Written by Hank Sohota. Originally posted on Good Audience on 28th January 2019.

A viable, sustainable and scalable P2P sociopolitical economy, which embraces digital and data sovereignty for all agents, is about to emerge. One in which, as a consequence, money and intermediaries — social, political and economic — will no longer play the central, and therefore controlling, role they play today.

Let us start where Bitcoin started

Whatever socially and politically legitimised ‘flavour’ of money operates within a given community, nation or civilisation, it fundamentally shapes the economic, social, and political potential — and therefore possibilities — within those domains.

The Problem with Money

Money — by its very nature a social construct, as it fundamentally relies on people’s confidence in it — has three defining core functions. These are:

1. a store of value (i.e. sufficiently stable in value — and particularly, in people’s confidence in it — over time), which enables it to be …
2. a medium of exchange (i.e. also sufficiently saleable across scales and space), all of which enables it to be …
3. a unit of account

However, in order for money to work at scale, standardisation is also required which, in reality, inevitably means centralisation. Unfortunately, this intrinsically undermines the hardness of money (i.e. it’s ‘uninflatability’*), and the level of confidence people can have in its core functions, because decision-making shifts into the hands of the few. One cannot have sound money without reliable and consistent long-term hardness, as well as confidence-maintaining monetary policy. Regrettably, the few — or in the bygone case of a monarchy, an individual — have a long history of abusing their fiduciary responsibilities on both counts.

So, in order to solve the ‘hardness of money’ and the ‘level of confidence’ problems, we need to solve the centralisation problem, which — applied more broadly — asks:

How do we coordinate, cooperate and collaborate across space and time, at scale, without the need for intermediaries, representatives, executives or organisation-owners?

Arguably, this articulates, for some, the holy grail of anarchy (which should not be assumed to be synonymous with lawlessness, chaos or disorder).

Limitations of Bitcoin and Ethereum

Bitcoin is an attempt at solving the ‘centralisation of hard money’ problem which in the bigger picture is a good place to start. However, it does this by using a distributed ledger of hashchain blocks (giving it immutability), hard coding hardness (giving it uninflatability), and constructing a single network-wide timeline through a decentralised but not fully distributed Proof of Work (PoW) consensus mechanism (giving it ‘uncensorability’*). This provides a form of ‘trustlessness’ by trusting the network rather than any individual entity or actor. Due to its significant practical and philosophical limitations, this approach provides only a partial and impractical solution because it is not distributed enough, not fast enough, not cost effective enough, and not scalable enough. Furthermore, it could push climate change too far in the wrong direction to be worth it, due to its electrical power consumption needs. Unless of course, conversely, it turns out to be a boon for renewable forms of generating electricity by increasing the financial incentives for it, perhaps even leading to green energy infrastructure which otherwise would not be funded. Nonetheless, these shortcomings will still apply even if all the near-to-medium term solutions work out as proposed. Even so, the four key features of Bitcoin*, in its current form, namely, immutability, uninflatability, uncensorability and unconfiscatability, are an historic achievement.

Ethereum, although not necessarily trying to solve the same problem — and not necessarily doing a good job of it — is fundamentally based on the same underlying ledger technology as Bitcoin and so suffers from the same or similar limitations, even before we include its ‘centralisation of power’ issues, its shortcomings as a cryptocurrency relative to Bitcoin, the complications and disadvantages of smart contracts, and its attempt to move to a Proof of Stake (PoS) consensus mechanism*. What Ethereum has done is enable the launching of several thousand Altcoins, none of which seem to make much sense, and nor do their fundamentals give one confidence that they will ever achieve their stated goals. Given that this has taken place in a new asset class and an unregulated market, no one should be surprised by the emergence of a FOMO-FUD wild west, or the role played in it by market makers.

Mutual Self-sovereignty — the foundational core construct of a fair and just sociopolitical economy

In my view, economics should have a strong focus on thrivability in human social systems — viable, sustainable and inclusive thrivability, at scale.

Although I over-simplify, I believe that at the heart of thrivability lies a dialectic in human social systems, that of group solidarity vs. individual sovereignty (cf. the political philosophy divide of left vs. right). Both aspects of this dialectic provide tremendous benefits for the group and the individual, namely, social cohesion leading to better survival odds, but this comes at a price, namely, acquiescence, conformity and homogeneity.

However, I would suggest that solidarity and sovereignty are two sides of the same coin – they mutually and dynamically ‘co-form’ and ‘in-form’ each other, and so co-evolve symbiotically. They constitute a ‘dialectical singularity’ which is brought into ‘harmony’ through mutual self-sovereignty (cf. Yin-Yang; i.e. black and white dynamically interacting with each other at the same time, without either diminishing in identity or the two combining to become a ‘middle’ grey). In this dynamic, both social cohesion and individual sovereignty are both ‘strong and fluid’, at the same time — a concept often referenced in Daoist philosophy using the metaphor of water. I believe it is this perpetual dynamic which leads to the anti-fragility of a human social system. I further believe, it leads to the perpetual emergence of one’s sense of self and one’s sense of identity.

The mutual self-sovereignty challenge

Even solving the centralisation problem — of hard money or more broadly — would not be enough. We need to go further and address ‘the mutual self-sovereignty’ challenge, which can be thought of as:

Not only do I need a viable option of not having to participate in any particular socially mediated ‘game’ played by a particular set of rules, I also need to be able to, easily and permissionlessly, change the rules of the game (i.e. create a forked version — preferably not a sh*tty/scammy one) and invite others to play, or — just as easily and permissionlessly — be able to invent an entirely new game.

Furthermore, and equally importantly, in all such games the rules (i.e voluntary and mutually enabling constraints) must be enforceable and policed in an emergent and self-organising manner by the participants — governance of the people, by the people, for the people — and the rules must respect relativity (i.e. multiple relativistic timelines) — global consensus should not be necessary. Otherwise, we inexorably end up back at the centralisation problem.

All of which means that Bitcoin and Ethereum — specifically their underpinning blockchain technology — are not going to take us where we need to go, in order to address our most pressing global and local challenges. This is because they are not sufficiently workable and do not go far enough although they will have been critical and essential catalysts. Even those who were initially inspired by the distributed ledger technology (DLT) of Bitcoin, as a means of addressing the challenges of enabling a radically new peer-to-peer (P2P) sociopolitical economy — which motivated some in the Bitcoin and Ethereum communities — are now having to recognise, and to concede, these limitations. Hence, the sense of malaise and disillusionment among the Ethereum and Ethereum-esque developers who are not in it for the money.

Holochain and the Post-monetary Economy

Holochain, on the other hand, will take us where we need to get to. It is the first technology, in human history, which genuinely addresses the mutual self-sovereignty challenge, completely and at any scale — in fact, it is inversely scalable, its efficiency and efficacy improve as network size increases — and as an integral component of the MetaCurrency and Ceptr projects, it also pre-dates both Ethereum and Bitcoin.

Holochain provides a bio-mimicry inspired, software-based, enabling social technology — a pattern, if you will — from which can emerge anarchy — life without mass intermediation as a necessity. Thus empowering us to move to a post-monetary epoch with, for example, a multitude of asset-backed mutual credit (crypto)currencies — which on Holochain are natively inter-operable — using a much broader definition of currency (i.e. a formal symbol system for shaping, enabling, and measuring flows — e.g. of value, promises or reputation). A much more enlightened interpretation of Hayekian thinking, I would suggest, than the neo-liberalism version.

A value flow, of any kind, must first be acknowledged and recognised before it can be managed for the better — making visible only GDP-related flows has been a disaster for humanity and the planet, if not potentially catastrophic. Then, and only then, can we begin the work of reinforcing or amplifying interrelated positive flows and mitigating — hopefully eliminating — interrelated negative flows, in an emergent and self-organising way. Thus we can form the basis on which more meaningful, and more humane, wealth and prosperity can be created for the many, perhaps even, for all.

Mass Disintermediation

Despite its long history, for most people, the economic and sociopolitical revolution Holochain will induce will seem like it happened overnight. This is because it is an open source software solution taking place in a digitalised world. It can be deployed at speed, at scale, and at zero marginal cost, using the full range of computational device types from a Raspberry Pi, to a smartphone, to a tablet, or a laptop — even a server — using software development languages and tools which produce secure, compact and fast web and native apps.

The first hApp (Holochain dApp) to be built — using Rust and WASM — is Holo, an hApp for hosting hApps which includes the first ever mutual credit cryptocurrency called Holo Fuel, to reimburse Holo hosts — who with Holo, host hApps using the spare computation and storage capacity on their own devices. This enables hApps to be accessed using a standard browser — such as Holochain favoured Mozilla’s Firefox — through the web, without any change in the user experience. However, even this hosting can be avoided, since any device running Holochain is natively both a user and a host. Holo’s purpose then is to provide a bridge between the current server-based web and the potential longer term server-less — because it is peer-to-peer — Holochain alternative. Ultimately, it should be possible to integrate mesh networkingtoo, which would mean a genuinely and fully distributed internet and web.

Furthermore, Holochain’s data integrity model supports mutual self-sovereignty by having an agent-centric orientation, using sourcechains (think, agent owned hashchains), digital signatures, and validatingdistributed hash tables (think, BitTorrent and GitHub), rather than a data-centric orientation. Thus fully returning value realisation and ownership, as well as privacy and confidentiality, to those actually creating the value locallyrather than intermediaries, representatives, executives or organisation-owners, seeking to extract and monetise it.

