content with the money forms at their disposal. Now, in countries such as Greece, the time for desperate measures like those invented by the Argentinians a decade ago has arrived. The contradictions built into the euro, conceived of in the euphoria of the free market’s “victory” in the Cold War, were disguised by the long credit boom. The financial crisis of September 2008 was at first represented by Europe’s elites as largely an “Anglo-Saxon” problem. The years since then have seen one inadequate half-measure after another. Meanwhile the crisis escalates and the dominant austerity policies are revealed ever more clearly as an anti-democratic move imposed on ordinary people by a class of bankers, politicians and bureaucrats.

The conversion of the whole world to free market capitalism (“neoliberal globalization”) in the early 1990s coincided with a digital revolution in communications. Wall Street took the lead in exploiting these new possibilities. After the dot-com boom crashed in 2000, a regime of low interest rates fuelled speculation in property. American bankers discovered that there was more to be made from lending to people with little money (through mortgages and credit card debt) than to people who have a lot, since higher interest rates and fees could be charged and assets could be seized on default. This led to the invention of “sub-prime” mortgages and to packaging these debts with other sounder loans for sale in capital markets with artificially inflated credit ratings. After 2005, it became obvious to some American finance houses that they should sell on the risky paper they had accumulated. But who would buy what they wanted to “short” (Lewis)? Enter Europe’s financial institutions who found they had a reasonably clear field, after the Cold War ended, in the “emerging markets” of Eastern and Southern Europe, Latin America, and Southeast Asia. French and German banks lent recklessly to Southern Europe, and they also bought heavily into American sub-prime mortgage bonds in the years just before the crash. Of all the world’s regions, the major and permanent loser in this economic crisis is Europe. Europeans now find themselves at the centre stage of the world economy, as they have not been since the 1930s, with financial markets hanging on each negotiation and election.

The central problem is not even mainly one of credit and debt, but rather reflects a deep-seated shift in the world economy, with national and international political institutions now unable to influence a money circuit that has gone global and lawless. In the second half of the twentieth century, humanity formed a single interactive social network for the first time. Money has acquired its apparent pre-eminence because the economy has been extended rapidly from a national to a global level without any of the social regulation that existed before. Naturally, the financial specialists used their newfound freedom to loot the world in scandalous ways that we will have to repair, if we can. But, in addition to drawing people en masse into unsustainable credit schemes, they also put in place some of the institutional mechanisms that will make the market work for all of us and not just for those with lots of money. Capitalism has clearly been instrumental in the making of world society, even if it is unlikely to be the basis for its stable functioning. Money is not simply a means of exploitation; it is also a mediator between individuals and society. Money, and the markets it sustains, is itself a human universal which could be emancipated from the social engines of inequality that it currently serves. It allows us, especially in its modern digital form, to move wealth to where it is needed in seconds, for example.

The monetary crisis that has overwhelmed the Eurozone needs to be seen in this context. The apparent triumph of the free market at the end of the Cold War induced two huge political blunders, both of them based on the premise that society should be shaped by the market economy rather than the other way round. First, the radical privatization of Soviet bloc public economies ignored the common history of politics, law, and social custom that shored up market economies in the West, thereby delivering economic control into the hands of gangsters and oligarchs. And second, the European single currency, which was supposed to provide the social glue for political union, was adopted without first developing effective fiscal institutions or economic convergence between northern and southern Europe.

The big mistake was to replace national currencies with the euro. An alternative proposal, the “hard European Currency Unit” (ECU), would have floated nationally managed currencies alongside a low-inflation European central bank currency. Countries that didn’t join the euro, like Britain and Switzerland, have in practice enjoyed the privilege of this plural option, but Eurozone countries cannot devalue and so must reduce their debts through deflation—or default. The euro was invented when money was already breaking up into multiple forms and functions. The Americans fought their Civil War before centralizing their currency; whereas the Europeans centralized their currency as a means of achieving political union. In this sense, the EU is a neoliberal experiment based on the dogma that markets logically precede politics.

Techno-utopian projects usually make the same mistake. Advertising itself as an “anonymous open source p2p digital currency”, BitCoin’s sponsors apparently believed that a market for money can be secured by mathematical innovation alone, while the actual politics is hidden. Early 2013 saw a classic “bubble” when the BTC/US$ exchange rate rose from $13 to $266 and fell to $50 in a matter of hours, only to stabilize around $100 afterwards. This last development was probably contrived by a single exchange that handles 80% of BitCoin transactions, thereby giving it greater influence over the price than a central bank. So much for the free market.

