Money in an Unequal World; LETS and Me

Two short articles on money for a Japanese audience

For Kohkoku (Future Social Design) Magazine, Tokyo, 2001

Money in an Unequal World

We live at a time of communications revolution and Japan is at the centre of it. In the last decades of the twentieth century humanity has formed a world society for the first time ever. At one level, this process of universal connection is symbolized by the internet, but it is also the explosion of mobile phone networks and global television audiences in the billions for events like the World Cup soccer finals or the Olympic games. At another level, this world society now takes the form of an economy, a world market fuelled by a rising tide of money whose movement is increasingly independent of national controls. This convergence of the media and markets is not accidental, since language and money are the two great vehicles of human communication. Money is becoming information and information money.

If humanity is growing closer together, it is also obvious that the world is becoming rapidly more unequal in alarming ways. The last two centuries of mechanization have exaggerated the gap between rich and poor and this gap has accelerated in the last quarter century, since modern money markets were invented. According to the United Nations Human Development Report (1998), the world’s 225 richest men (and they are men) own more than one trillion dollars, the equivalent of the annual income of the world’s 47% poorest people. The rate of car ownership in industrial countries is 400 per thousand, 16 in all developing countries. The rich pollute the world fifty times more than the poor; but the latter are more likely to die from the pollution. World consumption has increased six times in the last 20 years; but the richest fifth account for 86% of it. Nor is this simply a contrast between Japan and Bangladesh, whose average incomes differ by a ratio of over 150 to 1. In the United States, the ratio of CEOs’ earnings to the average American wage rose in just over a decade from 40 times to 400 times. Jim Clark, founder of Netscape, speaks of ‘the wealthy masses’, the 200,000 Americans who now own more than $10 mn, while the citizens of many African countries earn on average less than $500 in a year.

These two phenomena, connection and inequality, have been produced by the same social forces, which I call ‘virtual capitalism’. For over a century, since the 1860s in fact, when a series of revolutions (including Japan’s Meiji Restoration) launched the leading industrial powers in their modern political form, the world was organized by ‘state capitalism’, the attempt to manage accumulation and markets through national bureaucracy. This was the era of mass production and consumption, of heavy industries and centralization, when human destinies were tied to the impersonal institutions of states and capitalist markets. The ‘globalization’ brought about by the digital revolution of the last two decades has undermined the pretension of states to control their national economies. In the process, long-distance trade in information services has overtaken manufactures as the main focus of economic growth and the money circuit has become increasingly detached from real production and exchange. America’s economic leadership has been affirmed since the end of the Cold War, by its dominance of money markets, telecommunications and the internet. Its neo-liberal agenda for world economy has come to be seen as synonymous with globalization. The world holds its breath, wondering if this is a new stage of human evolution or a financial bubble whose end will engulf us all.

Perhaps all this speculation is too short-sighted. The challenge facing humanity today requires us to look at world history in the very long run. It is after all only two centuries since we entered the age of machine revolution. In that time the world’s population has grown from 1 bn to 6 bn; the proportion living in cities rose from 1 in 40 to a half; and energy production has been doubling every 25 years. The societies that have been stumbling through this hectic transition from the village to the city as our normal habitat are still significantly shaped by the 5,000 years of agrarian civilization that preceded the industrial era. Our institutions still reveal the priorities of the small urban elites who designed culture with the aim of controlling a passive rural labour force. These include territorial states, landed property, warfare, embattled cities, money as an object,

long-distance trade, an emphasis on work, racism, world religion and the family. State capitalism, a reactionary alliance of big money, traditional rulers and bureaucrats, is the main reason why we have made so little progress. If you doubt this, consider what happened to the largest concentrations of money ever assembled, the taxes paid to centralized industrial states since the second world war. The money was spent on subsidizing food and armaments, the priorities of the bully throughout the ages. And, if you doubt me still, take a look at world society today.

The habit of compiling statistics as a way of identifying national populations is 150 years old. By now we are quite able to absorb the information that Italian women have the lowest fertility rate or that France has the best health service. But we are not used to thinking of world society as a whole, through numbers or by any other means; and it is about time we did. The OECD countries (North America, West Europe and Japan) account for about 1 in 7 of the human population and over 80% of its wealth. Rich and poor are differentiated in various ways. Race, a nineteenth century semiotics of skin colour, still plays a major part in organizing economic inequality and international movement. The rich are also growing older and, in much of the rest of the world, children predominate; so that we are witness to a global demographic shift in which rich, white, old people are being replaced by poor, darker, young people. This is happening despite the barriers erected to keep people in place, to stop all but a few of the poor from moving to rich countries and to harass them when they get there, in what amounts to a global system of apartheid.