The Ultimate Question

Once workable, practical and ubiquitous, mutual self-sovereignty — as a movement — will redefine every dimension of our lives — social, political, economic, artistic and cultural. Most profoundly, it will completely change the nature of the stories we tell ourselves and each other in order to navigate our lives, both intra and inter generationally. In doing so, along with the societal implications of advanced, model-free, deep reinforcement learning AI — not to mention Ceptr and Ceptr-based AI — we will ultimately re-conceive and therefore redefine what we believe it truly means to be human — in the 21st century.

Disclosure: I am financially and philosophically invested in Ceptr/Holochain/Holo. I have never invested in Bitcoin, any alt-coin or crypto asset.

Photo by Freddie Collins on Unsplash

Thanks for reading.

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Further reading:

Ceptr/Holochain/Holo Whitepapers

Antonopoulos, M. (2016). The Internet of Money: A collection of talks by Andreas M. Antonopoulos: Volume 1. Merkle Bloom.

Antonopoulos, M. (2017). The Internet of Money Volume Two: A collection of talks by Andreas M. Antonopoulos. Merkle Bloom.

Ammous, S. (2018). The Bitcoin Standard: The Decentralized Alternative to Central Banking. John Wiley & Sons.

* Special thanks to Tone Vays and Murad Mahmudov for so freely sharing their intellectual musings with the public.

The post Beyond Bitcoin and Ethereum — a fairer and more just post-monetary sociopolitical economy appeared first on P2P Foundation.

This video was filmed at New Frontiers / Te Tūhura Nuku – November 2018 in Upper Hutt, New Zealand.

The post Alanna Irving on Tools for Value Sovereignty appeared first on P2P Foundation.

Over several sunny days in June 2018, a diverse group of 60 activists and researchers from 30 countries convened for a multi-day meeting to discuss the collective building of post-capitalist futures. The meeting provided the opportunity for a rich exchange of perspectives and experiences, as well as deep discussion and debate. The goal of the meeting was not to achieve consensus both an impossible and unnecessary endeavour but rather to stimulate mutual learning, challenge one another and advance analyses.

One session of the meeting – Transformative Cities – was held not as a closed discussion but as a public event attended by 300 people at which prominent activists and academics engaged with municipal leaders and politicians on the role cities can play in building post-capitalist futures.

In line with the meeting, this report does not intend to advance one line of analysis, but rather summarise some of the key ideas and issues discussed and debated (not necessarily in the order they were articulated). To summarise necessarily means to leave things out. It would be impossible to fully capture the incredible richness of the discussion that took place, but hopefully this report provides a valuable sketch.

The Age of Monsters Our Capitalist Authoritarian Present

Capitalism in chronic crisis

Any discussion of the post-capitalist future must begin with an analysis of the current economic, social and ecological context and the ‘monsters’ we now face. Most of the world is experiencing the brutal realities of extreme forms of capitalism. Inequality has surged to new heights, with an estimated $32 trillion stowed away in tax havens by wealthy corporations. Multinationals are taking over government and societal functions, aided by a trade and investment regime whose goal is to secure corporate power over judicial and legislative arenas and to increase profit thwarting the best plans of governments with the threat of expensive lawsuits. The goal is to privatise everything. Trump both disrupts but also reinforces this model putting in place the most extreme deregulation agenda while also advancing a nationalist agenda that seeks to replace the ideology of ‘free trade’ with ‘bullying trade.’ In this and other things, he may not be unique, but simply part of a new norm.

This year (2018) marks the tenth anniversary of the financial crisis, but we must recognise that the ‘financial crisis’ is not time-bound: capitalism is in a constant state of crisis. Of the most interconnected companies in the world, nearly all are financial. They are at once large and extremely vulnerable: when one collapses (as Lehman Brothers did), they could all collapse. Given that another financial crash is inevitable sooner or later, it’s critical that we are ready to explain it and show that crisis is a permanent part of the logic of capitalism. The dominant economic model continues to externalise environmental impacts. Climate change is now irreversible. We are in a new stage of capitalism and a new geological time, the Anthropocene characterised by repeated environmental crises. Capitalism is now undermining the earth’s natural systems, creating a scenario of chronic crisis. Yet the drive for profit is leading to ever more expropriation and environmental degradation, with the financialisation of nature representing the peak in the processes of enclosure. The ecological dimensions of capitalism may raise the question as to whether we have reached the limits of capital expansion.

The issue of population and mass migration has also risen in the political agenda within Western countries. In the 1970s, population was discussed largely in terms of hunger and changes in agricultural production. Now population is framed by populist right politicians in terms of the threat of mass migration from Africa and the Middle East to Europe, or from Central America to North America. Instead of blaming the capitalist system, and in the context of prevalent austerity policies, many politicians in Europe are blaming refugees for people’s precarious living conditions. Authoritarianism is on the rise in places like Italy, Hungary and Turkey with proto-fascist forces surging everywhere.

The ‘fourth industrial revolution’

Klaus Schwab of the World Economic Forums argues we are in the midst of the ‘fourth industrial revolution’ with rapid technological developments transforming the economy and society. Whether it is third or fourth revolution, rapid technological change has certainly created a new theatre of struggle: technology’s potential and its dangers depend on how it is used and who has access. Five giant companies have emerged (Apple, Google, Microsoft, Amazon and Facebook) that are now the most powerful corporations in terms of market capitalisation. Their US $3 trillion is equal to all the co-operatives in the world.

Tech companies have inserted themselves between the state and people by controlling technological infrastructure, the roads of the twenty-first century. For example, Facebook sought, albeit unsuccessfully, to provide free internet in India under the condition that the company become the internet platform for the country. Tech giants can be seen as a cartel that has seized the means of production, in which people and their communications are the product. The falsely labelled ‘sharing economy’ consists of companies like Airbnb and Uber which have created a new form of subordination and seized control not just of people’s labour, but also their capital people’s homes and cars.

This corporate model requires unprecedented knowledge of people’s behaviour and communications and therefore has helped constructed a new system of surveillance capitalism. It has also turned the neoliberal idea that information-based price signals make for an efficient economy on its head. The accumulation of huge amounts of micro-data about people is changing the nature of how the capitalist system works. Airlines charge people a different price based on information accumulated about them. Non-human agents are now buyers and sellers in markets, and algorithms are replacing humans.

Technology is increasingly touted as a means to ending poverty. Missing from this narrative are the structural causes of poverty and inequality and any critique of the market. For the Gates Foundation and U.S. tech firms in Africa, lack of access to the markets is the problem and technology development is the solution. They ignore the potential loss of jobs to new waves of automation the replacement of workers by robots and machines in sectors like logistics and banking. Or the ways that automation can exclude people, for example with the drive for a ‘cashless’ society providing major benefits to financial firms but making daily living ever more difficult for people on the economic margins. They also obscure some of the environmental costs of technology. For example, the expansion of blockchain technologies such as bitcoins that rely heavily on servers powered by coal.

Similarly, some corporations continue to push for large-scale technological manipulation of the Earth’s systems as a solution to climate change. There is a risk of an attempt at the UNFCCC in 2020 to end the geo-engineering1 moratorium established in 2010 by the United Nations Convention on Biological Diversity.

Inequality and war as the fundamental long-term reality in people’s lives

It is important to note that while certain trends have accelerated, the reality of dispossession and violence has long been a reality for much of the world. There is a danger of a western leftist nostalgia for a post-war European past that ignores that the social democracies of the West were made possible by imperial looting. The sale of neoliberal individualism as a solution was also only made possible by ongoing economic exploitation of labour in former colonies, post-Soviet countries and now in the West too. The story of Kenya in the last 40 years, for example, is not one of increased unemployment, but of a population that has never been employed millions of people who are excluded from the economy. Today’s neoliberalism has its roots in the liberalism of the Enlightenment, in which participation in the ‘sacred’ space was limited to white male slave- owners. In today’s context, that sacred space is reserved for the global elite – largely male and largely white. Any post-capitalist order dedicated to restorative justice will need to address and provide the reparations and restitution of this exploitative past and present.

Inequality is the fundamental reality for people’s lives across the globe. The Occupy movement succeeded in popularising the notion of the 99% and 1%. Even in the U.S., the wealthiest country in the world, 41 million people are living in poverty and another 140 million are just one pay check away from catastrophe. There is a significant population mostly people of colour who are permanently unemployed. For the 99% in America, as elsewhere, it is not possible to speak of a financial crisis that is ‘over’. As capitalist crises expand, War is emerging as the norm. In the United States, more than half of the discretionary budget goes to an increasingly automated military that makes use of robots and drones. As a consequence, fewer Americans are dying in combat, but there is no decrease in the number of people being killed by the U.S. military. Gaza serves as the new model for pacification and control. It is being used as a site to experiment with new military technology. The population has been deemed surplus: what happens to them doesn’t matter. Direct political resistance is met with violence. Anti-war mobilisation has tended to be separate from struggles for economic and environmental justice, but this is a false dichotomy. Social and ecological injustice is created by wars and fuels wars, with dispossession and exclusion facilitated by arms and security firms in the West and paramilitaries in the South.

Failures of the Left

As we think about post-capitalist alternatives, we have the imperative to analyse and learn from our own actions of social movements and political parties we have supported and allied with. Over the past century, there have been multiple examples of the left assuming political power Russia, China, South Africa, Latin America and failing to deliver or replicating systems of oppression. In Latin America, the ‘pink tide’ governments made important steps to reducing poverty but largely failed to structurally transform their economies and left office with social movements weaker rather than stronger. In Europe, the radical left is growing, but is divided and without clear answers on European integration or immigration. In Germany, for example, a huge internal debate is taking place inside Die Linke (the Left Party) over whether the party should focus more on the ‘German’ working class and less on the rights of refugees and LGBTs. Similar divisions were seen in the UK in the opposing positions on Brexit by the left. Meanwhile in Greece, the anti-austerity stance of the party Syriza was defeated by the Troika despite the overwhelming ‘No’ vote by its population in the referendum in 2015.