It is obvious enough that member states of the Eurozone have been denied the option of devaluation as a means of reducing national debt. The key problem for the European Union is the democratic deficit which has led governments to be accountable to finance rather than to their own people, as they largely were during the decades of social democracy after 1945. The economic stalemate in the Eurozone has political sources and could be resolved if the terms of public debate acknowledged contemporary social realities. It is unlikely, however, that the ruling elites who brought about the crisis will introduce effective solutions, since their prime responsibility is to save their own skins and those of their financial backers. Revolution and world war are not unthinkable conseqeunces of this mess. The EU was a bold political experiment that had some prospect of making regional federation the next stage in the making of world society. But its monetarist premises never allowed for the expression of economic democracy; and that is now coming back to haunt them.

The euro crisis is pushing Europe’s rulers inexorably along a path of social polarization, between a corporate bureaucracy and a population rapidly being stripped of the political, legal, and economic powers won after 1945. The whole story is a Greek tragedy in both the ancient and contemporary senses, where even the best intentions can no longer remedy the consequences of past mistakes. The tragedy is that, by granting undemocratic powers to the European Central Bank, the EU has ensured that the euro’s stability will be achieved only at the cost of general economic hardship. Mass political resistance will be the inevitable result, thereby further undermining the stability of the currency.

The collapse of national capitalism

The current crisis of the world economy is not merely financial, a moment in the historical cycle of credit and debt. The removal of political controls over money in recent decades has led to a situation where politics is still mainly national, but the money circuit is global and lawless. The crisis should rather be seen as the collapse of the money system that the world lived by throughout the twentieth century. This has been unravelling since the US dollar went off the gold standard in 1971, when a new regime of floating currencies emerged, and money derivatives were invented the following year. As the need for international cooperation intensifies, the disconnection between the economy and political institutions makes effective solutions impossible to reach.

There is still a tendency to see the disaster we are living through in economic rather than political terms. By attacking the free market rather than the use of the state to siphon wealth to the top, neoliberalism’s detractors often reproduce the ideology they claim to oppose. The euro is by no means the only symptom of this crisis, but it may well be seen in retrospect as the decisive nail in the coffin of the world economy. One way of approaching our moment in history is to ask not what is beginning, but what is ending. This is by no means straightforward. What is ending is “national capitalism,” the synthesis of nation-states and industrial capitalism whose main symbol is national monopoly currency (legal tender policed by a central bank). It was the institutional attempt to manage money, markets, and accumulation through a central bureaucracy within a cultural community of national citizens. However, it was never the only active principle in world political economy: cities, regional federations and empires are as old or much older.

National capitalism’s origins lay in a series of linked revolutions of the 1860s based on a new alliance between capitalists and the military landlord class. These ranged from the American civil war and Japan’s Meiji restoration to Italian and German unification. At the same time, Marx published Capital and a revolution took place in transport and communications (steamships, continental railways, and the telegraph). These new governments launched a bureaucratic revolution in the late nineteenth century and sponsored large corporations in a drive towards mass production. The national system became generalized after the First World War when states turned inward to manage their economies in times of war and depression. Its apogee was the social democracy built in the thirty years after 1945, what the French call les trente glorieuses.

People learn to understand each other as members of communities and money is an important vehicle for this. They share meanings as a way of achieving their practical purposes together. Nation-states have been so successful in such a relatively short time that it is hard for us to imagine society in any other way. Five different types of community came together in the nation-state:

  •  Political community: a link to the world and a source of law at home
  •  Community of place: territorial boundaries of land and sea
  •  Imagined or virtual community: the constructed cultural identity of citizens
  •  Community of interest: subjectively and objectively shared purposes in trade and war
  •  Monetary community: common use of a national monopoly currency

The rise and fall of single currencies is therefore one way of approaching national capitalism’s historical trajectory.

At present, national politics and media are so parochial that we find it hard to think about the human predicament as a whole. But money is already global in scope and the need to overcome this limitation is urgent. Perhaps only a world war and all the losses it would bring will concentrate our minds once more on fixing the world we live in.

Mainstream economics says more about what money does than what it is. Its main function is held to be as a medium of exchange, a more efficient lubricant of markets than barter. Another school emphasizes money’s function as a means of payment, especially of taxes to the government and hence on “purchasing power.” It is considered by some as a standard of value or unit of account, with the focus again on government’s role in establishing the legal conditions for trade. John Locke conceived of money as a store of wealth, a new form of property that allowed the accumulation of riches to escape from the limitations of natural economy.

