P2P Foundation https://blog.p2pfoundation.net Researching, documenting and promoting peer to peer practices Tue, 19 Mar 2019 10:00:00 +0000 en-US hourly 1 https://wordpress.org/?v=5.1.1 62076519 A Cooperative Manifesto for the 2019 Elections https://blog.p2pfoundation.net/a-cooperative-manifesto-for-the-2019-elections/2019/03/19 https://blog.p2pfoundation.net/a-cooperative-manifesto-for-the-2019-elections/2019/03/19#respond Tue, 19 Mar 2019 10:00:00 +0000 https://blog.p2pfoundation.net/?p=74750 Reposted from CECOP/CICOPA Europe While the debate on democracy in the European decision making has become a priority in many political public discourses, the very legitimacy of the European project is raised by many as a scapegoat for social policy failures due to austerity measures. In this context, the quest for democracy in the public... Continue reading

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Reposted from CECOP/CICOPA Europe

While the debate on democracy in the European decision making has become a priority in many political public discourses, the very legitimacy of the European project is raised by many as a scapegoat for social policy failures due to austerity measures.

In this context, the quest for democracy in the public sphere does not reflect the reality of workers’ everyday workplace environment, where workers’ voice and representation is ever more threatened.

Worker and social cooperatives, by bringing democracy into the workplace, practice and foster a model where workers are protagonists. When we engage for the benefit of local communities, when we pursue the general interest, when we preserve the industrial heritage of our regions, when we inject economic democracy in enterprise decision-making, we actively fight social exclusion, and counter populism and anti-democratic sentiments.

Our economic model is resilient and future-proof, we take up the challenges of the future of work and we fight for social justice in Europe.

The Europe we have in mind gives voice to its citizens, cherishes entrepreneurial diversity and leaves no one behind.

In the end of May 2019, European citizens will elect the new European Parliament, and here is what cooperatives in the industry and services want for the next parliamentary mandate.
Read our Election manifesto !

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Tecámac, Mexico: Water school equips communities to defend public water https://blog.p2pfoundation.net/tecamac-mexico-water-school-equips-communities-to-defend-public-water/2019/03/19 https://blog.p2pfoundation.net/tecamac-mexico-water-school-equips-communities-to-defend-public-water/2019/03/19#respond Tue, 19 Mar 2019 09:00:00 +0000 https://blog.p2pfoundation.net/?p=74760 Republished from Transformative Cities Since 2001 the Mexican government has been pushing municipal governments to privatize water. If this trend continues, 35 million people will be affected and community water management – with water systems built by the people and dating back more than a hundred years in some cases – will be destroyed. SAPTEMAC... Continue reading

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Republished from Transformative Cities

Since 2001 the Mexican government has been pushing municipal governments to privatize water. If this trend continues, 35 million people will be affected and community water management – with water systems built by the people and dating back more than a hundred years in some cases – will be destroyed. SAPTEMAC is challenging this through its Water School, giving local people the tools to defend their water supply.

Mexico’s Water School came about in 2016 when SAPTEMAC representatives saw the concept at work in Colombia. With the support of national umbrella group Water For All, Water For Life – and with no major funding – professionals including lawyers, engineers, accountants, geographers and teachers have been running training sessions in different locations to give people the professional and political means to defend themselves. Topics covered include water rates, account-keeping, billing, organisation and inventories, pipes and water pumps.

So far there are 25 systems involved in the project, and water users, students and academics who have participated in the project have volunteered to strengthen the school by contributing new theoretical and political tools for use in the second round of training sessions in 2018.

Water For All, Water For Life already runs a citizens’ initiative for a General Water Law, but SAPTEMAC is now complementing this with a campaign for local water laws with the same human rights approach in 16 states around the country. The most significant result achieved to date is that colleagues from other community water systems have expressed interest in participating in the Water School project in its second round of training.

“What inspires me about this initiative is its professionalization of a collective (community-based) water management mechanism and the explicit pedagogical dimension in the work they do. The national and international linkages of this initiative are also very inspiring.”

– Evaluator Lorena Zarate

Would you like to learn more about this initiative? Please contact us.

Or visit Tecámac Saptemac’s Facebook

Transformative Cities’ Atlas of Utopias is being serialized on the P2P Foundation Blog. Go to TransformativeCities.org for updates.

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AgtechTakeback – Technical Sovereignty and L’Atelier Paysan’s Tooled up French Farmers https://blog.p2pfoundation.net/agtechtakeback-technical-sovereignty-and-latelier-paysans-tooled-up-french-farmers/2019/03/18 https://blog.p2pfoundation.net/agtechtakeback-technical-sovereignty-and-latelier-paysans-tooled-up-french-farmers/2019/03/18#respond Mon, 18 Mar 2019 10:00:00 +0000 https://blog.p2pfoundation.net/?p=74729 This post by Julien Reynier is republished from Agtech L’Atelier Paysan is French non profit cooperative. We started in 2009 in South of France as project with a group of organic farmers dealing with a new global appropriation of farm technology. Based on the principle that farmers are themselves innovators, we have been collaboratively developing... Continue reading

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This post by Julien Reynier is republished from Agtech

L’Atelier Paysan is French non profit cooperative. We started in 2009 in South of France as project with a group of organic farmers dealing with a new global appropriation of farm technology.

Based on the principle that farmers are themselves innovators, we have been collaboratively developing methods and practices to reclaim farming skills, achieve self-sufficiency and a technical sovereignty in relation to the tools and machinery used in organic farming.

Technical Sovereignty

Our goal is to make farmers imagine, and collectively create, adequate equipment and the means of production on the farm. This is in contrast to a trajectory of over-investment, over-indebtedness and over-sizing.

We believe we can make technical choices and invent sophisticated low tech solutions. We don’t want to be overwhelmed by trendy, plug-and-play and miraculous high-tech tools that will only make us more dependent, will be more intrusive and less controllable.

In 2011, we set ourselves up as a staffed organisation working to promote farm-based inventions. Our aim was to collectively develop new technological solutions adapted to small-scale farming, and to make these skills and ideas widely available through courses and educational materials.

We have also been offering resources and guidance to farmer-driven projects involving the building or renovation of agricultural buildings.

We have five trucks equipped with the machinery and materials we need to run about 80 practical training courses on farms and workshops across France per year.

More than 2.000 farmers have participated in our workshops in six years. We provide advice and guidance for small-scale farmers on agricultural tools tailored to their needs, and accompany them through the trials and tribulations of their farming journey, individually or collectively, whatever their area of production – be it no till, direct seeding, processing tools, tractor, horse or hand power.

The development of tools and self-built machinery adapted to small-scale farming is a technological, economic and cultural instrument which has been little explored within agricultural development in France, although it can provide a significant impact on the growth of organic farming and contribute to improving organic farming practices.

The P2P Foundation’s Michel Bauwens interviews Julien Reynier and Fabrice Clerc from L’Atelier Paysan

L’Atelier Paysan is a French cooperative that works with farmers to design machines and buildings adapted to the specific practices of small farm agroecology. In addition to distributing free plans on its website, L’Atelier Paysan organizes winter self-help training sessions, during which farmers train in metalworking and build tools which they can then use on their own farms. L’Atelier Paysan works to develop the technological sovereignty of farmers by helping them to become more autonomous through learning and regain knowledge and skills.

In market gardening, crops are grown on beds formed from long strips of land. Generally, little or no attention is paid to ground compaction by tractor wheels. In subsequent years, farmers will then try to grow on these tracks. The idea of permanent, “ridged” beds is to form perennial growing beds so the tractor wheels always run in the same place. Tools are needed to form these ridged beds, which allow crops to have superior moisture retention and drainage, and to warm up better in the sun.

Michel Bauwens: What was the origin of L’Atelier Paysan project?

Julien and Fabrice: The project was born in 2009 after a meeting between Joseph Templier, an organic market gardener from GAEC “Les Jardins du Temple” in Isère (south-eastern France, near the Alps), and Fabrice Clerc, then a technician with ADABio, the local organic agriculture development association. ADABio was created in 1984 to help improve practices, find resources, and share knowledge, among other things.

Joseph and his colleagues used tools on the farm that are very relevant to the soil, especially adapted to an innovative cultural technique called “permanent beds”. Many young farmers came to train in the techniques, the system and the organization of the “Jardins du Temple” and then to practice them on their own farms and projects. At the same time, Fabrice went to many farms in the Rhone Alps to collect and disseminate knowledge and agrarian know-how. Fabrice and Joseph’s idea was to widely publicise the innovative tools used on this farm, which were crafted and assembled from recovered materials and refurbished old tools. Some standardization was necessary first, in order to be able to publish plans for building the tools from parts and accessories that can be found at any hardware store.

Your approach seems very pragmatic. Yet when I read through your website, it is also a very thoughtful approach (philosophical and political). How did you move from one approach to another?