The Next System

Power and principles in a post-capitalist future

Around the world, people are creating models of a post-capitalist future and engaging in prefigurative experiments to hegemonic shifts. What principles, values and drivers need to be at the core of the ‘next system’? How do these diverse next system proposals redistribute and transform (or not) power among different types of actors: capital, the state, a ‘partner’ state, labour, citizens, communities, the market, the commons?

As part of its New Systems project, the U.S.-based Democracy Collaborative has developed a framework to look at this question based on an analysis of a wide variety of ‘new systems’ possibilities and proposals, mainly focused on the global North. (They draw on their own on-the- ground experimentation in Cleveland, where three locally-owned cooperatives, the Evergreen Cooperatives of Cleveland, have been incubated and supported by procurement from large, local ‘anchor’ institutions (hospitals and universities).

The framework identifies three theories of change that underpin the variety of new systems proposals. At the one end are social democracy and radical localism, which can be described as countervailing strategies of containment and regulation of the current system. In these proposals, power lies with capital and the corporatist state. Similarly, in proposals like Sweden Plus and Steady State Ecological Economics, power continues to lie with capital and the state, but substantial shifts are envisioned. This can be described as combining strategies of containment and regulation with some systemic elements.

At the other end of the spectrum is evolutionary reconstruction: new institutions can be built, scaled up and can ultimately displace the current system. This theory of change drives a variety of the new models emerging today, including worker-owned, localised economic democracy; commoning; and public and socialised economic democracy. For example, the UK city of Preston is now working to relocalise procurement based on the Cleveland model, which has been embraced as a positive model by the national Labour Party, inspiring it to set up a Community Wealth Building Unit to learn from and expand similar initiatives across the UK.

Cooperation Jackson in the US city Jackson, Mississippi focuses in particular on organising under- and unemployed members of Black and Latino communities and helping build worker-organised and worker-owned cooperatives. The group presents its vision of a new society in concrete, practical ways and works to share these with other municipalities.

However, it is important to note that not all solidarity economies are progressive in nature. There is already a strong tradition among the right in Hungary and other parts of Eastern Europe of organising solidarity economies of a distinctly fascist flavour. Hungary’s right-wing populist government is currently starting pension cooperatives to help ‘good Hungarians’. Solidarity economies certainly mutualise resources and values, but the question is for whom and at what scale.

Self-organisation and counterpower

A systemic crisis needs systemic alternatives. The goal of a new system must be broader than just replacing the capitalist system; it must also replace the anthropocentric system, the extractivist system, the racist system, and the patriarchal system. So what is a systemic alternative? The shift from dirty to clean energy, for example, is not in and of itself systemic. There must also be a shift in who controls and produces the energy. One measure of a systemic alternative is whether it empowers social movements and facilitates communities’ self-organisation. Another is whether it replaces extractive, exploitative means of production with regenerative ones that promote wellbeing globally.

The recent experiences and failures of the ‘pink tide’ in Latin America provide important lessons. Bolivia’s Movimiento al Socialismo (MAS) government is one of the few to have survived the electoral backlash (and without the violence and chaos now afflicting Venezuela and Nicaragua), but even so, it is notable that indigenous communities and social movements were much stronger in Bolivia before Evo Morales and MAS were elected to power.

In Bolivia, as in other pink tide countries, the left reduced poverty but did not move to systemic alternatives. Economic power largely remains with the same elites as before. People from the movements thought they had taken control of the state, but instead were captured by it. Their goal became re-election, and with that came an increasing reliance on clientelism.

This trajectory can be seen in relation to energy. To its credit, the Bolivian government semi- nationalised the energy industry increasing the taxes paid by transnational corporations and giving the state-owned energy company a much larger role. But the goal became creation of the largest state-owned energy company. Small communities were prohibited from producing solar energy to sell to the grid, and thereby denied their own source of income. Giving real power to the community would have meant accepting less profit. The Bolivian case shows that state power has its own logic. In other words, if we assume engagement with the state is necessary, it must be radically transformed. When social movements put people in government, it is crucial to maintain and build autonomous counterpower outside the state.

The recent experience in Catalonia raises different but also important questions. There, the government went beyond the law to do what nationalist movements were asking of it. Although the movement was extremely powerful, capable of organising general strikes and powerful actions, it did not have the police or the army. It could not match the naked force of the Spanish state. Many of Catalonia’s elected officials including its vice president and several ministers are now in prison. These two different cases Catalonia and Bolivia remind us, á la Foucault, about power and the differences between force and coercion: the first eliminates the agent, while the second eliminates agency.

Democratisation of money

Democratisation of money must be a key element in the next system. ‘Economic man’ – the classic economic conceptualisation of people as rational, self-interested agents – is disembodied from biological time and ecological time. The body and the environment are both externalised in its formal accounting, although they bear the costs of unsustainable economic activity. It is also a debt-based system that invariably ends in crisis.

The reality of money production is that banks are not lending money, they are creating new money, which means there will always be a shortage between how much they put in and how much they want out. States, too have created money – as we have witnessed through the vast influx of capital provided by quantitative easing programmes in which trillions of dollars have been injected into the financial sector, chiefly supporting banks rather than investing in public services, essential infrastructure and a just energy transition. Overall, public money has been hijacked by commercial banking and speculative investors.

The question of the state’s role in post-capitalist monetary systems is key. There are many models and much discussion and debate about the best target the state or the commercial banking system for transforming monetary systems. One possibility is the democratisation of public budgets in which democratised, public control would replace the state system. Budgets would be built based on public need and would include a longer cycle of budgeting and public consultation. Democratisation would go further than ‘participatory monitoring/budgeting’: communities would both set the amount of the budget and decide how it is allocated. A monetary policy committee would decide how much the private sector can absorb and help determine tax (retrieval) rates.

Public ownership and transition

The demand for democratic control is also at the heart of a growing wave of local initiatives globally looking to de-privatise and regain public control of energy, water and other public services. TNI’s research in Reclaiming Public Services showed that there have been at least 835 (re)municipalisations of public services around the world since 2000.

This does not mean a return to the former models of bureaucratic state (national or local) control. Rather in many cases communities are seeking to develop new models that engage and involve workers and citizens. The shape of this varies though based on the political and economic context. In Croatia, demands for democratisation of public services have been a strategic way of preventing privatisation and asserting better democratic control over public companies. Activists are therefore calling for better monitoring of spending, more regular meetings with citizens and an independent supervisory committee. In Greece, the context of austerity though has meant local authorities have become eviscerated in their capacity to renovate public services. Citizens have therefore focused on developing community-based systems of solidarity to provide education and healthcare for all that often bypass state structures.

Energy has been a particularly important focus for developing post-capitalist alternatives, given the central role energy plays in the capitalist economy and the urgent need to transform our energy systems to prevent worsening climate change. Energy democracy provides a framework to democratise part of the economy and shift power with a big “P” – transforming society by means of shifting power in the power sector. Activists from Mauritius, South-Africa, Bolivia and the US shared how they have used demands for energy democracy and sovereignty to challenge private energy oligopolies and pollution affecting low-income communities, to demand a rapid just transition away from fossil fuels to clean energy and to explain the necessity for a democratisation of the economy.

Campaigners in a coalition called Power Shift in Mauritius managed to stop a coal plant by means of a hunger strike and by uniting middle class citizens, social movements and unions. They have advanced in its place energy proposals that would be based on solar generation in the countryside, helping to build connections between urban activists and rural sugar-growers. This is leading to new resistances in other arenas, for example against private grabbing of public beaches.

In South Africa, engaging unions has been key. Renewable energy was reframed as a threat to coal and steel workers, but movements have been active supporting union calls for a socially-owned renewable system. This notion of a just transition is critical to not only fight climate change, but also ensuring that workers and the most affected people are at the heart of the next energy system, in order for it to be just and democratic.

An aggregation of next systems?

To what extent will the next system be an aggregation of next systems? In the U.S., the context of decentralised government and an advanced stage of capitalism means that there are places ripe for new strategies and alternatives and others that are not. Local, small-scale initiatives can provide a means to get past the immense power of adversaries. In some contexts, the state can play a positive role alongside of local ‘next systems’, if they understand their role as facilitating and supporting such endeavours. While in other contexts the state – and national legal frameworks – are one of the key obstacles to transformative local practices.

Can we re-imagine the role of the state in a way that facilitates community self-organisation? In a non-hierarchic peer to peer (P2P) state, for example, the act of commoning could become the defining principle of the state. The nation (civil society) is a collection of commoners. P2P can create the conditions to optimise the specific what (resource), who (community) and how (rules) of commoning. Linux and Wikipedia are good examples: they provide the infrastructure, but they do not control the community. The potential is an economy that can be generative towards people and nature, by for example, enabling local manufacturing based on global design, which makes production not only more ecologically viable, but also better suited to community needs.

Emancipatory Futures

What must be done to embed emancipation at the core of the Next System? The experiences of the feminist movement and feminist organising, thinking and theory, offer important guidance here. The left has often asked the feminist movement to postpone its emancipatory agenda to wait until socialism or communism is in place. But new structures often simply replicate systems of domination. The MAS movement in Bolivia, for example, was very patriarchal before it came to power. It should come as no surprise that it replicated this in the government. Movements are also adversely influenced by the systems in which they function, even when they seek to change them. This can be seen, for example, in the external – often donor – pressure to professionalise organisations, which can create a separation between employed staff and the people and communities they work with. In order to transform society, social movements themselves must be transformed.