Karl Polanyi (1964) argued that only modern money combines the four functions (payment, standard, store, and exchange) in a few “all-purpose” symbols—the national currency. Although his analysis was intended only to illuminate the history of money, Polanyi’s approach offers profound insight into the causes of today’s global economic crisis. Our challenge is to conceive of society once more as something plural rather than singular, as a federated network rather than a centralized hierarchy, the nation-state. The era of national monopoly currencies is very recent (beginning in the 1850s), and it took the United States, for example, half a century to secure an uncontested monopoly for its “greenbacks.” However, “all-purpose money” has been breaking up for four decades now, since the US dollar was de-pegged from gold.

Since the Bretton Woods system of fixed parity exchange rates ended in the early 1970s, the world economy has reverted to the plural pattern of competing currencies that existed before central banks learned how to control national economies in the late nineteenth century. One aspect of the present crisis is that the international rule system imposed after the Second World War was subverted by the creation of an offshore banking system which brought the informal economy to the heart of global finance (Shaxson 2011). The separation of functions between different types of monetary instruments was also crucial to money’s great escape from the rules of the Keynesian consensus. Central bank control was eroded by a shift to money being issued in multiple forms by a globally distributed network of corporations, not just governments and banks.

Some brief examples will serve to indicate the momentous changes that have overtaken money in the last few decades. In Switzerland today, euros are commonly accepted in shops alongside the national currency. If you pay with a card, you can often choose the unit of account (Swiss franc, euro, pound sterling, US dollar). But only francs are acceptable for the payment of local taxes. Are national currencies a store of wealth? Hardly. They have all been radically depreciated and may even disappear, hence the flight to gold—which could turn out to be the biggest asset bubble of them all. As for real estate, the collapse of subprime mortgages got us into the present mess. And I have not even touched on what credit default swaps and collateral debt obligations are used for, or who issues them. The shadow banking system—hedge funds, money market funds, and structured investment vehicles that lie beyond state regulation—is literally out of control.

Georg Simmel (1900) considered money’s twin anchors to be its physical substance (coins, paper, etc.) and the social institutions supporting the community of its users. He predicted that the first would wither away, making the second more visible. The digital revolution in communications has been transforming money’s substance for two decades now. But globalization has made national society seem a lot less self-sufficient than it did a century ago. Radical reductions in the cost of transferring information have introduced new conditions for engagement with the impersonal economy, and world society is increasingly driven by money, markets, and telecommunications. The replacement of single currencies by numerous types of more specialized monetary instruments is one inevitable result of this.

This process of social extension beyond national boundaries is fraught with danger. We need to extend systems of social rights to the global level before the contradictions of the market system collapse into world war—but local political organization resists such a move. This dialectic of globalization is very ancient. Ours is becoming a multi-polar world whose plurality of associations and convergent income distribution resembles the medieval period more than anything since.

Simmel’s prophecy has been realized to a remarkable degree, as the digital revolution accelerates and cheapens electronic transfers. But if the essence of money is its use in a community with shared social institutions, national capitalism has lost its grip on social reality. We must therefore move from singular (national) to plural (federal) conceptions of society. The infrastructure of money has already become decentralized and global, so a return to the national solutions of the 1930s or a Keynesian regime of managed exchange rates and capital flows is bound to fail. The idea of world society is still perceived by most people as at best a utopian fantasy or at worst a threat to us all. We need to build an infrastructure of money adequate to humanity’s common needs, although this agenda seems impossibly remote right now. One move in this direction goes by the name of “alter-globalization” (Pleyers 2010), and the idea of a “human economy” (Hart, Laville and Cattani 2010) offers a bridge to that movement. The economy always has two faces, being pulled both inwards to secure local guarantees of a community’s rights and interests and outwards by engaging with outsiders through the medium of money and markets of various sorts—not just our own.

