February 21, 2008

Kilowatt Hour Notes and Other Mediums of Exchange

In April of 1981 the E. F. Schumacher Society convened a conference called "Community Survival in the Age of Inflation." Schumacher President, Robert Swann addressed the conference on the theme "The Place of a Local Currency in a World Economy: Towards an Economy of Permanence." In his talk he laid out the steps for implementing a local currency denominated in kilowatt-hours of electricity produced regionally using small-scale technologies and renewable resources.

In June of 2004, E. F. Schumacher staff member, Chris Lindstrom led the convening of a new conference: "Local Currencies in the 21st Century." It proved a historic gathering. Representatives from 17 countries shared experiences and built relationships that have led to new productive collaborations.

Much has happened in the development of new community-based systems of exchange. Advances in technology have suggested possibilities for the design of currency systems that Bob Swann could not have anticipated. And Bob would have been proud that in his own region of the Berkshires, over 1.5 million BerkShares have been issued from eleven participating banks since launch of the program in September of 2006.

A coalition of groups is convening a conference April 14th-16th in Seattle, Washington to explore monetary systems, how these systems impact both the individual and communities, and how this impact might be transformed through personal and community action. See their wiki page for conference details and registration information.

Keynote speakers include:

Hazel Henderson, producer of the TV series "Ethical Markets," author of "Creating Alternative Futures" and other books, and E. F. Schumacher Society Advisory Board member; and Nipun Mehta, an inspirational speaker and founder of CharityFocus, a fully volunteer-run organization that has delivered millions of dollars of web-related services to the nonprofit world for free.

Everyone who attends is welcome to present (the format will be 80% open space technology). Topics will include micro-credit, slow money, local currencies, complementary currencies, time dollars, retail trade exchanges, LETS, state of the art transaction software and hardware technologies, money and spirituality, ecological accounting, social venture and entrepreneurship, monetary theory, value network mapping, equity sharing, energy backed currency, organizational structures, gift economies, and barter.

The E. F. Schumacher Society is pleased to be a co-sponsor of the event in partnership with PlaNetwork, RSF Social Finance, Current Innovations and Tools for Change.

Following are excerpts from Bob Swann's original 1981 talk.

Chris Lindstrom, Michael Gordon, Sarah Hearn, Susan Witt,
Amalia Feld, Beeta Jahedi, and Chad Nicholson
Staff and Interns of E. F. Schumacher Society
140 Jug End Road
Great Barrington, MA 01230

* * * * * * * * *

from "The Place of a Local Currency in a World Economy" by Robert Swann, 1981

1. I want to focus on the institution of money and the opportunity that now presents itself to develop a better system than our present system. We need a monetary system which will by its nature promote and enhance the small scale institutions, small businesses, cooperatives, small communities, and local towns, while at the same time being sensitive to the unique ecologies of regions. Obviously, the system we have now, and which is failing, does not do so.

2. From a legal viewpoint, money is nothing more (or less) than a claim. But from a technological viewpoint, money is a tool. Like any other tool it can be shaped to perform in different ways. Just as both a scythe and a combine are tools for cutting wheat, so money may be designed to perform in different ways with different objectives. In the same way that we are presently designing and creating more appropriate hardware for small scale needs, so we must create an appropriate tool for exchange.

I do not mean to suggest that creating a better money or exchange mechanism will solve all the problems that confront our society. Not by a long shot. However, just as E. F. Schumacher pointed out, if we create inappropriately scaled tools we end up with many social problems (unemployment, dissatisfaction with work, alienation, etc.) so also the tool which we presently use for exchange, is inappropriately designed for the various functions for which it is intended and as a result has led to serious economic and social problems.

Economists are presently arguing about the possible "solutions" to these problems but since economists, like most modern technologists are looking for "macro" solutions, they have virtually overlooked the possibility of micro solutions. . . . . It is, therefore, I think up to those of us who are the advocates of appropriate technology and small scale to become the inventors, creators, and producers of an appropriate technology for money and banking. We cannot expect the answer to come from outside of our own ranks. Moreover, it is vital to us, because all of the other appropriate technologies with which we are involved depend eventually upon a proper and decent exchange system.

A new money system should have all of the attributes that we value (cooperation, self-reliance, community, etc.). Such would be the direction of the work on which we must concentrate in order to develop an "economy of permanence" in Schumacher's words.

3. If we are to begin to design a local money system that would work for development of a local economy, what are the elements or characteristics for such a system?

It would have to be simple to understand, but consistent with our experience of the present money system. That is: it would have to consist of both cash (or paper currency) as well as a checking system--or some other form of bookkeeping which utilizes the computer to simplify accounting. Unlike our present money system, it would have to be redeemable (i.e. exchangeable) in some real value--not necessarily gold or silver, but real needs of everyday use such as energy. Without redemption system it will be difficult to convince people of its value--after all isn't that exactly why the dollar so devalued--because it is not redeemable for real value from the primary issuer, the Federal Reserve.