Our world thus resembles nothing so much as the old regime of eighteenth century France before the revolution, with a remote minority seeking to control masses to whose fate they are largely indifferent. This is obscured by national consciousness, the legacy of a period in which people were persuaded to view their relationship to world society only through the lens of national citizenship. It is not even widely recognized that escalating inequality is a problem. Yet in the 1930s national governments were persuaded that the poor and unemployed posed a threat to social stability great enough to justify the introduction of policies aimed at lifting the spending power of those who lacked money. The post-war boom that petered out in the 1970s ensued from this commitment of some industrial states to maintain the economic welfare of their citizens. Something similar is needed in today’s world, where the poverty of the vast majority is a terrible burden on the world economy. But we are a long way from being able to realize such policies. It is hard to envisage the kind of disasters that might encourage such a political initiative. But we know that arrangements concerning money would have to be at the centre of any recovery.

Economic inequality is rising because of the stage we have reached in global capitalism. The political framework of nation-states for a time supported some equalizing measures, at least within their own boundaries. But these are becoming weaker in the face of neo-liberal ideology, money markets, e-commerce and global telecommunications. No substitute political framework has yet emerged, so that the world is becoming radically more unequal. Some would oppose globalization by reasserting national controls, but this backward-looking reaction fails to address the social forces unleashed by virtual capitalism. The world is entering a new age of liberal revolutions comparable to those of the mid-19th century and their target will be the states currently in place. Those who put their faith in these states run the risk of being swept aside.

In my book Money in an Unequal World (Texere, New York, May 2001; previously published as The Memory Bank  by Profile Books, London, 2000; see also www.thememorybank.co.uk), a large part is devoted to the vision of world history outlined here. My main purpose, however, has been to develop a humanist perspective on markets and money which might inform the attempt to construct a non-capitalist way forward. The political form of such alternatives is left deliberately vague, while the argument seeks to show individual readers how they might aspire to a higher level of economic agency under present circumstances. Not to put too fine a point on it, we have reached the stage when we, the ordinary people, can make our own money. Instead of experiencing money as an objective social force dominating our lives, it can become a measure of our interactions enhancing our subjective capacity to make society on our own terms.

A fundamental fact of our times is the cheapening of information transfers. Money was previously impersonal because trade could only expand if people who did not know each other trusted the real asset value of what was paid for their commodities. Now growing amounts of information can be attached to transactions involving people anywhere in the world. This provides the opportunity for us to make circuits of exchange employing money forms that reflect our individuality, so that money may be more meaningful to each of us as a way of participating in the multiple associations we choose to enter. All of this stands in stark contrast to state-made money in the twentieth century, where citizens belonged to one national economy whose currency was monopolized by a political class claiming the authority to manage its volume, price and allocation. Although economic power is still highly concentrated, the middle classes in the richer countries have for some time begun to experience greater personal influence over their financial affairs. The development of plastic credit cards is the most obvious manifestation of this trend. But customized treatment of clients by firms is becoming more sophisticated all the time. And, within the constraints imposed by a largely unreformed banking system, the number of money instruments at people’s disposal is multiplying, with inevitable results for the flexible management of their own economic affairs.

Money today, following a trend to become more insubstantial over the last two centuries, takes the principal form of electronic digits or bits travelling at the speed of light over telephone wires. This makes it easier to see what it has always done, even when it took the form of real substances: money conveys meaning. As long as it took the principal form of things, made of metal or paper, this function could be obscured. But today money is the way we keep track of a potentially bewildering number of contractual agreements linking us to a great variety of associations. It is inconceivable that we could dispense with this highly personal register of transactions. This is why I draw on the image of a memory bank. Memory banks are, of course, found in computers, but banks are, for most people, places to store money. From its beginnings in Europe, money was linked to the Goddess of Memory, the mother of the civilized arts and sciences. Communities were people who shared the means of communication and exchange; and these significantly involved the meanings conveyed through money. Today money is the most universal means of communication we have. We cannot afford to turn our backs on it just because the corporate owners of capital have assumed too much power to direct our economies. Rather we should be seeking ways of buying and selling which conform to the standards of a truer economic democracy. This means making non-capitalist markets and the money forms needed to run them.

We need to learn how to make economic relations that work for us, for each one and for all of us. For some months now I have been writing a book, Common Wealth: making money for ourselves, with Michael Linton and Ernie Yacub from British Columbia, based on my own researches and their experience in designing and implementing community currencies. Recently they have been engaged as advisers to the remarkable Japanese experiment in ‘open money’ sponsored by this magazine. We propose here a simple solution to the money problem — a prescription for any community, association, network or business to create and use their own money system as a closed circuit.  These new systems are designed as a complement to conventional money. Community currencies stimulate economic activity when people would otherwise lack the means of participating effectively in the commercial economy. Beyond that they teach us to see how money now works against most people and can be made to work for us.

A community money, by our reckoning, is best seen as an acknowledgement of the gift,  as so many  statements of recognition of the value received, as an intent to redeem or a commitment to honor. It is a symbol linking individual acts of giving to a circuit of exchange. Such circuits generate mutual credit within a self-selecting group of accounts. Transfers and balances are recorded by a registry which is a virtual bank with no ‘real’ money. In the latest stage of the technology, these transactions are recorded off-line on smart cards capable of registering a plurality of currencies and then communicated card-to-card via the internet.