A human economy approach

Nobel laureate economist Ronald Coase (2012) has published an article, ‘Saving economics from the economists’ in the Harvard Business Review. “The degree to which economics is isolated from the ordinary business of life is extraordinary and unfortunate”, he writes. “In the 20th century, economics identified itself as a theoretical approach of economization and gave up the real-world economy as its subject matter. It thus is not a tool the public turns to for enlightenment about how the economy operates. But because it is no longer firmly grounded in systematic empirical investigation of the economy, it is hardly up to the task…. It is time to reengage with the economy. Market economies springing up in China, India, Africa, and elsewhere herald unprecedented opportunities for economists to study how the market economy gains its resilience in societies with cultural, institutional, and organizational diversity. But knowledge will come only if economics can be reoriented to the study of man as he is and the economic system as it actually exists.”

There are many heterodox economists who reject the dominant model of rational choice in ‘free’ markets, and want to reconnect the study of the economy to the real world; to make its findings more accessible to the public; and to place economic analysis within a framework that embraces humanity as a whole, the world we live in. The human economy approach shares all these priorities. Our focus draws inspiration from and seeks to contribute to the tradition of economic thought, but, more explicitly than these currents within economics, we are open to other traditions in the humanities and social sciences, notably anthropology, sociology, history and development studies.

The University of Pretoria research programme (http://web.up.ac.za/humaneconomy) has been shaped by the ‘alter-globalization’ movement of the last decade. It is the third phase of an international project that originated in the World Social Forum. The first phase (2002-2009) was a series of volumes in several languages, produced by a network of Latin American and Francophone researchers and activists, which aimed to introduce a wide audience to the core themes that might organize alternative approaches to the economy. These books, called Dictionary of the Other Economy, brought together short essays on the history of debate on many topics. A second phase saw publication of the first English-language collection in this series, The Human Economy: A Citizen’s Guide (Hart, Laville and Cattani, 2010). Fifteen countries were represented, but there was only one author from Asia and Africa, where most people live.  The focus on exchanges between researchers and activists also left questions of research methodology relatively unexplored.

The University of Pretoria program adds a Southern African node to the network of scholars and activists represented by publications so far, thereby giving greater weight to African, Asian and Latin American voices in a broader South-South and North-South dialogue. It is the first coordinated academic research program in the process initiated by the World Social Forum. Starting from a core of social anthropologists, the program has extended its inter-disciplinary reach to include sociology, history, political science, geography and education. We have appointed some 20 post-doctoral fellows from Africa, Asia, the Americas and Europe; and in 2012 an inter-disciplinary group of eight African PhD students from five countries. Our main research focus is on Southern Africa, but participants bring research expertise from many geographical areas.

Our first method is ethnographic with the aim of joining the people where they live in order to discover what they do, think and want. Second, the economy is always plural and so we must address the variety of particular institutions through which people experience economic life. Third, we wish to help people to organize and improve their own lives. Our findings ultimately should be accessible for their practical use. This all adds up to a sort of humanism. It must be so, if the economy is to be returned from remote experts to the people who are most affected by it. But humanism is not enough.  The human economy must be informed by an economic vision capable of bridging the gap between everyday life and humanity’s common predicament, which is inevitably impersonal and lies beyond the actor’s point of view. This means drawing on philosophy, world history, literature and grand social theory.

Emergent world society is the new human universal – not an idea, but the fact of our shared occupation of the planet crying out for new principles of association (Hart 2010). We urgently need to make a world where all people can live together. Humanity’s hectic dash from the village to the city is widely assumed to be driven by “capitalism”. But a number of social forms have emerged to organize the process on a large scale: empires, nation-states, cities, corporations, regional federations, international organizations, capitalist markets, machine industry, global finance, telecommunications networks. So the task is to figure out how states, cities, big money and the rest might be selectively combined with citizens’ initiatives to promote a more democratic world society. We envisage the human economy in terms of a dialectic of small-scale humanism and large-scale impersonal institutions. Somehow these two poles of our social existence must b eintegrated effectively.

If economic strategies should be anchored in people’s everyday lives, aspirations and local circumstances, the movement should be one of extension from the local towards the global. We can’t arrive instantly at a view of the whole, but we can engage more concretely with the world that lies beyond familiar institutions. The chief way of achieving social extension has always been through markets and money in a variety of forms. They are intrinsic to our human potential, not anti-human as sometimes depicted. Of course they should take forms more conducive to economic democracy.