We have just put into words what is happening. A number of farmers in the Alps independently designed and built their own machines, adapted to their own needs. We have gathered and compiled all this into a guide. In the process of constructing this guide, it seemed useful to formalise our approach: first, to take an inventory of innovations on the ground, then to answer the question “what is the meaning of all this?” Why all these bottom-up innovations, which were traditionally outsourced to the equipment manufacturing industry. So, why was the farming world excluded from the design process? Whereas the farmer and the artisan of the village once built the machines needed, now farmers have disappeared from the chain of innovation.

It is not only in the agricultural sector that this has happened: it’s possible to build bridges with changes in other areas such as shared self-build community workshops, and to think about Do It Yourself from the viewpoint of human/social (re)construction. For example, in Grenoble, there are about ten woodworking workshops with available machines and tools, and self-renovation housing initiatives. They are important factors for emancipation, inclusion and social reintegration. For the last 6 or 7 years, we have been thinking a lot about these issues. We don’t want to just make machines. It is a total experience that consists of thinking about daily life and of the political approach it requires.

Current political debate reflects a very strong social demand on the ground. The guide to self-construction is the first book we published in 2012. This is the sum of the first field census of sixteen machines adapted to organic market gardening. These machines, which are low tech (in construction and design) call for a lot of craft know-how. They do not suffer in comparison with high-tech machines. Our machines are three to four times cheaper for an efficiency equal or superior to those of the trade. Why is this search for autonomy not more valued? This is a question of the technological sovereignty of farmers. It is something that is coming back into fashion, taken up by a militant farming community.

The word “farmer” was, until the 1980s, a word used to denigrate. Today, on the contrary, it means someone who is not only a cultivator of agricultural produce but part of a terroir, connected to an ecosystem and a social life. The word “farmer” relates to the invention of a specialized, segmented profession. Today they are even called “producer”, “operator”, or “Chief Operating Officer”. The logic of industrialists and economists invades agriculture.

Photos in this article come from another really interesting essay about the event les Rencontres de l’Atelier Paysan. Words (at the link) and photos (here and at the link) by Samuel Oslund of l’Atelier Paysan.

What are the current project developments?

The approach is open to the whole field of small and organic farming on a human scale. It started around organic market gardening, but now it is open to all sectors: arboriculture, breeding, viticulture… For example, we can include the re-design of livestock buildings and storage. For market gardeners who want to add some poultry farming to their production, we are also working on the issue of mobile buildings.

Depending on the demands of the farmers’ groups on the ground, our resource platform will respond to co-design the tools required for the specific practices of small and organic farmers. We want these tools to be used by conventional farmers to help them adopt a more autonomous and economical approach. It is becoming increasingly credible because it is intended to be a resource available to all farmers. Most of our users are already going through this process, but the technical principles developed, aim to ensure that conventional farmers are no longer frightened by the demanding, know-how-based, techniques of small farm agroecology.

The project started in 2009 at ADABio, a local association of organic producers, but very quickly grew to such a large scale that in 2011 a transitional association was created and then converted into a cooperative in 2014: L’Atelier Paysan. In this human adventure, meetings played a very important part. At each meeting, we took sideways steps, then small jumps and then big jumps. Today we are 11 permanent staff, quite a lot of seasonal staff as well as those who volunteer as a civic service. Everyone comes as who they are and our approach is closely linked to what each person brings. We are very attentive to the requests that come to us, and we have more and more!

What is your business model?

We operate 65% through self-financing and 35% from public funding. In our view, these are normal contributions to our effort to produce and disseminate common goods. We believe that we are in the public interest and that communities need to be involved. Unfortunately, with the reactionary right-wing coming to power in many places, this sort of support has been drastically reduced.

However, we are relatively more secure than other structures, sometimes subsidized at 80%. The 65% self-financing comes from our self-build training activity. In France there are joint vocational training funds that can cover the cost of training. We also profit from a margin on group orders for internships.

We will raise funds more and more from the public: if we want to change the agriculture / food model, the whole of society is involved. That’s why we have set up a partnership with a Citoyens Solidaire endowment fund to collect donations and the associated tax*. It is a mechanism that allows people to choose where their taxes are going. We want to make citizens aware of our work so that they can contribute to the economic independence of L’Atelier Paysan.

What is your relationship with other farmer or social movements?

L’Atelier Paysan is positioned as one of the actors in the alternative food project, an additional tool in the social and solidarity-based agricultural economy. As actors of this arena, we naturally wanted to associate ourselves with those that represent the agricultural environment, to connect, so that they might disseminate our information, our technical material and to bring together our different users. Moreover, the question of agricultural machinery was very seldom dealt with by the existing organisations.

Also, we have had an awareness-raising activity for a year now, through the InPACTassociation, which brings together about ten associations at the national level. We have been the standard-bearers for the technological sovereignty of farmers in this context, in particular to document and expose, on the one hand, the over-sizing of farming equipment production tool and, on the other hand, the publicly funded introduction of robotics and digital technology supported by the techno-scientific community.

At the international level, we are in the Via Campesina network. We participated in the 2nd Nyéléni forum on food sovereignty (in October 2016 in Romania) where we talked about agricultural equipment, saying that there can be no food independence without farmers’ technological sovereignty.

At the forum we met with Spaniards, Romanians, Austrians, Czechs and Hungarians, who were very interested in questions around farming equipment. We staged an exhibition of drawings and fact sheets that really appealed to people. It was not especially a field of exploration for these activists, and there, something happened. No one in Europe has yet set up a platform such as L’Atelier Paysan, which provides ways to document and disseminate knowledge (data sheets, self-construction training …).

We went to Quebec in January 2014 to organize the first self-build training in North America, with the CAPÉ (Coopérative d’Agriculteurs de Proximlité Écologique) and l’EPSH (École professionnelle de Saint-Hyacinthe ), around the vibroplanche (for cultivating permanent “ridged” beds). And now, they independently create self-build courses from the shared tools on our website.

In the United States, we are connected with Farm Hack, incubated and launched by Greenhorns, which itself came from a young-farmer’s coalition, the NYFC (National Young Farmers Coalition). They share tips on adapting machinery via hackathons and open-hacking camps. Though they have not yet organized any training.

We also have discussions with the Land Workers Alliance (a member of Via Campesina) in England. Two years ago they organized the first Farmhack event which we attended to present our work.

Here, a farmer can come for training and can build their own tools: it doesn’t cost much thanks to our famous training funds and group-buying of materials and accessories. Working with metal, tool use (a kind of after-sales service), sharing (using the machine and adapting it to their context in the form of versioning); this is the whole methodology that one wants to share. There is a very specific context in France, which means that a structure like ours can still rely on a large amount of public aid and shared professional funds to pay for the internships (this is not the case in the USA, for example, which has to rely on private funds).

In general, our approach is total, that is what is exciting in this adventure. We are giving ourselves the means to advance this process, between ourselves and with other actors. From a practical point of view, to reach one person is good, but to reach many takes us much further. We also consider political and economic issues, and what are the factors for acceleration and efficiency. The question of agricultural machinery is a question of political and scientific thought. On the whole, on a whole bunch of questions, there is no science-based production. On April 5th we are organizing a seminar on technological sovereignty: we have struggled to find people who have admitted incompetence. These are questions they have never faced.

What do you think of the “Commons” as a political concept?

We would like to be further advanced on this issue of the Commons. We assume that the issue of food, like drinking water, the air we breathe and biodiversity, are essential to protect. In turn, the means to achieve it (know-how, agricultural land, communal areas, techniques…) must by definition be common, since this is the survival of our species. All the know-how and the knowledge of farmers did not come ex nihilo [from nothing. Ed]: they come from sharing, putting into a common pot, shared innovation and openness. We see as a scandal any attempt to expropriate technological solutions so that they can be part of another feed-source for personal profit. This is an issue that we are exploring and trying to pay attention to.

We are alert to the legal regimes related to this issue of the Commons, to open licenses and to what could best reflect this willingness to share knowledge through which we enrich our community of users. If we use Creative Commons, we are always looking for the right license that best expresses this willingness to share.

The starting material of our work are the tools developed by Joseph: he participated very much in the emergence of these communities. But he didn’t only tinker with machines, he also thought of them with regard to a working group of farmers who wanted to adopt the innovative cultural techniques of permanent beds. His machines are designed in a collective. It is therefore the result of a whole lot of visits and picking up of knowledge and know-how from his peers. He had the talent and the energy to imagine and manufacture these machines. It is his way of contributing, like other activists.

How do you see social change? The political atmosphere is not very positive for the change we want. Do you imagine that you work in a “hostile environment”? Is there a political side to your work?

There is the question of public education. The first step of the document on the technological sovereignty of farmers will be to amalgamate the ideas of the users, the political partners, etc. Some participants in our training events do not take long to take the ideas and techniques and disseminate them.