Most importantly, we would need to establish a measurement of value which would be as universal as possible and not subject to swings in value up or down as our present money system is. In other words, it would have to remain as constant in value as possible in order to establish a sense of permanency and security as well as make it more practical for exchange to take place.

Such a method of measurement would be the most revolutionary element in the design and would be the key factor in making it possible for a universal system of money and banking--without the need of central banks or central governments becoming involved in money issue. Once this standard of value had been arrived at, it could be monitored by the state or federal government just as the Bureau of Standards maintains and monitors other standards of measurement such as weights and units of space. But it would not require state intervention into the economic sphere, as is now the case.

And finally, it would have to be organized at the local level and controlled by the community as a whole (i.e. each community would elect members of the board of the issuing bank which would preferable be a non-profit institution). Under such a structure as I am suggesting, banking would become more truly a profession, and bankers would be paid for their services, but the community would decide how and where its currency would be invested.

Let me reiterate briefly these specifications: a local currency (appropriate scaled currency) should: be consistent with customary practices (cash, checking, and accounting systems); be redeemable in some form of real need of every day value; and although based on local production, be a universal measure of value.

4. To restate the major point of this talk: the most pressing need I can imagine for a local and regional self-reliant economy is the invention and establishment of an appropriate exchange system such as I have described. Yet such a system, because it is based on a universal measure of value like a kilowatt-hour of energy, could, at the same time, become the key to eventually establishing a worldwide system. For it is obvious that while on the one hand we are at an historical point where local and democratic participation in the economy is essential to our economic survival and to our humanity, it is also clear that we live in a world which is rapidly moving towards a one world economy.

This new, appropriately scaled monetary system would consist of thousands of small, primarily self-reliant regions exchanging or trading directly with each other using a common unit of exchange. Thus the foundation for a cooperative world economy would emerge.

I would therefore call for a task force of volunteers to come forth from this conference determined to study and then implement the first stages of such an appropriate money and banking system.

February 6, 2008

Bringing Morals Back to the Table

Many of us are eating locally and organically produced food. From a modern economic perspective, where price is often the paramount consideration, these choices seem illogical.

What accounts for this shift, and does it have the possibility of expanding to all of our economic decisions?

At the end of his 1966 essay "Buddhist Economics," economist E.F. Schumacher asks, "whether modernization as currently practiced, without regard to religious and spiritual values is actually producing agreeable results?"

Economics, practiced as a science, an objective discipline, seeks to reduce relationships to only those that maximize utility. The worker's creativity and spirituality are discouraged, and consumers are asked to put aside their moral considerations in economic decisions.

Buddhist economics is the description of another path in economic reasoning, one that involves people "imbued with a fully developed sense of the sacredness of all existence." Schumacher looked to all faiths to inform his thought about creating a more sustainable economy. He recognized the human as an individual but also as a creative element within a larger system.

The Buddhist economist asserts that a person's work should have a threefold result: develop and use his faculties; join with others in a common task; and create the goods necessary for comfortable existence. Work becomes an act of bringing needed goods into the world with respect for the environment that led to their creation.

For the Buddhist economist this is the process of finding the middle way, with both material comfort and spiritual reverence.

Altering the economic perspective requires replacing an outward reflection of materialism with an inward reflection of morality. In other words, breaking away from a system that asks us to separate ourselves into "the economical man," who cares only about compensation and price, and "the moral man" of compassion and good will. Working in the tradition of the ideas taught by Schumacher, the E.F. Schumacher Society in Great Barrington, Mass., has launched a local currency, BerkShares, for the southern Berkshire region as a means of reconnecting these two sides and implementing our values in economic decisions. We use the local currency because it represents a support of the local economy that includes our friends and family. BerkShares defines the physical boundaries of our purchases so that we may see their full impact.

As we learn to reinitiate our morality into economic decisions with the help of tools like BerkShares, we will realize the role that locally scaled production can play. Our morals will demand that our purchases be accompanied by a more complete picture of the processes that led to their creation. Therefore, a movement toward relocalizing production must accompany the incorporation of morality into economics.

The American economic system assumes a consumer chooses goods with the lowest price. The decision that many of us are now making to forgo price in favor of local food is based on our values. We believe that food should not travel over vast distances and that a farmer has a right to a living wage. When our purchasing decisions take these value judgments into consideration, we are willing to pay more for local and organic products. This is the beginning of a new economy that embraces the moral and sacred values in all our purchasing decisions.

No endeavor that involves the interaction of conscious beings with an inherent ethical sensibility can be treated as an absolute science. Working conditions, environmental health and community support can be included in our economic decisions. The E.F. Schumacher Society and many other organizations are working to build the models that can bring together our economic system and our morals. These models will provide the meaningful work and the awareness of production necessary for a more complete and fair economic system.


Michael Gordon

This article first appeared in the January 19, 2008 edition of Albany, New York's "Times Union" newspaper