A promising example is emerging in the U.S. right now. The Poor People’s Campaign is resurrecting the intersectional movement built by Martin Luther King a half century ago, linking systemic racism, poverty, militarism and climate change. The campaign, which targets state governments, started with local community meetings involving a wide range of impoverished communities from indigenous people to war veterans. Significantly, the movement did not emerge from left, but from the faith-based movement. Led by two preachers, it uses the language of morality, rather than electoral politics.

The goal need not and perhaps cannot be to ‘unify’ movements around a single issue. The feminist movement speaks in terms of cross-movement organising, an approach that acknowledges that tensions can exist within and across movements. Transformative cross-movement organising focuses on the creation of emancipatory spaces and then joining other spaces in solidarity and humanity. An example is the ‘feminisms’ social movement in Spain, which features a diversity of women with different approaches, shared leadership and the exploration of new ideas. On March 8th 2018 feminists succeeded in organising a massive general strike focused not only on highlighting gender inequalities, but also the need to curb consumerism. ‘We strike to change everything’ as the slogan went.

Breaking the boundaries of imagination

A key step is to recognise and break through systems that limit the imagination. The feminist movement has shown that there are other ways of imagining human relationships. A new vocabulary can be used and different types of knowledge black feminist thought or migrant women’s experiences, for example can be valorised, prioritised and transmitted in creative ways, such as art and storytelling. In the Association for Women’s Rights in Development’s (AWID) methodology used to imagine feminist futures, imagination is the reality. A fantastical feminist village is created to articulate emotional, social and systemic alternatives. A similar transformative, emancipatory process plays out in real eco-villages, where the act of commoning forces people to reconfigure and critique relationships with themselves, nature, and ‘economic man’. It is often difficult, sometimes psychologically traumatic work, even for those with radical politics and particularly for those who have been socialised in capitalist systems.

Liberating our imagination enables us to challenge the limiting notion that capitalism and the nation-state are the only logical, possible systems. This is relevant to the question of the state’s role in emancipation. People’s experiences and ideas about the state diverge widely. Class, locality, race, gender, history all shape these perspectives. For some, the state is always present and must therefore be engaged, albeit carefully and with recognition that it is contradictory territory. Yet for others, this does not resonate. The Soviet state, for example, doesn’t even exist anymore. In Georgia, there is no functioning state to speak of. Survival is entirely dependent on the family, but people would prefer a progressive state to have a role. Taking the nation-state for granted or assuming that it is natural is to limit the imagination.

And what of the state’s role in emancipation? In his history of Black Reconstruction in America, African-American intellectual W.E.B. Du Bois saw the state as a means, albeit limited, to open up space. He recognised that the state could not provide freedom, but that not being in chains was better than being in chains. Aside from post-1804 independent Haiti, in which former enslaved people took power, advanced a universalist vision, and inspired movements across the Southern hemisphere, there are precious few examples of the state being emancipatory. Insights from the women’s movement are useful in thinking about the state, power and emancipation. There is an important distinction to be made between power as domination (power over) and power to transform (power to). The former can be used to describe the state, with its power over resources and capital, which may provide distinctive levers of power. The latter expresses people’s own transformative capacity, the fact that the system depends on their contributions. In London, for example, social movements organised against proposed property development along the Thames in the mid-1980s. When the Labour Party gained control of the municipality, it used its power to stop the development and support movements to build an alternative. But the party didn’t create transformation; the social movements did. The distinction between power over and power to may provide a way to understand the ability of the state or political parties to facilitate (or not) transformation.

Radical movements of resistance and transformation

Agency, resistance and collective structures

Around the world, new forms of agency are emerging. Numerous intersectional political struggles are merging resistance with transformative processes. In Greece, for example, a grassroots, anti- racist solidarity movement emerged to both resist the Troika regime and to create new, collective, autonomous, solidarity structures to respond to people’s immediate needs. The movement goes well beyond a response to austerity in that it recognises crisis as a permanent new condition. People in the movement are reflecting on new institutions and new forms of politics. Self-organisation is a critical component of this as it connects the personal and the political. The movement is creating its own material structures of power and spaces where power is redefined. It is defending local spaces and promoting new practices of health, education and economy.

Some of these new structures, which pre-date the refugee crisis, were formed by the anti-racist movement to put migrant communities and Greek people on the same level to fight isolation, self-blame and embarrassment. The movement aims to create new and different social fabrics in communities, and involves diverse groups of people, including those without work, precarious workers, women, pensioners and migrants. It has revitalised living memories of Greek family networks, communal structures and solidarity structures that once existed. It is engaging and empowering people to create their collective solutions. The movement insists on a democratic approach, which means that the people in the community, not the activists, decide what issues they want to address.

Restoring political agency

Restoring agency is similarly critical to the movements in Croatia. After severe impoverishment and de-industrialisation in the 1990s, followed by the recent process of EU integration, people lost their sense of agency. EU elites treated Croatia as backward, in need of help and with neoliberal economics as its only salvation. But the left is now being re-born: a new generation of leftists have come of age who cannot be associated with the discredited former regime and are no longer constrained by the anti-communist discourse of Post-Socialist Europe. Diverse social movements ecological, cultural, student occupation, right to the city, refugee solidarity are engaged in joint efforts. A lot of work has been done to build the transactional capacity of civil society; the next step is building mobilisation capacity. In the Croatian context, people are very distrustful of politics. Despite scepticism about engaging in electoral politics, the movements recently organised a municipal platform to run the Zagreb local election, which succeeded in putting four people on Zagreb’s city council. The aim is not to become an electoral actor, but to use electoral politics alongside other strategies and to develop political involvement.

Occupying territory while demanding rights

In Brazil, the urban Homeless Workers’ Movement (MTST) involves 72,000 families in 32 occupations around the country. MTST emerged out of the agrarian landless movement (MST) and, like MST, considers itself a territorial movement. MTST is demanding that land serve its social function in accordance with the Brazilian Constitution, drawing attention to the fact that many human rights like decent living conditions, access to health care, and education are dependent on having a place to live. The movement is resisting real estate speculation in a context in which 1% of the population owns 30% of the land. In addition to occupation tactics, MTST engages in demonstrations and strikes, and targets the government. In the run-up to the World Cup in 2013, for example, MTST united with other movements and had some important successes, including a decrease in the price of public transportation.

But as with social movements in other ‘pink tide’ countries, the political context including the 2017 parliamentary coup against Roussef and the imprisonment of the former leftist Workers’ Party president Lula da Silva has been difficult and complex. (MTST in early 2018 protested Lula’s imprisonment by occupying his apartment, the purported reason for his imprisonment as it was falsely claimed he had won the apartment through a corrupt kickback).

The lesson from Brazil is that voting is not enough. As with the Bolivian experience, counterpower must be maintained. Since the coup, rights have been dismantled, impunity is rampant and a new anti-terror law deems social movements terrorists. MTST responded by thinking about new forms of participatory governance and uniting leftist movements in a platform called Vamos! (let’s go). The focus is on ideological education and political empowerment. Vamos! insists that everyone should participate in democracy, starting with meetings to set goals for the next president and the government on various issues, including gender, health, education, diversity. More than 500,000 people contributed to the online platform.

Power or counterpower, force or process?

The differences between these movements in Greece, Croatia and Brazil begs the question: what do we mean by counterpower? Of course, one possibility is to see it as a way to accumulate force to resist adversaries or remove them from power. But it is also important to consider the kind of power constructed in the process. Counterpower can be seen as a process in which pre- formative structures and ways of relating to each other are created. The struggle is not to take power but to build it. It may be preferable to speak about power rather than counterpower: building power goes beyond countering something, but about defining the political society we want a new hegemonic model.

At the same time, the full, complex story of these cases also begs the question: which power are we dealing with and at what level? In Greece, the ECB and the finance ministers of the eurozone simply refused to negotiate with Yanis Varoufakis, the democratically elected finance minister. In Croatia, the EU, with Germany in the driver’s seat, provides the social and economic blueprint to be followed. In Brazil, a democratically elected parliament supported by real estate speculators waged a coup against a democratically elected president. International financial power may be eclipsing that of the nation-state. And nation-state power may eclipse local power. For example, in Europe and the U.S., urban movements have welcomed refugees creating ‘sanctuary cities’ and the like but immigration rights are not a local-level competence. The challenge is that compartmentalised counterpower can be easily crushed. Even if they are not crushed, anti-systemic initiatives can end up inadvertently reinforcing rather than undermining capitalism. In Jackson, Mississippi, for example, its efforts to create community land trusts may have contributed towards trends of increasing land prices that force people to relocate.

For some, the answer lies in being aware and active at all levels local, national and international. For others, the emphasis is on preparing the ground, so institutions are in place when top-down power structures ultimately implode.

Preparing the ground: the transformative city

A key question is how can we scale up grassroots struggles to confront global forces like corporate and financial power? Cities will certainly be a core arena of struggle, as cities are not just local arenas but global too given they emerged as a result of globalisation, privatisation, and, most importantly, the rise of global finance. They both encapsulate global processes such as the ‘grabbing’ of cities by corporate and financial firms and the concomitant rise in expulsion, poverty and inequality. Yet throughout history, they have also been unique spaces where people without power can build cultures, economies and make their own histories. Cities have always endured and outlived more formal, closed systems. Today’s urban activism is therefore critical: people need to be organised and ready when the current ‘grab’ comes to an end.