We are also starting to have quite a lot of feedback from researchers / thinkers, who congratulate us for imagining this new way of thinking. This is our goal because we are not going to be able to produce everything: scientific studies, political thinking … What partnerships can be set up to make common the commonalities of these subjects? Additional advocates can be found at meetings. We do not have a strategy. There is nothing stronger than a groundswell to spread our way of doing things. The tidal wave will be less important, there will be no media buzz, no pretty teaser with a background of country music, but this is much more powerful. When people have experienced their ability for self-determination, there is a kind of arriving without the possibility of backtracking.

Are there projects similar to yours but which you criticize and if so, why?

We are quite distinct from the sort of ideas promoted by the likes of Open Source Ecology in the US with a beautiful trailer, to us that does not seem grounded in reality. None of the machines actually work. It is a process of innovation that comes from not involving real users. They are engineers who imagine things a bit on their own.

We are also distancing ourselves from Fablabs, which seem to be an incubator for start-ups rather than for public education. For us, a Fablab must be a place of public education and not of low-cost technological experimentation for the industry.

We are in Grenoble, the cradle of nanotechnology. Here, a Fablab is funded by industry and advanced technology. So there is Fablab after Fablab (woodworking, pedal-powered machines…), and they are generally talking about something other than the quality of what is produced. It takes funding to run a Fablab. In 2013, those who won the call for projects from the Ministry of the Digital Economy are not those who provide public education. How do we finance a general interest?

More broadly, if by Fablab we mean laboratories of open innovation and shared human resources, there are tens of thousands in France. There are ecocentres, Third-Places, associations related to self-build, others that repair bicycles, social innovation, human and economic. They are not necessarily in the high-tech field and are less publicized, but they are working on the necessary questions.

Where do you see yourself in 10 years? How do you think the world will be in which you will evolve? Do you project yourself into the “global arena” and if yes / no, why and how?

The observation is that today, in January, we do not know much about where we will be at the end of December. This has been true since the beginning of the adventure. We are in an exploratory phase, and it is very difficult to know where we will be in 3 years. After 5 years we have already exceeded our dreams of 3 or 4 years ago! Our collective dynamics explode, economically we will have to find more avenues because humanly we will not be able to go much further. We refuse work every day! One of the interesting tracks in a time-scale of 3 or 4 years is to set up our own training centre on a farm with a workshop training centre suited to our needs, a logistics platform, a classroom, offices, garages, and accommodation. Why a farm? To have our feet on the ground, a real support for our experimentation and a working tool to match our needs. Today we operate within our means, but we have ways to improve our work.

In the years to come, beyond the concerts at Rock à la Meuleuse (rock on the grinder) which we organized during our Rencontres in June 2016, we have plans to explore an illustration of our work through contemporary art.

Among the perspectives, we imagine a European network centred on technological sovereignty. In the world of development and international cooperation associations, this idea has been around since the 1970s, based on appropriate technologies: reclaiming ourselves, being more sociable, connecting and building links throughout Europe so that there are more exchanges between our different countries.

Our adventure is not without effort. Part of what helps us keep going is that we don’t miss out on poetry, pleasure and being as we are. We thoroughly, and I mean thoroughly, explore the paths and horizons that are available to us.

One of the objectives for which we believe we are on the right track is the following: while in France local development has always been specialized, today things are actually de-compartmentalized. If we think about things more “globally”, we will participate in developing something richer, more powerful and sustainable. What makes us strong is that we control the whole chain: self-building at the political and collective level.

We are full of energy: our desire is to testify that the fields we are exploring with the methodologies we use, can be applied to a whole bunch of other things.

This article was written by Michel Bauwens for the P2P foundation’s blog, where it first appeared under a Creative Commons Attribution – Share Alike 3.0 Unported License. Read the details…

All images by L’Atelier Paysan. Check out the full photo essay here.

Interview translated by William Charlton and edited by Ann Marie Utratel.

*A registered (private) donor can get a tax exemption of 66% on a donation. On a donation of €150, the donor receives a €100 rebate – the recipient gets 80% of the donation i.e. €120 http://www.citoyens-solidaires.fr/don-particulier/ for business donations (60% tax exemption) see http://www.citoyens-solidaires.fr/don-entreprise/

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The Rojava Revolution: Co-operation, Environmentalism, and Feminism in the North Syria Democratic Federation https://blog.p2pfoundation.net/the-rojava-revolution/2019/03/18 https://blog.p2pfoundation.net/the-rojava-revolution/2019/03/18#respond Mon, 18 Mar 2019 09:00:00 +0000 https://blog.p2pfoundation.net/?p=74711 Republished from Global University for Sustainability The Fifth South-South Forum on Sustainability (SSFS5) was organized by Global University for Sustainability and the Department of Cultural Studies, Lingnan University, together with 10 co-organizers, on 13–18 June 2018, in Lingnan University, Hong Kong, China. SSFS5 focused on “Transformative Visions and Praxis”. On Day 3 (15 June 2018),... Continue reading

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Republished from Global University for Sustainability

The Fifth South-South Forum on Sustainability (SSFS5) was organized by Global University for Sustainability and the Department of Cultural Studies, Lingnan University, together with 10 co-organizers, on 13–18 June 2018, in Lingnan University, Hong Kong, China.

SSFS5 focused on “Transformative Visions and Praxis”. On Day 3 (15 June 2018), in the session of “Community Governance and Participatory Democracy”, John RESTAKIS (Community Evolution Foundation, Canada) delivered a lecture on The Rojava Revolution: Co-operation, Environmentalism, and Feminism in the North Syria Democratic Federation. The video is produced by Global University for Sustainability, 2018.

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Citizen currencies strengthen agricultural supply chains https://blog.p2pfoundation.net/citizen-currencies-strengthen-agricultural-supply-chains/2019/03/17 https://blog.p2pfoundation.net/citizen-currencies-strengthen-agricultural-supply-chains/2019/03/17#comments Sun, 17 Mar 2019 09:00:00 +0000 https://blog.p2pfoundation.net/?p=74719 Republished from Ripess.eu by Antonin Calderon & Jean Rossiaud (Leman Currency / APRES-GE in collaboration with Gaëlle Bigler (FRACP / URGENCI) This is the third issue of the series we started in October, on the theme of “local currencies”, after a general presentation of the advantages and challenges of local currencies through the example of the... Continue reading

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Republished from Ripess.eu

by Antonin Calderon & Jean Rossiaud (Leman Currency / APRES-GE in collaboration with Gaëlle Bigler (FRACP / URGENCI)

This is the third issue of the series we started in October, on the theme of “local currencies”, after a general presentation of the advantages and challenges of local currencies through the example of the Leman currency (October 2018) and the avenues for collaboration and synergies between local currencies and sustainable food (December 2018), we propose today to reflect in terms of production/supply chains, for different types of agricultural products, and starting once again from the Geneva experience: from seed to production, from production to processing, from processing to distribution, from distribution to consumption. The five key agricultural sectors on which Leman and the Chamber of the Social and Solidarity Economy (APRES-GE) are currently working are the following:

  • Beer: from hops to pints
  • Vegetables: from pitchfork to fork
  • Bread: from seed to bread
  • Wood: from tree to stere
  • Wine: from vine shoot to glass

This is why it is particularly interesting to bring the different actors in a production/supply chain together around the same table, in order to reflect together on current and potential value flows – and the resulting cash flows. Many economic actors generally do not have the time to take this step back. The local currency offers producers a great opportunity to strengthen the links between them, and between them and consumers, and thus to strengthen the local economy in the face of competition from globalized markets. The service provided by the local currency is “economic facilitation”: it is a form of brokerage that allows producers to better choose their local suppliers, and in case of overproduction to sell stocks in the payment community.

The beer production/supply chain: from hops to pints

Let us take the example of the beer sector to illustrate what we are saying. The development of artisanal breweries is currently in full expansion and their operation is easily modelable. The main links in this chain are: farmers, malthouse, breweries, distributors, as well as bars, restaurants or grocery stores. The diagram below illustrates this.

If you still don’t know it, you should know that 90% of beer is made up of water, which is used as the basis for adding malt, hops and then yeast. To this can be added additional ingredients, such as coffee, fruit, spices or other condiments or herbs.

Farmers (1) grow the cereals, which will then be processed into malt by the Malting plant (2). At the same time, hops (2”), a climbing plant, must be cultivated and its flowers harvested and dried; yeast (2”) must be produced, usually in a laboratory.

These three ingredients are used by artisanal breweries (3), with water, for the production of beer. Other goods are also needed to produce beer, including bottles, capsules, labels, glue, and of course water. These products are considered as secondary in the beer production chain, although they are obviously necessary. More and more often, breweries collect their bottles, through a deposit system, and reuse them.

Then, the distributors (4) are responsible for transporting the drinks produced in bars, restaurants and grocery stores (5), where they are sold for consumption, and in particular to employees (6) of the various companies in the beer industry. Indeed, some of the beer consumers work in the sector.

A new activity should also be integrated into this beer sector: mushroom houses (4′). They work with breweries, recovering the used malt (spent grains) and using it as a substrate on which mushrooms (especially shiitake and oyster mushrooms) will grow. The recovery of the substrate is currently being studied for use as protective packaging, for its lightweight and shock absorbing properties.