The principles of an ‘economy’, conceived of as a specific strategy, must be discovered, articulated and disseminated. Such an economy, to be useful, should be based on general principles that guide what people do. It is not just an ideology or a realistic description. The social and technical conditions of our era — urbanization, fast transport and universal media – must underpin any inquiry into how the principles of human economy might be realised. We do not assume that people know best, although they usually know their own interests better than those who presume to speak for them. In origin ‘economy’ privileged budgeting for domestic self-sufficiency; ‘political economy’ promoted capitalist markets over military landlordism; ‘national economy’ sought to serve the interests of a citizen body. Perhaps ‘human economy’ is a way of envisaging how unique human beings are linked to humanity as a whole. It would then synthesise the others in a sequence of social extension (house-market-nation-world) whose typical social units co-exist at complementary levels.

Harnessing bureaucracy to the ends of grassroots democracy

The euro crisis is a consequence of the neoliberal idea that politics can be banished from monetary policy, a dream shared by the techno-utopians who designed BitCoin. But it also manifests the collapse of national capitalism as the dominant economic system of our times. This ought to represent an opportunity for community currencies – and I once thought so – but many of them unconsciously retain the assumptions of national capitalism in their basic form as stand-alone bounded entities. The ‘human economy’ approach must express an economic vision that can bridge the gap between everyday life (what people know) and humanity’s common predicament, which is inevitably impersonal and lies beyond the actor’s point of view (what they don’t know). Humanity’s shared occupation of the planet cries out for new principles of association. Small may be beautiful and a preference for initiatives grounded in local social realities is unchallengeable; but large-scale bureaucracies, whether governments or business corporations, are also essential if our aspirations for economic democracy are to be realised. Money and markets should take forms that are more conducive to this end. It helps to recognize that they already span the extremes of human experience.

We have to start with what people do, think and want where they live; but what we all share as humanity also matters. The human economy idea may have its origins in small-scale informal activities and a humanist ideology, but it requires the development of global social networks and ideas too. For the human predicament is impersonal; there are powerful anti-humanist forces in our lives. So we have to build bridges between local subjectivities and the new human universal, world society. To be human is to be a person who depends on and must make sense of impersonal social conditions.

There is a pressing need for more effective social coordination at the global level and the drive towards local self-organization is strong everywhere. Special-interest associations of every kind proliferate. Resistance to the unequal society we have made often takes the form of denigrating the dominant bureaucratic institutions — “the state” and “capitalism” being favourites – in favour of promoting small-scale self-organized groups and networks. Yet it is inconceivable that any future society of this century could dispense altogether with the principal social forms that have brought us to this point. So the real task is to work out how states, cities, big money and the rest might be selectively combined with citizens’ initiatives to promote a more democratic world society. Combining the flux of self-organized small-scale initiatives with the rigidity and longevity of large bureaucracies is devilishly difficult; but in the end this strategy offers more lasting prospects for success than going it alone as “mice in the basement”.

This idea is not particularly new. It is just that many activists in the community currencies field would not consider working with bureaucracies that they think of as the antithesis of what they aspire to. Yet the shippers of Nantes and Bordeaux provided strong support to the French revolution, the industrialists of Milan and Turin to the Italian revolution. Kenya’s world-leading experiment in mobile money, M-pesa, was launched by a subsidiary of Vodacom. Hewlett-Packard has long developed research stations in outlying areas in an attempt to make computers accessible to the world’s “poorest four billions”. The notion of a ‘popular economy’ has emerged in Latin America since the 1990s, bringing new coalitions (peasants, urban informal workers, unions) into an alliance with progressive political regimes. Brazil under Lula introduced a system of community development banks with over 50 branches of which the first was Banco Palmas. These combine microfinance and complementary currencies with strong local democratic input and are seen as promoting the social and solidary economy. The government of Uruguay has sponsored a ‘3C’ alternative circuit of exchange and credit for SMEs in which national utilities and local tax offices anchor the circulation of unpaid invoices as currency by accepting them in payment of bills. A major problem with alternative trading circuits is what the big players could use them for and this restricts acceptance of the means of payment. But everyone has to pay for telephones and local taxes. My last example is outlined more fully since I know it at first-hand.

Invoice Clearing Bureau South Africa (ICB) is the licence holder of an electronic invoice validation system. This was the brainchild of Neville Kerdachi, a South-African-born Lebanese now in his early 70s. He took part in his family’s businesses before establishing his own as a manufacturer, real estate developer and horse-owner. His vocation, however, was as a factor in Durban port, buying up shipping invoices for cash at a discount (against delays in payment and the risk of non-payment). His experience in this field goes back half a century. This led to the formation of ICB which is hosted by BANKSERV as a platform linking buyers, sellers and banks. The company chairman is Vishnu Padayachee, an activist and organizer under apartheid, prominent development economist and former director of South Africa’s central bank.