Cities have a special role to play in ‘preparing the ground’ for transformation. Cities like New York and Oakland, California and Cadiz, Spain are forging ahead in tackling climate change. Local governments in some countries have been able to push back against neo-liberal plundering in their territories and develop alternative economies such as communal gardens. Municipal and ‘fearless city’ movements are growing worldwide and are using networked and horizontal structures to scale up their power, assert solidarity and exchange lessons. For urban activists, local transformation, when done right, has the potential to provide solutions to systemic, global problems. Local, grassroots activists can prefiguratively fight for their issues, meaning they can already do what they want the world to look like. This is the approach of Code Rood, a grassroots collective in the Netherlands that is using civil disobedience and other strategies to fight for climate justice while experimenting with resilient forms of sustainable living. The key is that local efforts are connected around the world; that practices of social innovation can be shared and replicated.

As discussed above, the question of institutional political power and its risks is relevant to these municipal movements. As with state power, so too with city power: for example, the new city government in Amsterdam led for the first time by the Green Left party intends to join other ‘fearless’ cities movement, fight for a just energy transition, tackle polarisation and re-define the relationship between government and citizens. But its ability to deliver on its good intentions depends on its ability to overcome entrenched power, its courage to oppose false market- led solutions, and its openness to constant dialogue with social movements and civil society organisations. Strong activism is vital for giving politicians both the leverage and motivation (i.e. sustained political pressure) to realise transformative change.

What can’t be left out of the discussions around cities, however – nor states for that matter – are the politics of natural resource exploitation on which they depend. Even progressive cities are often thriving from processes of extraction and dispossession in rural areas – whether it is food systems dependent on land dispossession, poorly paid migrant labour, soil erosion and toxic pesticides or dams providing energy and water to cities yet built on appropriated indigenous lands. Similarly states can develop progressive policies on the back of exploitation. This has clearly been the case in Latin America. Venezuela, for example is currently opening up 10% of the country to transnational mining in the name of funding social services.

Constructing a post-capitalist hegemony

Public policy to facilitate transformation

Tame it, smash it, escape it or erode it? Diverse thinkers from Marx to today’s John Holloway, Hilary Wainwright and Erik Olin Wright theorise a range of necessary, possible or impossible routes to ending capitalism. How can we build a post-capitalist hegemony in support of radical transformation and at what level? Concrete experiences inform a diversity of perspectives on the question. Reciprocally, the severity of the situation for many people their immediate struggle to survive reminds us that ideas must translate into concrete action.

In Uruguay, for example, the leftist government has sought to democratise institutions and to develop initiatives focused on the country’s large population of poor people. Industrial tripartite councils were created that gave workers a seat at the table with multinationals and bureaucrats. Workers were involved in defining the plans for key sectors and actively involved in how the government negotiated foreign direct investment. Alongside this, a national development fund was created to support development of worker-owned cooperatives, while the Plan Juntos (the Together Plan) aimed to address extreme poverty and vulnerability. Families in irregular settlements (on unsecure land) were supported to build their own houses, with support from technical staff who were required to live in proximity to the communities. But the houses were not the goal: the purpose of people’s participation was to support a process of transformation, and not to legitimate the policy. The goal was to move from a focus on symptoms to causes and to shift from individual experiences to structural and collective responses.

Or the need for autonomy?

Experiences in Bolivia, where communities have developed hundreds of autonomous community- managed water systems, provide a different perspective. Bolivian communities have long self- organised to address their needs and problems, including not only water but also security and garbage. They did not wait for the state to provide such services. Contrast this to the appealing narrative by President Evo Morales, which held that everything was bad before he came to power and that his ‘government of the people’ would solve the country’s problems. The consequence has been the demobilisation and fragmentation of what was a very strong movement. Behind the narrative lurked a new form of domination. From this vantage point, it seems that the focus should be on solutions that come from the people, with emancipation being not a goal, but a way of life. In Bolivia, people are not thinking in terms of ‘post-capitalism’ but in terms of autonomy and self-determination. They are not asking the state to solve problems, rather for it to respect the organising that is already happening.

Seizing the means of narrative production

As the Bolivia example shows, narrative power is critical. Corporations and elites are currently exerting enormous control over the news. Algorithms and social media are spreading misinformation, narrowing people’s perspectives and polarising society. Behind the myth of ‘free’ news is the exercise of power. But a media that serves the public can play a crucial role in bringing about post-capitalist transformation. Similarly, other cultural actors opinion-makers, the creative sector, designers and makers can be valuable and strategic allies as fellow commoners. They can help forge and strengthen cultural norms, ethics and values that support post-capitalist efforts.

A media that serves the public would be transparent about sources of funding and information. It would be participatory and engage in dialogue with citizens. And it would tell inspiring stories, connect to ideas, and motivate people into action. It would facilitate a process of transformation by challenging people’s biases and assumptions, bringing them different perspectives, and showing that another world is not only possible but already here.

NOTES

1. Geoengineering refers to a set of proposed techniques that would intervene in and alter earth systems on a large scale recently, these proposals have been gaining traction as a “technofix” solution to climate change. http://www.etcgroup.org/content/un-convention-still-says-no- manipulating-climate

The analysis in this report is written by Paige Shipman and Nick Buxton, but is the collective work of Achin Vanaik, Agnes Gagyi, Ana Mendez de Andes, Ashok Subron, Brid Brennan, Ben Hayes, Brett Scott, Brian Ashley, Christophe Aguiton, Christos Giovanopoulos, Daniel Chavez, Danjela Dolenec, Dany Marie, David Fig, David Sogge, Edgardo Lander, Erick Gonzalo Palomares, Fiona Dove, Firoze Manji, Gisela Dutting, Hakima Abbas, Hilary Wainwright, Inna Michaeli, Irene Escorihuela, Joachim Jachnow, Joel Rocamora, Kali Akuno, Laura Flanders, Lavinia Steinfort, Lyda Forero, Mabel Thwaites Rey, Marcela Olivera, Mary Mellor, Mary Fitzgerald, Myriam van der Stichele, Nuria del Viso, Pablo Solón, Phyllis Bennis, Renata Boulos, Sacajawea Hall, Saskia Sassen, Satoko Kishimoto, Sebastián Torres, Selcuk Balamir, Sol Trumbo Vila, Stacco Troncoso, Susan George, Tamás Gerocs, Thomas Hanna, Tom Henfrey, Vedran Horvat, Yuliya Yurchenko, Sopiko Japaridze. It does not mean that everyone agrees with everything written here, but it is an agreed summary of the discussions.

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See the shared notes from this session too.

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Paul Brinkkemper: Have you ever tried to explain to someone how money is created as a loan by banks? Then you most likely came across misunderstanding, disbelief and apathy. If the movement for monetary reform is to gain influence among the general public, we have to educate many people. To be effective we must find persuasive ways around the common psychological defensive reactions. To do this, we have created a board game called Money Maker to make it fun and easy to understand the banking system. In Money Maker every player becomes a bank that can create money, similar to how a modern fractional reserve bank works. While playing, players subconsciously create a credit boom and watch it fall apart in a big bust. In the end, only the richest player wins, but all players walk away with a fundamental understanding of our broken banking system, and if they pay attention, some pointers on how the system can possibly be improved.

What are the common reactions to hearing how banking works?

If you happen to have a conversation with friends or family on the workings of the monetary system, you may recognise one of three common reactions:

1. Many people simply do not care. “All that banking is very complicated, and abstract. I have better things to do with my time. Why bother? I don’t understand how it works, and I am not able to change it anyway.” An apathetic public is unlikely to catalyse any improvements in the money system.
2. Misunderstanding is also a very common reaction when talking about how the banking system works, especially when talking with trained professionals. When speaking about the money system with a banker or an economist, there is almost a Babylonian confusion where people use the same words but attach different meanings to them. Especially when using the word money. M0; M1; M2; M3; TMS, are a few of the many different definitions of money. It is very difficult for people to work together if they do not have a shared vocabulary of the tools at hand.
3. Disbelief is very common among people who have a certain degree of education or training on the subject. It can be very difficult to let go of a worldview that you have held onto for a very long time. “Why would this person talking about money creation now here tell me the truth? Surely, if it was that important, I would have learned about it in high school. Or otherwise I would have read it in the newspaper or heard it on television” is a typical reaction. We even met one journalist who was not allowed to write about money creation in his newspaper because “money creation is the topic of conspiracy theories.” When you cannot talk about something, it becomes nearly impossible to solve any issue related to it.

Why should we focus on changing the minds of people who don’t agree with us?

These reactions are what one might consider part of the cognitive dissonance that people employ to keep their worldview intact. Psychologically, we need to keep our worldview intact to function in the world: doubting the existence of gravity every five minutes can be troublesome. But if our attachment to our current worldview is too rigid, it can prevent us from learning new things and evolving.

From the perspective of the monetary reformers, this cognitive dissonance lies as a great psychological defensive barrier between our group and the public at large. If we are to influence the greater public, we will need to find a way around this psychological defensive barrier. This is exactly why we have created the board game Money Maker.

How do you play Money Maker?

You play an investment banker in a city during the renaissance. All players start out with some money and an infinite amount of credit that they can create. There is a market for production and consumption goods, commonly referred to as ‘work’ and ‘food’. Every turn the players can bid on investments, the highest bidder wins the investment. Investments cost a certain number and type of goods to build and produce a certain good every turn. Players can pay for goods and investments with money or credit. At the end of a players turn, a roll of the dice determines the influence of credit on the economy and whether there is inflation or a credit repayment event is nearing. During a credit repayment event, all players must repay their outstanding credit with gold coins. Players that repay their credit successfully, increase in credit rating and can employ a higher leverage. Insolvent players that cannot repay their credit must borrow from solvable players. In the end, the richest player wins.