These money systems – most commonly termed “LETS” systems, as they enable us to do things — can take a number of forms. The principles they share, however, are simple and general: a closed circuit of exchange linking a network of members each of whom issues the currency from a zero base, operating at minimal cost and freely distributed as software to like-minded groups. The scale of these networks can vary widely: smaller groups are able to function with a high level of mutual knowledge and trust; larger ones increase the size of the pool at the cost of greater anonymity and risk of default. Using smart-card technology, it is now possible for individuals to belong to a dozen or more such currencies at once, reflecting different needs and patterns of association. Most people would belong to several exchange networks, as well as dealing in conventional currencies, both national and international. These ideas are the result of an evolution of shared practice over two decades linking activists in hundreds of such communities worldwide. The model for this process of diffusion is the open source code movement enabling free software to be shared and developed collectively over time.

If our age resembles in some ways the time when agriculture was invented 10,000 years ago, then we are the first digging stick operators scratching around unprofitably in the dirt, primitive pioneers in a process culminating in organizations of unimaginable complexity, such as Chinese civilization. It is impossible to predict where today’s initiatives in designing more democratic markets and money systems will lead. Nor can we tell how, if at all, a move in the richer countries towards greater economic democracy on a small scale will affect the grotesque disparities of income that mark world society today. Nevertheless, it seems to me that we may be on the verge of dealing a death blow to the cultural inheritance of agrarian civilization. Ending a regime of territorial state monopolies may not be the same as abolishing money in its old form as capitalism, but it is the necessary first step towards human emancipation. It will probably require a revival of the middle-class revolution that inaugurated the modern period, one in which personal concerns for individual economic empowerment are wedded to campaigns aimed at abolishing the obscene inequality of our world. There are precedents for this in the campaigns to abolish slavery, colonialism and apartheid. Our great advantage is that we live in a world unified by movement and communications as never before. One step towards improving that world would be to recognize the need for monetary infrastructures better adapted to human needs and purposes.

Keith Hart

Paris

March 2001

LETS and me

All my life money has been an obsession. When I was 5, I was bewildered by the relationship between rationing coupons and pocket money. When I was 12, I took up betting on the horses. Gambling saw me through university. 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 perhaps 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 the 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 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, 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 this was confirmed when I met Michael Linton in a Manchester pub in early 1994. Until then, I had thought of LETS as isolated alternative exchange systems, 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 operations in cities like Manchester (my home town) 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 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 active relationship with some of that continent’s most pressing problems, in Nigeria, Angola and South Africa, for example. Of these by far the most upsetting was Angola. This country has suffered a million war deaths in three decades; its people live continuously on the brink of disaster. Yet the rest of the world is largely indifferent. I organized a conference and a book (Why Angola Matters, 1995). But the sheer scale of the poverty, violence and disease afflicting Africa drew me into 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, especially the writings of Third World revolutionaries, such as M.K. Gandhi and C.L.R. James. I became 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 of that was a book on — you’ve guessed it — money (Money in an Unequal World, 2001; see my article in fsd2). Unlike in my academic work, I was able to draw on my wide personal experience in writing this. My theme was the relationship between the communications revolution and changing forms of money and exchange. I proposed the development of markets and money on a non-capitalist basis and, of course, I drew heavily on the example of LETS to show where such developments might go. But it still seemed to me that there was a large gap between the world’s economic problems and the scale of initiatives affecting a few individuals mainly in the rich countries.

Last year, I went to see Michael Linton and Ernie Yacub at their home 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 and they imagined I might bring some skill and perspective as a writer. For much of 2001, we have exchanged ideas and material in preparation of the book. They have been heavily involved in the Japan Open Money Project and this magazine, while I have been making a world tour that took in Brazil, South Africa, India, the USA and several European countries. What impressed me most about JOMP was the unique combination of a wide variety of corporate enterprises and grassroots democratic organizations. This led me to wonder if the liberal revolutions which inaugurated the modern world, combining capitalist elements with popular movements of many kinds, 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 prominent part in this. I am now conversing in Paris with Kenta Ohji, a member of the New Association Movement (NAM), and this all looks very promising.

But our team has not been limited to Japan. Michael and I attended a conference in Berlin in which we were able to explore the relationship between open money and the free software movement. And he is currently pursuing an amazing range of alliances from electronic payments in Brussels to schools in London and the fast-growing community currency scene in Argentina. I have been guiding research on the informal economy in France including several projects on LETS which the French call SEL. The leading newspaper Le Monde has argued in an editorial that SEL may be the most promising face of social democracy in France at this time. The movement towards open money is gathering pace. It does seem that the gap may be narrowing between the problems we face as human civilization and our attempts to approach these problems through LETS initiatives.

Now the decks are cleared for us to write our book on community currencies. It is provisionally called Common Wealth: building community and economic democracy with open money. Readers of this magazine will be no strangers to its central message. We aim to promote greater equality and freedom by using our own money, showing people everywhere how to organize as thousands of closed exchange circuits on the model of LETS. Economic democracy in this limited sense points us to more inclusive forms of community. Above all, making money for ourselves is a realistic way of building a more equal world .

Keith Hart

Paris

November 2001

Note: The book was not completed and our collaboration went into temporary abeyance, but is by no means over.

London

April 2006

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