The aim of e-Invoice Banking is to speed up access to liquidity tied up in invoices due to mature at some future time. More generally it addresses the question of slow payment by big buyers to small suppliers (SMEs), while also offering the former a rationalised method for handling their own invoices in bulk (at a smaller than usual discount). Once an invoice has been placed in the system by the seller and acknowledged by the buyer, it is validated by the bank which may then pay 70% or more of the invoice value to the supplier (validation takes place through a sophisticated, yet quite easily integrated system, which is the competitive advantage of ICB’s software). It dramatically changes a firm’s cash flow, a major headache for most regardless of size, enabling it to purchase more stock, build cash balances etc). Liquid diamonds, someone called the system. ICB charges R25 per transaction and also hopes to gain revenues from licensing its system abroad.

Launching this system has not been easy. The banks have been slow (as usual) to adopt it and attempts to secure the political patronage of the South African government proved to be unworkable. The system does not require separate regulation since it is just an intermediary between buyers, sellers and the banks. In principle it could be set up anywhere in the world. It has won approval and interest from the Bank of International Settlements and the World Bank, among other global institutions. But the mechanism is essentially decentralised and does not rely on such support. Its birth has undoubtedly been facilitated by the sophistication of online finance in South Africa. The transition to mobile telephony (which is currently expanding fastest in Africa) is just one step away.

This system potentially addresses the needs of a large number of SMEs and provides a service to big corporations like Nestle and Walmart. ICB’s software is superior to their internal accounting processes. Its speed and efficiency allows outstanding invoices to be cleared on a large scale at a lower discount rate than competing services. Setting up small accounts is always labour-intensive and gradual, whereas a contract with one large corporation can contribute significant capital to the process of building up the e-invoice network. In the history of internet commerce, the most successful operators (Amazon, iTunes) have combined individual blockbuster best-sellers with a million small items (the long tail) which make up half of Amazon’s total revenues. The lesson of ICB, which is not yet fully established, is that the needs of small businesses are not best met by forming networks with similar organizations at a level removed from big business and government. Innovation on an appropriate scale requires hi-tech organizational resources — and money of course — that lie beyond the reach of grassroots networks. Yet, when combined fruitfully, the benefits for the little people can be substantial – for an estimated 200,000 Black SMEs in South Africa, for example. The key to ICB’s strategy is the low cost of individual operations, their integration into existing bureaucratic systems and an ability to span the whole range of economic activity. There are wider lessons for all who would solve common economic problems through monetary innovations.

The beneficiaries of these innovations are ordinary individuals with complex economic lives. Lindiwe — a middle-aged Zulu woman who once worked in a factory and is now a domestic servant in Durban — rents township accommodation from the municipality and travels to and from work in informal minibuses. She looks after her mother who receives a state pension and her brother’s young daughters since he has AIDS. Her teenage sons are unemployed and drifting into crime and drugs. Her husband disappeared over ten years ago. She sells cosmetics to neighbours in her spare time, shops once a week in a supermarket and at local stores the rest of the time. She attends a prosperity church, has joined a savings club and owes money to loan sharks, but doesn’t have a bank account. Note the variety of sources she draws on, few of them directly part of corporate capitalism. Lindiwe understands her own life better than anyone. But there are questions she doesn’t know the answers to: Why are there no longer mining jobs for the men? Why did all the factories close? Why are the schools failing? Why has a Black government done so little to reduce poverty and inequality?

A human economy approach must somehow bridge the gap between Lindiwe’s life and a world driven by forces she cannot know. But, given our preference to anchor economic strategies in people’s everyday lives, aspirations and local circumstances, we have to push out the limits of understanding through extension from the local towards the global. We can’t arrive instantly at a view of the whole, but we can engage more concretely with the world that lies beyond the familiar institutions that immediately secure our rights and interests. Lindiwe could not juggle the plethora of institutional factors in her life without money. Her unanswered questions require a new kind of political education, one grounded in the circumstances she knows well, but also capable of opening up to broader perspectives. Innovations in money and markets, as all proponents of complementary and community currencies know, are particularly well-suited to this purpose since they span the extremes of human experience.

 

Keynote address for the 2nd International Conference on Complementary Currency Systems, “Multiple monies and development: making payments in diverse economies”, held at ISS, The Hague, 19-23 June 2013.

References to be added

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