How does Money Maker explain complex economic concepts?

Money Maker is a microcosm of the Fractional Reserve Banking System, so very early on players figure out that they can spend more credit than they have money to buy the best investments. This leads to great increases in the price of investments and goods: the psychology of credit causes a credit-fueled boom. Without realising it, players learn about the credit-fueled boom and bust cycle.

Eventually, the credit must be repaid. Players who have spent too much credit need a bail out from their more careful competitors. These competitors can exploit the need of these indebted players to demand interest or the properties of indebted players in exchange. In this way, players learn about the importance of solvability and liquidity.

Without focusing on the exact terminology, Money Maker highlights the importance of the concepts behind solvability and liquidity.

When players repay their credit successfully, their credit rating improves. A higher credit rating means that they can spread out their credit over more places. This reduces the chance that they need to repay all of their credit at once. A higher credit rating means that players can create more credit and that the credit boom enlarges. This helps players learn about the workings of leverage.

In the game box, there is also an easier version of the game where players play without being able to create credit. To play Money Maker without credit is similar to a full reserve / sovereign money banking system. Players then see that there is no more boom and bust cycle, and experience the stability that comes with this. There is also a possibility of a debt jubilee in the game, which allows the players to experiment with how a mass cancellation of all debts would affect the economy. This shows players how the money system can be reformed to work differently.

And what do people think of it?

Playing Money Maker is a great way to introduce people to the workings of the banking system because it is an engaging way of learning. Rather than learning from a book, players are experiencing it in a game. Since the parallels to the real world are obvious, you can hear players say things like “You are a total Greece, so deep in debt” or “you are a real Goldman Sachs, profiting of others misfortune.”

Most importantly, playing Money Maker is a great way to get around the common psychological reactions against hearing how the banking system works. Any misunderstanding amongst players is quickly resolved by consulting the rulebook. For the duration of the game there is a suspension of disbelief. This suspension then carries over into the real world at the end of the game. Since players have seen the fractional reserve banking work in miniature, they can easily imagine it working similarly in the real world. Instead of exhibiting apathy, players are engaged in the game and trying to win. They experience that their actions can have a positive impact on the outcome. And most importantly: they experience that the money system is a system that exists by consent, and that if they play by different rules, the money system can work much simpler and be more stable for all players.

To learn more about money maker, you can find out more at www.moneymaker.games, or get in touch via [email protected].

For IMMR members, we have special deals to resell Money Maker to your fans in your country, as an tool for fundraising, education and community building. You can find out more about this online at partner.moneymaker.games

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To understand them and what they’re fighting for, it’s important to understand the system they’re challenging.

Our money system is underpinned by national central banks and treasuries that issue foundational “base” money. This includes the physical cash in our wallets and also reserves, the special forms of digital money that commercial banks hold in their central bank accounts, which are inaccessible to us.

These commercial banks then boost the money supply by issuing a second layer of money on top of the central bank money layer, through a process called credit creation of money (sometimes called “fractional reserve banking”) to create commercial bank money, which we see as bank deposits in our bank accounts.

The details are subtle and complex ― especially at the international level ― but the interaction of these players issuing money and taking it out of circulation makes the money supply expand and contract as if it were breathing. Monetary reform groups target different elements of this. Here are five of them.

1. Government Money Warriors

Stephanie Kelton, professor of public policy and economics at Stony Brook University, is one of the leading lights of modern monetary theory.

We say that the sun rises, but in reality the sun stays fixed and the illusion of sunrise is created by the Earth turning. Modern monetary theory argues that a similar delusion occurs in our thinking about government money ― we often claim that a federal government “raises money” through taxation and then spends it, but actually it is government institutions that originally issue money by spending it into existence and then withdrawing it from circulation by demanding it back in taxation. If the government issues money, then why would it have to raise money by asking for it back?

The idea that a federal government can run out of money like an ordinary household or business is an illusion, argue advocates of modern monetary theory. A government can only run out of money if it either does not issue its own sovereign currency (like the European nations, which have opted for the euro) or if an artificial political limit has been placed on how much money it can issue. In the latter situation, governments must first recall money via tax (and other means) before reissuing it elsewhere.

This is why modern monetary theory advocates are incredulous about conservatives who want to block spending on education and health care by saying we don’t have the money to pay for it. “Governments with monopoly control over their currency can always pay for their policy priorities,” says Pavlina Tcherneva, an economics professor at the Levy Economics Institute at New York’s Bard College.

Under modern monetary theory, if there are unemployed people who want to work and material resources for them to work with, a federal government can issue new money without causing inflation because the increase in money supply will be met with an increase in production. “The goal is to use the public purse to serve the broad public interest without accelerating inflation,” said Stephanie Kelton, professor of public policy and economics at Stony Brook University and former senior adviser to Sen. Bernie Sanders (I-Vt.).

2. Bank Money Reformers

Bank money reformers want to target the powers of commercial banks to create money.

Other reformers target the commercial bank money system. They argue it creates economic instability, over-indebtedness and concentration of power in the hands of banks ― the very banks that led us into the 2008 financial crisis.

Bank money reform groups include the American Monetary Institute, Positive Money, and the International Movement for Monetary Reform.

Commercial banks create new money when they issue loans. The moderate wing of the bank reform movement argues that, because the government grants them this privilege, banks should be subject to greater democratic scrutiny over their lending. The hard-line wing believes bank creation of money should be banned altogether.

The movement to curtail bank money is politically more diverse than modern monetary theory; it’s been supported by certain libertarians, including the late economist Murray Rothbard, neoclassical economists such as Irving Fisher, as well as left-wing proponents, such as the U.K.’s Green Party, which believes bank money-creation leads to environmental crises and corporate domination.

Their prescriptions are not uniform: Positive Money, a research and campaigning organization in Britain, calls for the power to create money to be granted exclusively to a democratic, accountable and transparent public body, creating a “sovereign money” system in which we might all have our own accounts at the central bank. This is distinguished from full-reserve banking, which would require your bank to have the reserves to fully back your account.

3. Cryptocurrency Crusaders

The Bitcoin logo on display at the Consensus 2018 blockchain technology conference in New York City on May 16.

Cryptocurrency crusaders not only reject both national and bank money systems, but also reject the entire concept of credit money (money that is “created from nothing” through law or social agreement), calling for it to be replaced with “commodity money” (money that is “created from something” through production). They have inherited the baton from “goldbugs,” who called for gold to be money.

The movement, which began with Bitcoin, argues that the best money system is one that’s outside of human politics. This comes from a philosophical tradition that says systems should be governed by the boundaries of God, physics or math, rather than laws set by politicians. With gold, for example, these natural boundaries would be geology: how much gold can be found and extracted. In Bitcoin’s case, the boundary comes from the fact that the digital system sets a hard limit on how much digital money can be issued and then forces participants to “mine” it as if it were a commodity.

Because Bitcoin hard-liners believe true money is a limited-supply good that must be extracted through production, they claim that fiat money ― created by banks or countries ― is artificial or deceitful money under the control of corrupt powers. There’s a puritanical edge to these cryptocurrency crusaders, who mistrust human institutions and trust in an abstract ‘godlike’ order of mathematics and markets.

While theories like MMT hinge on collective human political institutions, crypto crusaders see politics as foolish. This distrustful attitude shows: The movement sometimes seems as much at war with itself as with the fiat money system, with bitter in-fights between supporters of different crypto-tokens.

They are, however, the richest of all monetary reformers, with many crypto users having ironically become millionaires in the fiat currency they claim to dislike so much.

4. The Localists

A note worth 10 Brixton pounds, an alternative currency in London, is illustrated with an image of David Bowie.

There’s a whole history of alternative non-government money prior to cryptocurrency. These original alternative currency variants include mutual credit systems, timebanks (where time is used to measure how many credits you earn), local community currencies, such as the U.K.-based Brixton pound, and systems like the Swiss Wir, a currency used between businesses.

The tradition is also skeptical of large-scale government-bank money systems, but rather than calling for them to be replaced by a robotic algorithm, they believe small-scale communities should take control to issue money locally.

Unlike cryptocurrency advocates, they have no problem with money being “created out of nothing.” Rather they have a problem with who gets to do that and at what scale. They believe large-scale systems alienate people and dissolve close-knit communities.

A mutual credit system like Sardex in Sardinia, for example, does not reject the idea of money expanding and contracting, but it brings together an island community to decide on what terms that occurs.

While the other movements are outspoken, local complementary currency enthusiasts are often humble and below-the-radar, working for low pay to build resilient community structures.

“Local currencies change how money is issued,” says Duncan McCann of the New Economics Foundation, “how it circulates and what it can be spent on in order to re-localize economies, encourage environmental behaviour, and promote small businesses.”

The crypto-credit alliance looks to merge older, alternative currency systems with blockchain technology.

5. The Crypto-Credit Alliance: Mutual credit meets blockchain technology

This is the least-known or developed of the movements, but is perhaps the most exciting. Nascent initiatives, such as Trustlines, Holochain, Sikoba, Waba and Defterhane, seek to hybridize older alternative currency systems like mutual credit with the blockchain architectures that underpin cryptocurrencies. They share common ground with both modern monetary theorists, who also see commodity money as regressive, and cryptocurrency advocates, who wish to bypass the government.