All these actors also have costs for premises, energy, production and transport machinery, IT, printing and administration. This is what we call the secondary network of suppliers.

The following diagram summarizes the primary network of the beer sector, by modelling the flows of goods/services, as well as the cash flows that allow these exchanges.

The economic relationship

The local currency is above all a tool for establishing economic links between the actors of a sector. While stakeholders are convinced of the value of creating a strong local economy, they do not always have the time, energy or even the knowledge to analyse all current and potential flows in their own economic production/supply chain Pressed by short-term economic constraints and lack of liquidity, they usually go as fast and cheap as possible, whereas their real economic interest in the medium or long term would be to favour a concerted and solidarity-based approach, for example in a pooled credit system.

Working in their own local currency encourages economic actors to be aware of the specificities and various constraints within the chain and puts everyone in commercial contact with their potential suppliers and customers: the farmer with malting, malting with breweries, distributors with breweries, and bars, restaurants and grocery stores with distributors.

The stakes are not only economic and ecological. Admittedly, it makes it possible to increase the volumes of activity of each individual and the wealth produced on the territory; and the development of this territory, in short circuits, reinforces economic resilience and ecological sustainability (reduction of CO2 emissions). On the social and political level, the economic network thus created breaks the isolation of each actor and it is the social fabric that is strengthened. Together, it will be easier to defend your collective interests and become stakeholders in public policies to promote local agriculture.

Monetary liquidity for the sectors

The pooled credit system offered by a complementary local currency such as the Leman in the Lake Geneva region provides significant liquidity to the production/supply chains. Indeed, each actor is granted an operating credit line (currently between LEM 1,000.- and LEM 20,000.-, depending on its size) that can be used without interest rates and without limit as long as it remains below the established threshold. The potential for economic exchange for the entire economic chain concerned is therefore increased by the sum of the credit limits of all its players.

This ancestral system of credit pooling, which has practically disappeared today, swallowed up by the contemporary banking system, is nevertheless a very simple and very stable system. The network as a whole is by definition always totally balanced “at zero”: the sum of the positive amounts is always equal to the sum of the negative amounts, and there is no monetary creation. The more money turns, the more wealth is produced. The lack of liquidity is a barrier to activity. Shared credit therefore replaces bank credit very advantageously.

Conventional bank credit is expensive – when it is granted, because banks often refuse risk. It raises the price of products, because it is necessary to include the cost of money (interest) in the selling price, and weakens the seller in a competitive market occupied by large groups that lower prices.

By working in local currency, we recreate a parallel economy, and we avoid pressure from large groups and foreign products. Getting started with the complementary currency, particularly for agricultural sectors, must be seen as a survival and development strategy. But we must play the game together, companies, employees and consumers, so that the currency can continue to supply the local economy continuously, without stagnating in bottlenecks.

Towards healthy irrigation of the production/supply chains

The main challenge is therefore to avoid the formation of pockets of local currency retention, which indicate an economic blockage. Such a blockage is beneficial if it allows the actor in question to question himself about his partners who do not accept the local currency. It may be time to change it, and to opt for suppliers who also fit into the logic of relocation and social and environmental responsibility.

This is where the services of local currency “facilitators” come into play: they work with companies to integrate suppliers into the payment community, if they meet the conditions of the charter and, if not, to find new partners.

On the other hand, pockets of local currency are problematic if companies cannot put as much currency back into the circulation as they accept: the currency then loses its primary function, which is to facilitate trade. The risk of devaluation of the currency (it will be exchanged below its official value, for example 120 units will be requested for a good/service worth 100 in state currency) is therefore significant.

Two types of actors can find themselves structurally in this “bottleneck” position. First, the company that would occupy a central place in the supply chain, and would have no or too few substitutes. In the “beer” sector, it is the malting industry, with which all local breweries have an interest in working in local currency. Secondly, the company at the “end of the chain”. In our example, it is the farmer who grows the cereals that will then be processed into malt. The following diagram shows this problem of pocket retention of local currency at the end of the supply chain.

For these two cases, there is a simple theoretical answer, but it is not so easy to put into practice, because it already requires a dense economic network: the payment of part of the salaries in local currency. However, the money supply redistributed monthly is a powerful lever for boosting the local and sustainable economy through consumption. This is explained in the diagram below.

We have therefore seen that producers in the agricultural sectors have a clear interest in using the local currency to resist competition from large groups and foreign producers. However, this success is based on the balance of flows. Strengthening the local economy therefore requires organization and patience, as it involves bringing all its stakeholders into the payment community into a virtuous circle.

It is up to the local currency to carry out this work of economic facilitation and credit pooling, and it must be given the means to do so. Once this work is done, in the same way that an irrigation system would be installed in a crop, money can then flow in a virtuous way by creating value in the local and sustainable economy, and by strengthening economic resilience, in the face of systemic financial crises. 2008 should be a lesson to us!

In a future newsletter, we will take the example of one or more particular companies and how they use local currency on a daily basis to make sense of their work: an economic sense, of course, but also the feeling of participating fully in improving the common good.

This post is also available in / aussi en: French Spanish

Photo by practicalowl

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New century, new tools but what future are you creating? https://blog.p2pfoundation.net/new-century-new-tools-but-what-future-are-you-creating/2019/03/16 https://blog.p2pfoundation.net/new-century-new-tools-but-what-future-are-you-creating/2019/03/16#respond Sat, 16 Mar 2019 09:00:00 +0000 https://blog.p2pfoundation.net/?p=74687 This post by Betty Lim is reposted from Medium.com “The role of humans as the most important factor of production is bound to diminish in the same way that the role of horses … was first diminished and then eliminated.” Nobel Prize–winning economist Wassily Leontief, 1983 Very broadly, a paradigm is about the way you perceive,... Continue reading

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This post by Betty Lim is reposted from Medium.com

“The role of humans as the most important factor of production is bound to diminish in the same way that the role of horses … was first diminished and then eliminated.” Nobel Prize–winning economist Wassily Leontief, 1983

Very broadly, a paradigm is about the way you perceive, interpret and live your life. In one where there are so many of us but money is scarce and you need money to survive, doesn’t money (and status) motivate and reward people to do things?

Since this signals you to be a money-chasing machine — to constantly (and blindly) battle anyone/anything that gets in your way — have the world wars really ended? Or have they evolved into Business-as-usual where common sense goes out the window as your livelihood depends on not understanding anything beyond your self-preservation?

Based on artificial Scarcity, has the incumbent paradigm experientially “groomed” you to be ‘a clock thinker’ in your respective survival silo/bubble (and to be systemically blind)?

So, although a transition is underway, do you see how we are being self-organized to shove each other from the world’s dumbest idea into the world’s most dangerous idea?

This is similar to the late 1960’s, when private sector firms in the US were starting to feel the initial pressures of global competition. Like many today, people had desperately wanted quick fixes.

That’s when Milton Friedman published a very confusing New York Times article in 1970, titled ‘The social responsibility of business is to increase its profits.’ After he retired from GE, Jack Welch even admitted the concept of shareholder value focusing on consistent quarterly results was “the dumbest idea of the world.”

However, that idea has infiltrated and shaped all our lives as we are like fish in the water.

In between physical and digital Scarcity

Until 2004, the Internet was decentralized, and a startup could go public with a business plan written on a single sheet of paper (single sided). But that year, Google IPOed and Facebook was launched.

Surveillance capitalism has since flipped us from customers being served to products being sold. Based on more of the same thinking and doing, doesn’t surveillance capitalism really mean ‘post capitalism’ and in a ‘post-monetary’ world, isn’t the future of money the data we generate?

Google and Apple have embraced open source. In 2014, TechRepublic recognized Facebook as the world’s biggest open source actor and Tesla also made available all its patents for other manufacturers to copy. Microsoft recently open sourced 60,000 patents while Amazon has opened its ‘Machine Learning University’ to all developers.

On 21 June 2018, Mark Carney, the governor of the Bank of England, spoke about how “Data is the new oil” and called for “a new world order.” Was he signaling technocrats to self-organize, to build and to champion the new ‘smart’ infrastructure and to eventually replace money with our data (and all our assets)?

Self-organizing to perpetuate the Age of Nonsense

As you join the race for recognition, convenience, speed and bargains, here’s Tom Goodwin on how we self-organized to create the initial digital Business-as-usual model:

“Uber, the world’s largest taxi company, owns no vehicles. Facebook, the world’s most popular media owner, creates no content. Alibaba, the most valuable retailer, has no inventory. And Airbnb, the world’s largest accommodation provider, owns no real estate.”

In 2018, he opined how three years had flipped the above scenario:

“The world’s largest taxi firm, Uber, is buying cars. The world’s most popular media company, Facebook, now commissions content. The world’s most valuable retailer is now Amazon, and has more than 350 stores. And the world’s largest hospitality provider, Airbnb, increasingly owns real estate.”