Cryptocurrency unleashed a lot of creativity, but much has been wasted on toxic speculation. On the other hand, localist mutual credit movements have powerful ideas but often struggle to get heard or to spread. Crypto-credit innovators are exploring the creative possibilities of merging these two to solve flaws in both.

Originally published in the Huffington Post

The post These 5 Rebel Movements Want To Change How Money Works appeared first on P2P Foundation.

As our demands grow bolder—true full employment, the rebuilding of the social safety net starting with Medicare for All, an overdue green and just transition—so will the naysayers’ inevitable refrain: “How will you pay for it?” This Left Forum panel on June 5, 2018 moderated by Gar Alperovitz brought together the speakers listed above. They show a way out of the austerity trap and reveal that the obstacles to bold action at a national scale on jobs, healthcare, and climate are political, not economic. This is a partial, edited transcript.

Gar Alperovitz: One of the things that’s happening around the country, as you probably know, is  there’s an upsurge of interest in the idea that the banks ought to be under public control. There are public banking initiatives in something like 30 or 40 cities and a couple of states around the country. There was a forum on this  only six years ago promoting the idea. We’re seeing all over the country a very, very fast pick-up on this, including in Los Angeles, Washington D.C. and several other cities. State legislation pending in Michigan and Washington state.

The subject we’re going after today is probably the other piece of the puzzle, monetary policy and money, because there’s a revolution going on in that area as well. It’s not simply the establishment of public banks, but actually getting down to how money works, a subject that has been obfuscated for many, many decades.

We’re going to go into how the revolution is emerging very, very fast on the ground as well as in theory.

Our first speaker, Stephanie Kelton, is currently a professor of public policy and economics at Stony Brook University. She was also chief economist on the minority staff of the Senate Budget Committee. More important, she was the key economist behind Bernie Sanders’ presidential campaign, so we’re delighted to have her. She is also one of the leading experts in this field and getting a lot of attention, deservedly so, for not only for opening a way to rethink monetary theory or monetary practice, but for explaining it to the public in serious terms.

The ‘pay-for-it’ trap

Stephanie Kelton: I’m going to try to focus my remarks on three broad topics. I’m aiming at a progressive audience obviously, but honestly I give a version of this exact same talk most of the time to conservative audiences. The response that I get in those audiences, it would surprise you probably, is extremely positive.

What is it about what I’m going to say that can resonate both with audiences like this and with a very fiscally conservative audience? Let me jump in and we’ll see where this takes us.

This is just to tell you the kinds of things progressives are up against when they propose a big, ambitious agenda.

Bernie Sanders runs for president on the most ambitious agenda I have seen in my lifetime. Hillary Clinton publishes in her book a bit of an exchange she had with someone who said, “Man, it’s awful. Every time we propose something, he goes bigger. We say we want debt-free college. We want to help make college more affordable. He says, ‘Let’s make it free.’ If we say we want to make health care more affordable and increase access, he says, ‘Let’s just make it free.’ Every time we propose something, he goes bigger.” In this exchange that is included in her book somebody said, “This is like Bernie saying, ‘I think America should get a pony.’” Hillary, the fiscally responsible voice in the room says, “How will you pay for the pony?”

It’s the idea that all of this stuff is so grandiose that it’s beyond reality. This is what we’re up against as progressives, putting forward a bold agenda.

This again is Hillary Clinton, from years before the 2016 campaign, when she’s a senator. She’s talking about the reality of being in Washington D.C.She says, “The reality is you cannot cut taxes or increase spending unless you can pay for it.”

What she’s saying is, and I worked on the budget committee, if you propose to do something, you’ve got to show people how you’re going to pay for it. If you want to cut taxes or you want to put more money in education or infrastructure or defense or anything else, you’ve got to show where the money is going to come from. A congressional budget office has to take a look at it. Things are supposed to be done in a deficit-neutral way so that you’re not adding to future deficits so that you’re not increasing the size of the national debt.

Okay, so Senator Sanders gets accused of putting forward a big proposal and not paying for any of it, right? Everybody “knows” that. That was the accusation, but that wasn’t the reality. He actually attempted to play by Washington rules, which are you’ve got to pay for the stuff you want to do. If you go down his agenda, every item on the agenda, you could really draw a line from what it was he was proposing to the source of revenue that was supposed to pay for it all, whether it was Medicare, infrastructure, making public colleges and universities tuition-free. If you actually looked at what he proposed, it was paid for in the conventional sense of the word.

Now, obviously if you have to find the money, as Hillary Clinton says, then where do you look when you need money? Who’s going to pay for stuff? Who’s got the money? Obviously the rich people have the money. It’s a natural place to look when you’re trying to find the money to pay for a big ambitious agenda. You go for the billionaire class or you go for Wall Street, and you say Wall Street will pay.

If it’s making public colleges and universities tuition-free, which was one of the things he proposed, the pay-for on the other side of that was a tax on Wall Street speculation. You’ve all heard this probably 100 times.

How do you pay for a progressive agenda if these are the constraints because this is the current narrative? This means that you have to fight two battles. You have to fight for the agenda that you’re fighting for, and you have to sell policies on their own merits, and you simultaneously have to wage war on another front, which is you have to fight to raise the revenue. You have to get people to vote for the tax increase, for the closing of the loopholes of whatever it is that’s giving you the additional revenue. You’re waging two battles when you do this. My spending proposal is this, and here’s where I propose we get the money. This one can’t happen unless and until this one happens and you have success on the revenue front.  It actually means that you are in a very real sense dependent upon the rich because you can’t feed a hungry kid, you can’t fix crumbling infrastructure, you can’t provide health care for all, unless and until you can claw some cash away from the people who have it. You need their money. It makes you dependent upon the wealthy.

I think progressives should ask themselves, “What is the purpose of tax?” If your instinct, if your impulse is to say to pay for the stuff we want, my suggestion is you’re doing it wrong.

Rethinking taxes

In the 1940s, the New York Federal Reserve Bank was headed by a guy named Beardsley Ruml. He wrote this really important piece in 1946 called “Taxes for Revenue are Obsolete’” What’s he saying? I don’t know that I need to read the whole thing, but he says basically the need for the government to raise taxes in order to remain solvent and run its affairs is completely yesterday. We don’t do that anymore. Why? Because we have a central bank and because we went off the gold standard. The fact that we changed the monetary system in this fundamental way opens up space for us to do stuff we couldn’t do before when we had to find the money.

You’re trapped in a gold standard framework when you’re operating in this frame of mind that money is this finite thing that exists somewhere, it’s physical and you’ve got to find it, and you’ve got to go get it in order to spend it. Ruml says, no, no, no, that’s not how it works in the modern era – by the way, modern in the 1940s, and we still haven’t caught up with this reality.

Ruml goes on to say the purpose of the tax is not to fund the federal government. The purpose of the tax is multifold. One important thing it does is it allows the government to remove some money from the economy so that you don’t overheat the economy through government spending. In other words, taxes help you keep a lid on inflation. If you just spent money into the economy but you didn’t tax anything back, you’d run the risk of overheating the economy, causing an inflation problem.

Another thing taxes do is affect the distribution of income. You lower taxes on some folks, they end up with more take-home pay. You raise taxes on others, it takes the money away. You impact the distribution of income. You use taxes to incentivize or disincentivize behavior. A carbon tax is a good example. You don’t want as much pollution. You don’t want certain activities taking place, put a tax on it. You want to encourage certain other things like people driving electric cars, give a tax incentive or some form of a subsidy to encourage that.

The last one is he says you might want for some reason or another to have a line item where you can keep track of a certain program, like for example Social Security or the Highway Trust Fund or something like that. Taxes do a lot of stuff that’s important. What they don’t do is provide the government with revenue that it needs in order to operate.

Go back to this picture. You don’t tax the rich because you need their money in order to feed a hungry kid or fix a crumbling bridge. You tax the rich because they are too damn rich and extreme concentrations of wealth especially, but also income, are bad for the functioning of the economy, are bad for democracy. That’s the rationale for taxing the rich. Not because we can’t do other things unless we get money from them to pay for it.

You tax Wall Street speculation because you want to discourage certain behaviors, not because you need their money that you raise from a financial transaction task in order to pay for free college. Think it through. Suppose you said, “We’re going to make public colleges and universities tuition-free in the US. It’s going to cost about $70 billion a year to do that.” Now, to pay for it, we’re going to put a tax on Wall Street. Every time somebody buys stocks or engages in derivatives trading or bond trading, they’re going to pay a small transactions tax. That’s our tax.

Now, you simultaneously have said you want to break up the banks, you want to make banking boring, you want to shrink the size of the financial sector, and you have made yourself completely dependent upon what in order to fund your education proposal? Wall Street speculation. Not only do you need Wall Street to continue to speculate, but you’re going to need them to do more of it over time and grow because of the amount of money need to pay for college and university. You don’t want to hitch your wagon to the very thing that you loathe and are trying to shrink as part of your overall economy. There is a rationale for doing it, right? That would be to discourage certain behaviors, not to fund programs.

The household fallacy

My argument is that when we think about the government’s financial operations we tend to do so with reference to our own. We think of the government as a household. I say, “Well, I can’t go on spending more than I take in year after year and borrowing. I’d go broke.” This is a huge mistake, and if progressives do it, they need to stop it right now. The federal government is nothing like the household. The federal government plays by a completely different set of rules compared to all the rest of us.