Because instead of Big Business paying most of us a decent salary to buy the goods and services we produce, this digital trend revolves around us creating the value and buying their services and products while all the key benefits (wealth) end up in the pockets of the Big Business and their owners.

Automation, robotics and artificial intelligence (AI) have (gradually, initially) been replacing humans.

Meanwhile, the gig/freelance economy has emerged as the 21st century’s global factory on demand — marketed as your having freedom, autonomy, and self-determination but where ‘employees’ have no benefits.

According to a 2016Spera report:

  • In the next five years, half of the United Kingdom’s working population may be self-employed.
  • Independent workers comprise the fastest growing group in the European Union labor market: A 45% rise from 2012 to 2013.
  • India’s 15 million independent workforce is the world’s second largest, filling about 40% of the world’s freelance jobs, and their ranks continue to grow.

The so-called sharing economy has many renting out their spare capacities — whether that’s themselves, their homes, cars or whatever else they have. We even volunteer our time, ideas and intellect for free on social media platforms, oblivious to how algorithms are learning about us from what we share to create value for the digital oligarchs.

Of the two trend-setting countries? Zero-hours contracts prevail in many parts of the UK economy as it grapples with Brexit while the US is regressing into a third world country. Check this out.

With better, faster, cheaper as their mantra, what profit-maximizing businesses will want to keep shelling out money to humans they no longer need to employ?

As the cost of living shots up and money scarcity addicts you to surviving only for yourself (and your loved ones), we are now being lured to DIY (with our time, efforts and money) a very different reality from what we know today. This latest transition may even standardize what it means to be a sustainable human.

Because as we continue to think and live ‘I win, you lose,’ wouldn’t our individual data all be aggregated and turned into Big Data — the future of money — for absolute control?

Why? Because the Business-as-usual function of extracting our value based on ‘I win, you lose’ to maximize profits has not changed one iota. Based on artificial Scarcity, wouldn’t the new digital tools simply accelerate the extraction of the rest of our value from cradle to grave?

Do these social movements have the answer?

To explore, get your copy of Social movements powering the future of money, the first of two or three books to try to explain why we need a paradigm shift from artificial Scarcity to True Abundance.

Our future depends on you!!

About twenty or so years ago, Prince perhaps said it best: “Don’t be fooled by the Internet.”

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Self-Regulation and Regulatory Intermediation in the Platform Economy https://blog.p2pfoundation.net/self-regulation-and-regulatory-intermediation-in-the-platform-economy/2019/03/15 https://blog.p2pfoundation.net/self-regulation-and-regulatory-intermediation-in-the-platform-economy/2019/03/15#respond Fri, 15 Mar 2019 10:00:00 +0000 https://blog.p2pfoundation.net/?p=74715 Republished excerpt from SSRN.com Forthcoming in: Marta Cantero Gamito & Hans-Wolfgang Micklitz (eds.) The Role of the EU in Transnational Legal Ordering: Standards, Contracts and Codes, Edward Elgar 2019 Christoph Busch University of Osnabrück – European Legal Studies Institute Abstract Digital platforms are not only market intermediaries between different groups of platform users. They are... Continue reading

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Republished excerpt from SSRN.com

Forthcoming in: Marta Cantero Gamito & Hans-Wolfgang Micklitz (eds.) The Role of the EU in Transnational Legal Ordering: Standards, Contracts and Codes, Edward Elgar 2019

Christoph Busch

University of Osnabrück – European Legal Studies Institute

Abstract

Digital platforms are not only market intermediaries between different groups of platform users. They are also providers of governance mechanisms that are essential for the functioning of digital markets. Moreover, public regulators are increasingly relying on platforms as regulatory intermediaries, drawing on their superior operational capacities, data pools and direct access to platform users. A future EU regulatory policy for the platform economy should consider these multiple roles of digital platforms. Considering the rapid pace of technological innovation and the variety of different business models, the regulatory framework should be flexible enough to adapt to technological and economic developments. The chapter suggests a combination of principles-based legislation and ‘techno-legal standards’ elaborated by European standard-setting organisations involving all relevant stakeholders. A model for co-regulation could be the ‘New Approach’, which has been tried and tested over many years in the field of product safety and which could be transferred to platform regulation.

Read more and download the paper at SSRN.com


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Podcast of the Day: The White Paper by Satoshi Nakamoto – Jaya Klara Brekke, Ben Vickers and Paul Mason in conversation https://blog.p2pfoundation.net/podcast-of-the-day-the-white-paper-by-satoshi-nakamoto-jaya-klara-brekke-ben-vickers-and-paul-mason-in-conversation/2019/03/15 https://blog.p2pfoundation.net/podcast-of-the-day-the-white-paper-by-satoshi-nakamoto-jaya-klara-brekke-ben-vickers-and-paul-mason-in-conversation/2019/03/15#respond Fri, 15 Mar 2019 09:00:00 +0000 https://blog.p2pfoundation.net/?p=74707 Republished from Soundcloud.com In the wake of the 2008 financial crisis, the mysterious Satoshi Nakamoto published a revolutionary white paper that described a simple peer-to-peer electronic cash system that would later become Bitcoin. In the decade since the launch of the digital currency, the nascent blockchain technology behind Bitcoin has been heralded as having the... Continue reading

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Republished from Soundcloud.com

In the wake of the 2008 financial crisis, the mysterious Satoshi Nakamoto published a revolutionary white paper that described a simple peer-to-peer electronic cash system that would later become Bitcoin. In the decade since the launch of the digital currency, the nascent blockchain technology behind Bitcoin has been heralded as having the same radical potential as the printing press or the Internet, in particular presenting extraordinary challenges to traditional banking. Yet the paper contains no reference to existing political ideas, monetary or economic knowledge. Why?

THE WHITE PAPER, with an introduction by James Bridle, situates Bitcoin within an obscure historical movement of decentralisation, powered by the ideologies of encryption, showing how blockchain is part of a wider project to redraw the maps of political possibility. Crypto-economist Jaya Klara Brekke’s guide analyses Nakamoto’s canonical text as the Rosetta Stone that reveals the far-reaching implications of decentralisation.

In this discussion held at Foyles on 4 February 2019, Jaya sits down with Ben Vickers and Paul Mason to discuss how Nakamoto’s White Paper can serve as a compass for the rapidly shifting terrain of contemporary techno-politics.

Visit Ignota Books for more information about THE WHITE PAPER.


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https://blog.p2pfoundation.net/podcast-of-the-day-the-white-paper-by-satoshi-nakamoto-jaya-klara-brekke-ben-vickers-and-paul-mason-in-conversation/2019/03/15/feed 0 74707
The Latent, Unused Power of Citizens and the Production of Public Collateral https://blog.p2pfoundation.net/the-latent-unused-power-of-citizens-and-the-production-of-public-collateral/2019/03/14 https://blog.p2pfoundation.net/the-latent-unused-power-of-citizens-and-the-production-of-public-collateral/2019/03/14#respond Thu, 14 Mar 2019 09:00:00 +0000 https://blog.p2pfoundation.net/?p=74693 This post by Ann Pettifor is reposted from TNI, as part of their Longreads series, State of Power 2019. It was just a montage of words uttered over a video in the summer of 2018. Soon the words went viral. They helped unseat a Wall St-friendly Democrat – one primed to be the next Congressional... Continue reading

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This post by Ann Pettifor is reposted from TNI, as part of their Longreads series, State of Power 2019.

It was just a montage of words uttered over a video in the summer of 2018. Soon the words went viral. They helped unseat a Wall St-friendly Democrat – one primed to be the next Congressional leader. They were uttered by Alexandria Ocasio-Cortez.

This race is about people vs money. We’ve got people. They’ve got money. A New York for the many is possible. It doesn’t take a hundred years to do this. It takes political courage.

She was right. It did not take a hundred years. All it took was one summer, political courage, a big idea – The Green New Deal – and hard graft. A Green New Deal would subordinate the financial system to the interests of society and the ecosystem, and help transform the economy away from its addiction to fossil fuels, she argued.

The big idea, her hard work and courage were all that was needed to harness latent power: the power of the people of the Bronx.

Her story will underpin the theme that follows. Citizens’ latent and untapped power in countries with sound taxation systems to hold financial elites to account – and implement a Green New Deal. It can be used to transform the balance of power between the people and the private finance sector. It is power that lies in abeyance, repressed by the dominant moneyed class. But suppressed also by the narrow, myopic view that we, and our politicians, have of the potential economic power of citizens.

Video explainer on the Green New Deal

To harness citizens’ power, it is important to understand that taxpayers have agency over global financial markets. Around the world, taxpayers subsidise, embolden and enrich centres of financial power like those of Wall St and the City of London.

The bank bailouts after the Great Financial Crisis demonstrated that citizens and their publicly financed institutions have the power to protect capitalism’s rentiers from the discipline of the ‘free market’. Thanks to the backing and firepower provided by millions of honest, taxpaying citizens, central banks deployed immense financial power and bailed out the globalised banking system – stemming a cascade of debt deleveraging that could have contracted the money supply, credit, and economic activity and deepened the crisis.

Thanks to taxpayers, central bankers prevented another Great Depression. It was a great power deployed in the name of citizens, but without their authority – or even their knowledge.

To grasp and deploy this financial power in the interests of society and the ecosystem, citizens need to understand that this was and is ultimately our power. It is latent power, not used by citizens to defend the public interest, but by technocrats to defend the interests of private wealth.

To grasp and deploy this financial power in the interests of society and the ecosystem, citizens need to understand that this was and is ultimately our power. It is latent power, not used by citizens to defend the public interest, but by technocrats to defend the interests of private wealth.

Money and debt

The reason for our political impotence can be found in the fog and mystery surrounding the creation of money and the operation of the monetary system. Thanks to the economics profession’s neglect of money, debt and banking, there is a great deal of misunderstanding and confusion about money and the financial system.

Arguments rage about whether money is just ‘created out of thin air’ – or whether gold or bitcoin are real money. Whether bankers and/or governments can just ‘print’ money ad infinitum. Or whether there are limits to the printing of money. The ignorance and confusion is probably no accident. It helps protect the private finance sector from scrutiny: ‘all the better to fleece you with’ to quote the wolf in the fairy tale.

Sensible people (including the Bank of England) agree that money, as Joseph Schumpeter explained, is nothing more than a promise to pay, as in, ‘I promise to pay the bearer’. As such, money is a social construct, based on trust or promises to pay and upheld by the law.

When someone applies for a loan from a bank, the money is not in the bank. Instead, licensed commercial banks ‘create’ money every time a borrower promises to pay. They make the loan by entering numbers into a computer, and (digitally) depositing funds into a borrower’s account. The borrower promises to pay back the money created by the banker. As guarantee the borrower offers collateral, signs a contract, and agrees to pay interest on the loan.

For that trust to be upheld, the institutions that create money (licensed commercial banks) are supported and regulated by a publicly backed central bank issuing the currency. Regulation ensures that trust between banker and borrower is enforced.

Private bankers can only create new money and operate effectively as part of the monetary system, which includes a central bank. While commercial bankers can digitally create new money at the bidding of a borrower, they cannot print currency or mint coins. Only the central bank can do that. The central bank’s great power is to issue the currency – sterling or the dollar or the rupee –in which new money is created. And to help determine the value of the currency.

That power can be exercised by central banks only because of the collateral backing the currency they create. That collateral is made up of citizens’ tax revenues. The more taxpayers that back the currency, the sounder the tax-collection system, the greater the value of the currency.

This process is illuminated if we compare the collateral that backs up the US Federal Reserve with that of Malawi. The central bank of Malawi, like the Federal Reserve, issues a currency. But Malawi has far fewer taxpayers than the US.

Malawi’s currency has less value globally because it lacks the substantial taxpayer collateral that  industrialised countries can mobilise behind their currencies. Photo credit: Ahandrich [CC0, Wikimedia Commons]

Thanks largely to colonialism and to IMF policies, Malawi also lacks important public institutions: an independent central bank; a sound tax-collection system; a system for enforcing contracts or promises to pay (criminal justice); and a well-regulated accounting system for assessing assets and liabilities. Consequently, Malawi’s currency – the kwacha – has little value compared to the dollar.

Even worse, due to the absence or weakness of public institutions, Malawi is reliant on other people’s money – obtained via other monetary systems. Access to foreign monetary systems mostly takes the form of loans in dollars, sterling or yen – that are heavily conditional. While some of the money may benefit the Malawian people, the cost of repayment to foreign financial institutions invariably takes its toll on the nation’s financial resources, its human and ecological assets.

It is the lack of monetary autonomy provided by sound public institutions, including a tax-collection system, that renders citizens in countries like Malawi relatively powerless, and vulnerable to predatory foreign lenders.

It is the lack of monetary autonomy provided by sound public institutions, including a tax-collection system, that renders citizens in countries like Malawi relatively powerless, and vulnerable to predatory foreign lenders. It also explains how and why poor countries remain dependent and subordinate to rich countries.

Regrettably the IMF and World Bank actively discourage low-income countries from investing in the vital public institutions essential to a sound monetary system – one that would restore their financial and economic autonomy.

Citizens in countries with sound monetary institutions and a tax-collection system enjoy considerable potential power and agency over the globalised financial system.

Taxpayers – not banks – underpin the financial system

Understanding how taxes prop up the value of a nation’s currency for private financiers is a first step in understanding citizens’ potential power. The world’s mobile financial speculators and rentiers prefer to deal in currencies underpinned by stable public institutions, financed and backed by millions of taxpayers. While of course there is trading in many emerging market currencies, speculators prefer to hold sterling, dollars, euros and yen. These currencies are backed by strong economies. But their value is ultimately derived from citizens – willing, honest, law-abiding taxpayers – who provide the revenues that underpin the currency.

Taxpayers do not just pay direct and indirect taxes every day, month or year. Because new taxpayers are born every day, citizens will pay taxes for decades into the future. If our publicly financed state institutions remain stable, tomorrow’s new-borns will go on paying taxes into the future.

To understand the duration of taxpayer power, it helps to look back at the history of the British financial system. Back in 1748 the British government issued perpetual bonds, which were debts with no maturity date for repayment, but which paid interest to lenders at 3 per cent each year. The government had no difficulty selling these bonds (known as ‘consols’) to the public. Public confidence – that the British government would fulfil its obligations to pay interest on the loans in perpetuity – was high. That confidence was justified, as interest was paid on the bonds each year until finally they were redeemed in 2015.

No other asset has that kind of long-term, safe backing.

Ambitious and manipulative Becky Sharp in Thackeray’s classic nineteenth-century UK satirical novel Vanity Fair wished that she could

‘exchange my position in society and all my relations for a snug sum in the Three Per Cent Consols…for so it was [wrote Thackeray] that Becky felt the Vanity of human affairs, and it was in those securities that she would have liked to cast anchor.’

Becky’s envy derived from the security granted to those with funds enough to invest in the British government’s debt – known then, and for several centuries, as Three Per Cent Consols (shorthand for Consolidated debt). On an inheritance of £10,000 wealthy young women of the nineteenth century could live on the tidy sum of £300 a year; £25,000 would generate a comfortable £750 a year.

Illustration in William Makepeace Thackeray’s Vanity Fair from 1848  [Wikimedia Commons]

Public debt is an asset that earns income – just as a buy-to-let property earns rent for its owner. But while a buy-to-let investor has to sweat to maintain, advertise and rent out the asset, debt earns income effortlessly for the wealthy and for financiers. It does so by paying interest added at a certain percentage per year.

Unlike an investor’s property, debt is light as air, intangible, invisible. The only evidence of its existence is found in database entries, numbers on a balance sheet or in words on a ‘bearer bond’.

The differences do not end there. A building or property is subject to the laws of physics. It can age, crumble, or be razed to the ground. Football clubs are great assets – because fans are committed long-term, and willingly and regularly pay ‘rents’ to the owner of the asset, for the privilege of watching their team, or by buying a club T-shirt. But clubs can lose value by falling down league tables. Works of art – say a Rembrandt painting – are assets with greater longevity, but are also likely to deteriorate, and in any case, are subject to the whims of fashion.

Not so the government bonds of countries like Britain. While sovereign debts can be defaulted on, safe government debts do not rot with age, as Professor Frederick Soddy (1877–1956) once explained. That is because debts are not subject to the laws of thermodynamics, but to the laws of mathematics. As such, debt effortlessly earns income for investors, at mathematical rates. And if the debt is the safe public debt of nations like Britain, the US or Japan, it can do so for a long, fixed period of time.

The British government has since 1694 honoured its debt obligations without fail. In a world of globalised capital flows in which capital sloshes from one part of the world to another, the price of UK government bonds may rise and fall, but their safety and longevity is never in question. That is because the system is managed by public authority, not left to ‘the invisible hand’ – but mainly because most British citizens regularly and faithfully pay taxes.

It’s the collateral stupid

And to understand why safety is such a big issue for the private finance sector, remember this: the global financial system froze in August 2007 and then collapsed. Not because financiers ran out of money. Not because of a run on the banks. But because everyone in the sector – everyone – lost confidence in the value of assets used as collateral, particularly the value of sub-prime property mortgages on bank balance sheets.

Why did that matter? Because the value of sub-prime assets (mortgages) had been used to leverage inordinate amounts of additional finance through borrowing. If the asset or collateral against which the borrowing had been leveraged was worthless – then the leveraged debt was unlikely to be repaid from the sale of the promised sub-prime collateral.

The collapse of confidence in asset values (or collateral) led to the collapse of the globalised financial system.

And that is where we, citizen taxpayers, came in. Citizen collateral, in the form of tax revenues, did not collapse in value in the crisis. Instead public collateral maintained the authority of central banks, and gave them the power to issue new central bank money (liquidity) in exchange for assets from private bankers. The process was called Quantitative Easing (QE).

The backing of taxpayers enabled central bankers to bail out Wall St and the City of London. The safety and soundness of our taxes upheld the value of currencies, despite the crisis. This was most evident in the US. Even as the global economy tanked, and financial turmoil soared, the value of the dollar rose.

Central banks used the collateral power provided by citizens to leverage vast amounts of central bank money – about $16 trillion – to bail out the global banking system.

Public debt as a gift to financiers and rentiers

To fully understand the power wielded by central bankers, it is important to understand that each time the government applies for a loan, or issues a bond, it creates a debt – or liability – for the government. At the same time, by borrowing, the government creates a valuable financial asset for the private sector.

Governments regularly (once or twice a month) invite pension funds, insurance companies and other private financiers to finance their bonds or loans, in exchange for promises to pay interest annually, and to repay the principal in full at the end of the term of the loan (bond).

This process is in effect no different from a woman seeking a mortgage. She invites a banker to accept her ‘bond’ or promise to repay in exchange for new finance, backs this up with collateral, and commits to pay interest annually and the principal in full at the end of the loan’s term.

Once the commercial banker has issued the finance and accepted the bond, the woman has a liability – to repay the bond. The banker on the other hand, has an ‘asset’ – the woman’s bond or mortgage. It is valuable to the private bank because unlike gold the loan generates income for every year that the woman pays interest. It is probably backed by the collateral of her existing apartment. Plus, the principal on her loan will probably be worth more in real terms when it is finally repaid.

Governments raise finance from both the private finance sector, or from a central bank, in just the same way as an ordinary borrower raises money from a commercial bank. The government promises to pay interest, and offers collateral. The difference between a government’s bond and the woman’s mortgage is that a bond issued by a government with a good record of repayment is a more valuable asset. As such it serves as vital collateral (or ‘plumbing’) for the private financial system.

The woman’s mortgage is also an asset, but will be less valuable because she may not have established a good credit record, and may be backed by just one income (her own). The government by contrast, is backed by a revenue stream from millions of taxpayers.

That explains why government bonds (or government debt) are extremely valuable assets for the private finance sector. They are safe and reliable. They generate income (interest payments) on a regular basis. Debt as a security or asset can be used to borrow (or ‘leverage’) additional finance.

Just as the ownership of a property enables a homeowner to re-mortgage and raise additional sums secured against that property, so safe, valuable financial assets act as collateral for the raising of additional finance. Newly borrowed money, guaranteed against either the original debt/collateral, or against the stream of interest payments derived from the debt, can then be invested, or lent on at a higher rate of return.

At the time of its bankruptcy Lehman Brothers was said to have a leverage ratio of 44. That’s like having an asset that earns £10,000 a year, and then taking out a £440,000 loan secured against it, to go on a gambling spree

To understand leverage, think of a homeowner who borrows £80,000 against a property worth £100,000 with just £20,000 in equity or capital. She has a leverage ratio of four. In other words, she has borrowed four times the equity/capital in her asset.

At the time of its bankruptcy Lehman Brothers was said to have a leverage ratio of 44. That’s like having an asset that earns £10,000 a year, and then taking out a £440,000 loan secured against it, to go on a gambling spree. According to the Bank for International Settlements, Wall St’s investment banks started with a leverage ratio of 22 in 1990, which rose to ‘the dizzy height of 48 at the peak’.

Leverage on that scale is most easily achieved against collateral that is as safe as public debt. The scale of wealth generated would be unimaginable to a present-day Croesus.

Shadow banking and the collateral factory

There is another aspect to safe, public collateral not widely understood. That is how it is used in the shadow banking system – the private financial system that operates in the financial ‘stratosphere’, beyond the reach of states and regulatory democracy.

Non-regulated bank-like entities that have scooped up the world’s savings (e.g. asset management funds, pension funds, insurance companies) hold vast quantities of cash. BlackRock for example, has $6 trillion in assets.

These sums cannot safely be deposited in a traditional bank, where only a limited amount is guaranteed by governments. So to protect the value of the cash, the asset management fund will, for example, make a temporary loan of cash to another in need of it, in exchange for, or guaranteed by, collateral. This exchange is known as a repo – or repurchase arrangement.

As Daniela Gabor has argued, the US and European repo markets, the largest in the world, are built on government debt. In other words, ‘the state has become a collateral factory for shadow banking’.

The risks of this unregulated market for the global financial system, are scary. One reason is that while someone operating in the real world, say a homeowner, may only once be able to re-mortgage her asset or property, unregulated shadow bankers can use a single unit of collateral to re-leverage a number of times. Manmohan Singh of the IMF has estimated that by late 2007 collateral ‘churned,’ or was used roughly three times to leverage additional borrowing in speculative markets.

That’s like using the value of a single asset – one’s property – to guarantee additional borrowing from three different banks. In the real world of financial regulation, homeowners are not allowed to do this.

If we are to understand the history of how the rich have become immensely, grotesquely richer on unearned income, while earned income has fallen in real terms, leverage ratios against public assets in the both the real and shadow banking sectors explain a great deal.

In short, the ability to regularly drain a government of interest payments, and to use the asset of public debt to leverage additional finance, is why asset management firms, private equity corporations, insurance companies, pension funds and financial speculators have massively increased their capital gains. It is also why secure government debt is in such demand. Private financiers can’t get enough safe government bonds – or public debt.

The shortage of public debt and the rise of austerity economics

The Great Financial Crisis (GFC) triggered a flight away from private debt and to the safety of public debt – especially the safest – British, European and US debt.

This huge financial shock of the GFC led to a massive contraction of the global money supply, and threatened deflation – a generalised fall in prices – which would in turn lead to bankruptcies, unemployment and wage cuts.

To counteract that threat, central banks – on our behalf – expanded their balance sheets and, in exchange for collateral (much of which was dodgy or ‘toxic’), provided extraordinary levels of new credit or liquidity to the private financial system. In the process, civil servant technocrats in central banks protected free-market players from bankruptcy and the discipline of the free market – dealing a considerable blow to the ideology.

The deflation shock cried out for a massive fiscal response. There was an initial, but limited fiscal expansion, which led to what Credit Suisse called a ‘flood of safe collateral that caused public shadow money (Treasuries, mortgage-backed securities, US government agencies) to soar, fully offsetting the contraction in private shadow money (corporate bonds, asset-backed securities, and non-agency mortgages)’.

As a result of the panicky demand for public debt, the price of government bonds rose, and because of the way the bond market operates, the yield (‘interest rate’) on bonds fell dramatically. Demand for public debt, greatly eased government borrowing (interest) costs.

Pretty soon though, politicians and officials in government treasuries, cheered on by orthodox economists, right-wing think tanks and the media, soon fell back on neoliberal or ordoliberal theory, and imposed fiscal contraction – or austerity. Public investment – government spending – was either slashed or prevented from rising.

These double standards –the expansion of finance for the private finance sector, and contraction for the public sector – are intrinsic to orthodox economics, but seldom challenged by the economics profession.

These double standards –the expansion of finance for the private finance sector, and contraction for the public sector – are intrinsic to orthodox economics, but seldom challenged by the economics profession.

As a result the production of government collateral (public debt) fell.

Austerity and the simultaneous wage freezes and cuts at first worsened the crisis. Since 2010, austerity has both prolonged the crisis, and held back recovery in the US and Europe. The effect of this backward economic policy was to increase insecure, low-paid, low-skilled and unproductive employment, while lowering wages across the board.


Austerity isn’t working poster. Credit: Flickr/Wandererwandering/CC BY 2.0

In the US, while the initial Obama-led stimulus stabilised the economy, it was insufficient to restore long-term stability. Instead there were severe state and local government spending cuts, households were left to retrench after the sub-prime trauma, and wages fell in real terms. Between 2009 and 2014, inflation-adjusted wages in the US were flat or falling across a range of available wage measures. More recently, real wages grew, but growth rates for recovery as a whole still trail far behind the 2.0–2.2 per cent annual rates from 1947 to1979.

As a result of austerity, the issuance of safe government debt contracted. Why should this matter? Because the low supply of government debt tends to boost (in fact, crowds in) the creation of unsafe private debt, or assets. These unsafe private assets are used instead by the banking and shadow banking system to expand borrowing and credit. Central banks rightly worry that such credit expansion on unregulated, dodgy assets will probably lead to another financial crisis.

Viewing public debt through the wrong end of a telescope

Understanding the value of public debt changes our view of it. Like a loan undertaken for a project that will create employment and generate income, public debt, if invested in productive activity, is a good thing. It generates income. Not just salaries and wages for those employed; not just profits for the private sector when salaries are spent on their goods and services; but also tax revenues. Income, corporation and consumer tax revenues, then used by government to repay the debt.

Public borrowing and spending are especially important after a crisis, when the private sector is weak, and lacks the confidence to borrow, invest and spend. Yet most Chicago-school economists view public debt as a threat to the economy. Governments that cannot ‘balance the books’ are regarded as incompetent and hounded by the media.

Hostility to public debt varies, but fear is embedded in the German psyche, because the word for debt – ‘Schuld’ – is the same as the word for ‘guilt’. Saint Matthew’s ‘forgive us our debts as we forgive our debtors’ was interpreted by Saint Luke as ‘forgive us our sins as we forgive those that sin against us’.

Until we fully grasp the importance of public debt to the finance sector, immensely wealthy, globalised corporations will continue to parasitically extract rent from public assets; inequality worldwide will continue to widen; and we, the many, will become relatively poorer and powerless.

Guilt, sin and the public debt are deeply intertwined, but only in the minds of economists, journalists and the public. Debt becomes something quite different in the minds of financiers and rentiers. To Wall St. and the City of London, the safe public debt of Britain, Europe and the US is a truly awesome and even phenomenal gift.

They cannot get enough of it.

Until we fully grasp the importance of public debt to the finance sector, immensely wealthy, globalised corporations will continue to parasitically extract rent from public assets; inequality worldwide will continue to widen; and we, the many, will become relatively poorer and powerless.

When enough of us do come to understand this latent power, we will discover that another world really is possible.

Social democrats and the financial system

At the heart of neoliberal ideology – ideas shared by those that economic historian Quinn Slobodian defines as ‘globalists’ – is the belief that the state must shrink as a share of the economy. Second, that private capital markets must remain ‘free’ to roam globally and without friction. In other words, globalised capital markets must have the ‘freedom’ to be detached from the world’s states, and from democratic regulation.

As explained above, the deep irony of the ideological obsession with self-regulating capital markets, austerity and the shrinking of the state is that private financial markets cannot function without the backing of governments, their taxpayers, and the safety of public debt.

The ‘timid mouse’ that is the private finance sector cannot operate without the protection of the ‘roaring lion’ that is the public sector, to quote Mariana Mazzucato.

Given that safe public assets are so fundamental to the stability of the private financial system, why would right-wing politicians and officials contract their supply? The answer can only be: ignorance, fed by ideology opposed to the collective role of the state.

But what of the left? The Great Financial Crisis was met with shock and disbelief on the left. While many progressive economists had focused on the domestic, tangible economy – the state, markets, labour and trade – they largely ignored the intangible economy, the globalised finance sector.

Social democratic parties turned a blind eye to a global, deregulated financial system that threatened systemic failure.

In the meantime, many had embraced ‘globalisation’ – the ability to travel widely and draw money in any part of the globe; the ease with which globalisation facilitated the import of exotic fruits and vegetables; cheap smartphones; and the gifts bestowed by technology on the globalised system. These were all met with enthusiasm by social democratic parties that turned a blind eye to a global, deregulated financial system that both facilitated these activities, but also threatened systemic failure.

As a result, the left had no coherent response to the collapse of globalised capital markets. Throughout the period of austerity, the left – both in the US and Europe – found itself on the back foot, defensive of social democratic governments that had built up debts as a result of the Great Financial Crisis. Social democratic governments endorsed both QE for bankers and austerity for the majority. This approach guaranteed their downfall, and even extinction. (The French Socialist Party no longer exists as a political force or organisation, and was obliged to sell off its own headquarters.)

These failures weakened the ability of the left to argue that at a time of catastrophic private economic failure, public investment in jobs was essential to restore social, political and economic stability. Instead taxpayer-backed subsidies and assets were deployed by central banks via QE to protect private profits and capital gains.

No wonder the public revolted.

What is to be done?

A first in the many steps that must be taken to transform the economy is understanding. People cannot act to transform what they do not understand.

Understanding how taxpayers guarantee and endorse the activities of the globalised, deregulated private financial sector, must be more widespread. Only then can we begin to demand ‘terms and conditions’ for public subsidies and guarantees – and to use that power to regulate and subordinate the globalised financial sector to the interests of society as a whole. To demand that public financial assets be used for public, not private benefit.

This understanding is fundamental if we are to respond to the greatest security threat facing humanity: climate breakdown.

Armed with understanding, we will then need a plan. The Green New Deal is such a plan.

The Green New Deal

The genius of Alexandria Ocasio Cortez’s Green New Deal is that it provides a broad, comprehensive plan to transform the US economy and tackle climate breakdown. If the efforts of US Democrats led to an internationally coordinated campaign to implement it, the plan has the potential to transform many economies around the world, and to ensure a liveable planet in the future.

But – and it’s a big but – a comprehensive plan for economic transformation will require financing on a grand scale, comparable to that of a nation embarking on war. We know that can be done. Governments have always found money to finance wars.

Back in 1933, President Franklin D. Roosevelt’s plan – the New Deal – found money to fight a war against unemployment and poverty. His administration did so by overturning neoliberal economics, and implementing Keynesian monetary theory and policies. By ensuring that the monetary and financial system was managed by public, not private authority, his government raised the financing needed to lead the US out of the economic catastrophe of the Great Depression. Roosevelt’s New Deal not only created jobs and generated national income. It also tackled the ecological catastrophe that was The Dust Bowl.

WPA packhorse librarians, ready to deliver books and other materials to remote rural areas in Kentucky, 1938. Photo courtesy of the National Archives.

Implementation of the New Deal was achieved first, because the Roosevelt’s administration had a clear understanding of the nature of money, and of the publicly backed monetary system. But its success in tackling Wall St interests was down to political mobilisation, organisation and action. Roosevelt had the political courage and the political ballast to confront, and subordinate the interests of Wall St to those of society and the environment.

Any international movement for a Green New Deal will have to summon up the same political courage in countries around the world. Campaigners will have to mobilise, organise and act to renounce the economic ideology that allows the 1% to grow fantastically rich on taxpayer-backed subsidies, bailouts and guarantees – while denying financial resources for public investment, economic and ecological transformation.

Campaigners will have to discover, and then deploy, their latent power to subordinate global finance to the interests of society and the ecosystem.

ABOUT THE AUTHOR

Ann Pettifor is a political economist, author and public speaker on the global financial & economic system, on money, monetary policy, and on the UK economy. Her latest book, The Production of Money (Verso 2017) explains the nature of money and the monetary system. She is one of the few economists to have predicted the 2008 economic crisis. During the late 1990s, she led a campaign, Jubilee 2000, which as part of an international movement resulted ultimately in the cancellation of approximately $100 billion of debt owed by the poorest countries. She is currently director of PRIME (Policy Research in Macroeconomics) a network of economists that promote Keynes’s monetary theory and policies, and that focus on the role of the finance sector in the economy.

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Community Wealth Building and the Preston Model: Call for Contributors. https://blog.p2pfoundation.net/community-wealth-building-and-the-preston-model-call-for-contributors/2019/03/14 https://blog.p2pfoundation.net/community-wealth-building-and-the-preston-model-call-for-contributors/2019/03/14#respond Thu, 14 Mar 2019 09:00:00 +0000 https://blog.p2pfoundation.net/?p=74690 CERG/RDLAC Silvertown Session 9th May 2019 Community Wealth Building, Albert Road, North Woolwich E16 2J This is a call for people interested in contributing to an economic, social and cultural development workshop happening in the Silvertown/North Woolwich area of the Docks on the evening of 9th May 2019. The workshop is part of a series... Continue reading

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CERG/RDLAC Silvertown Session

9th May 2019

Community Wealth Building,

Albert Road, North Woolwich E16 2J

This is a call for people interested in contributing to an economic, social and cultural development workshop happening in the Silvertown/North Woolwich area of the Docks on the evening of 9th May 2019.

The workshop is part of a series of funded events called The Silvertown Sessions organised in partnership by the Cultural Engine Research Group (CERG) and the Royal Docks Learning and Activity Centre (RDLAC).

The workshop will include people living and working in the community, local employers, traders and the local authority.

The main conceptual focus of this Silvertown Session is the notion of Community Wealth Building. We have a guest speaker, Dr Julian Manley from UCLAN. Julian will introduce what is commonly referred to as the Preston Model of Community Wealth Building.

The main aim is consult widely on the potential of this concept as applied to this particular area of the Docks.

The Silvertown Sessions are lively, engaging, relaxed and entirely free events with plenty of food and drink produced and supplied by the local community.

If you’re interested in attending please contact Tony Sampson (t.d.sampson[at]uel.ac.uk) and/or keep an eye on our blog for latest event updates.

Further reading:
Julian Manley explains the concept behind the Preston model, and how worker-owned co-operatives supported by major local players could help empower communities.
Could a grassroots development approach help address inequality?

Aditya Chakrabortty in the Guardian “In an era of brutal cuts, one ordinary place has the imagination to fight back.”

The Preston Model and the Eight Basic Principles of Community Wealth Building (P2P Foundation)

The Preston model: UK takes lessons in recovery from rust-belt Cleveland (Julian Manley in the Guardian).

Centre for Public Impact



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