If we want to go out and buy a car tomorrow, we have to have the money in the bank or be able to prearrange the financing. The dealership is not going to let us drive off the lot with a car until we have security financing to pay for the car, right? What we think is that the government prearranges its financing – the T.A.B. or “taxes and borrowing”; it collects taxes from the rest of us, it engages in borrowing when it sells bonds. It arranges the financing. It raises the revenue. It has money and now it goes out and spends. The spending comes last.

That’s completely backwards. What happens in reality is the federal government – the House and Senate – get a budget together. If the budget passes, there’s an appropriations process. It is through the appropriations processes that the budget authorization for government spending is triggered. That’s how the government pays for everything. We spend first, and the taxes and borrowing are secondary. The rest of us can’t do this. Money matters.

The fact that the federal government has control of the U.S. dollar, creates it, issues it, and is its sole source, means it can never run out of money.. You can try to create it, but you’d get arrested for counterfeit. You can’t do it. You can’t create high-powered money. The government’s money is special.

How should progressives answer the question, “How will you pay for it?” It’s a trap. Don’t fall into this. What they’re really asking is not how will you pay for it but who will pay for it. The question is designed to name the enemy. Who’s going to be footing the bill? In other words, who’s paying the T.A.B.? Don’t answer that question.

The bottom line is all this pay-for stuff is built around the idea that deficits are bad. They aren’t. Dr. Evil told us a long time ago that deficits don’t matter. Well, it turns out they do, but not the way we usually think about it. Deficits matter, but not because they add to the national debt, burden future generations and all that kind of stuff, create instability in the economy. Deficits matter because the government’s deficits become surpluses somewhere else in the economy. Guess what? Dick Cheney knows it and the Republicans know it. How do I know that? Because they just passed tax cuts that will add $1.5 trillion to deficits over the next 10 years. Why did they do that? Because they know that when a government is increasing its deficit somebody else’s surplus is going up, and they know exactly whose surplus it is. They’re using the budget deficit to channel financial resources to the people they are trying to help. Democrats or Greens or whoever could be using budget deficits to channel financial resources, infrastructure, real things, to the people they’re trying to help.

How should progressives talk about money, debt and taxes? Don’t repeat this stuff about taxes paying for federal government programs. It’s not taxpayer money. This is the wrong frame. Don’t talk about the debt as if it’s something that we owe. It’s something that some of us own. You may have treasuries. Mostly they are concentrated in the hands of wealthier individuals. Don’t talk about government money as if it’s something that the government needs to get from us. They’re the source of the money. We get it from them. They don’t need it from us.

An economy on FIRE

Gar: The next person is going to give us the next step. Michael Hudson is the distinguished professor of economics at University of Missouri, Kansas City. He’s also a research fellow of the Democracy Collaborative. Michael has been in this for a long time. Michael, take it away.

Michael Hudson: My first discussion of modern monetary theory really was in Canada 40 years ago. I was the financial advisor to the Canadian government. At that time the big problem from Canada was how provinces would get enough money to build infrastructure. I’m going to talk a little bit about that because it’s the same problem that the United States is facing today. You can understand it, I think, more clearly in the international sense.

There are two ways of financing infrastructure. One would be if the government, the Bank of Canada, which was more than any other bank able to create its own money, spent the money into the real economy for infrastructure. The banking lobbyists – I won’t call them conservatives; they were radical reactionaries and lobbyists for the banks – said, “Look, if the government creates the money, you’ll have to borrow it, and you’ll have to pay 5 percent, 6 percent, but you can save half a percentage point by borrowing German marks or Swiss francs.”

This was Trudeau’s liberal government, and you can’t get more right-wing than the liberals in Canada. What they did was they borrowed billions for Deutsche marks and Swiss francs that were turned over to the government central bank. What did the government do? All this domestic spending in the real economy was in Canadian dollars to hire Canadian labor, to buy Canadian goods and services, to build the infrastructure.

My point was, why do you need Swiss francs and German marks if you’re going to create dollars? The Swiss francs and German marks ended up in Canada’s central bank as its foreign exchange reserves. What did it need these reserves for? If the government is going to create the money as a result of this borrowing abroad, why have the foreigners?

Well, the answer from the banks was you need the foreign banks as an honest broker because they’re responsible. In literature, you think of bankers as being responsible, but they’re really not responsible. What happened after 1979 was that the Canadian dollar went down from about $1.06 into the $0.80s. The Swiss franc went way up. The German mark went way up. The result was that Canada had to pay a 50 percent premium on the capital as a result of having the banks work as the honest broker for them.

None of this was necessary. The government could spend it into the real economy. The problem is the private sector is not just the real economy. The private sector also is the FIRE – finance, insurance and real estate – sector. You can see today the ability of the government to spend money into the economy through the Federal Reserve’s quantitative easing, technically bailout money to subsidize the finance, insurance and real estate sector. This is considered to be noninflationary.

Who gets to create money

You have to ask, what kind of inflation are people talking about? When they talk about government spending into the real economy and running deficits, they say there will be price inflation. What they really mean is wage inflation. What they want to do is keep wages down. When they talk about inflation of prices, they really mean living standards going up. We don’t want that, do we, because we call that consumer price inflation. We don’t call that rising living standards. The fact is, there’s a disconnect. There’s no reason why consumer prices should rise when wages go up. There’s a disconnect with the largest increase in prices that we have today, whether it’s housing prices and rents, as you have in New York, or medical care.

The government is able to create money now for the financial sector, but there is this patter about why you can’t run a deficit for the domestic economy. Now, what is true for Canada is exactly what Stephanie has explained for the United States. Banks can create money simply on their computers. If the rich people lend this money to be spent, how is the price effect any different from the government simply creating the money? The effect is exactly the same. That’s what they don’t get. You don’t need to borrow to spend into the economy at all. It’s a science fiction story, a parallel universe, as if the governments are somehow dependent on the banks.

All this developed about 100 years ago when the Federal Reserve was created in 1913 and ‘14. Before that, there was a crisis in the United States in 1907. Congress had maybe 18 volumes of national monetary commission reports. One of the volumes explained everything that the Federal Reserve had done, creating money, moving it around 12 districts, pumping it into the economy for the autumnal drain when you have to move the crops. All of this was done by the treasury. The difference is that the treasury was controlled in Washington. I have on my website from an Indian journey all of the documents of how the Federal Reserve was created, essentially to take control of the money supply out of Washington and distribute it to the banks in the various Federal Reserve districts.

You have a whole political fight between the FIRE sector and the government sector. You can only understand this fight by looking at the politics of it.

Unforeseen financialization

The fact is that Karl Marx was much too optimistic about the financial system. His volume three of “Capital” was all about how finance tended to grow and extract more and more from the economy. The FIRE sector today essentially funds real estate. It extracts rents. It raises prices. It backs great monopolies. Banks don’t create money into the real economy basically. They create money to buy companies, divide real estate already in existence. They transfer wealth, but they don’t really produce.

I’m working with Gar’s group to re-describe how the gross domestic product accounts. We actually treat the FIRE sector, finance, as a subtraction from gross domestic product, not an addition to.

Getting back to Marx, Marx expected in the late 19th century that the historical destiny of capitalists, he wrote, was to take banking and money creation out of the feudal stage, out of the medieval European stage and industrialize it and essentially move towards public banking. The whole 19th century was doing this. There are three volumes of the national monetary commissionary report on the right spot for the large German banks and how German banks were working hand in hand with government to finance industry. The Bank of Canada was formed during this time.

Things had not worked out that way. World War I changed everything, and now you have instead of industrializing finance, you’ve had a financialization of industry. What you’re having instead of the government spending into the real economy, it’s starving the real economy.

What happens when a government doesn’t pump money into the economy? That means there are only two sources. One source is international. You borrow the money abroad in a foreign currency that you’ll have to repay at a currency risk. The other source is domestic; you borrow from the banks or you let the banks pump the money into the economy. The problem is the banks don’t pump the money into the economy. The banks only lend essentially for the real estate, corporate raids, corporate loans. They even make loans to corporations to pay dividends. The beneficiaries are the 1 percent or the 5 percent.

The real question of the budget deficits or modern monetary theory is who’s to get the benefit of the money? Will it be the 1 percent or will it be the 99 percent? The answer can be increasing the flow of funds, and the flow of funds, who gets what will make it very clear. Who gets the result of the government spending in forms that do not take the form of a deficit or if it runs the deficit, is it into the real economy or the FIRE sector? You need to divide the private sector into FIRE and into the industrial, agricultural and infrastructure.

Gar: Let me say, I suspect there are people out there, because I’ve done this myself several times, who hear the words ‘the banks will create the money’, and that doesn’t ring straight for most people, that money is actually created. Those questions, I’m sure, are going to hang in the air into which modern monetary theory has the answers. I want you to understand that.

Another way to think about it, although we can easily get into a trap about taxes here: When the government wants to run a war, money does not seem to be a problem. It creates money when it wants to, and it taxes back some of it if it likes to. By way of comment, having talked to a number of folks, the word ‘create’ kind of gets in the way sometimes if you’re not economists.

Fear of a job guarantee

Our next speaker is Pavlina Tcherneva, an associate professor and chair of the department of economics at Bard College and a research associate at the Levy Economics Institute. She’s led the way in showing very, very practical applications of the theory.

Pavlina Tcherneva: Thank you. You are all, I’m sure, familiar with the seven deadly sins. Today I would like to address the seven deadly fears of economic policy. Mostly I’d like to address and face those fears and how to defend a progressive agenda, whatever that may be.

The policy proposal that I’ve been working on for 20-odd years is an employment program that has become known as the job guarantee program that has recently entered the mainstream conversation. A number of senators and representatives have endorsed the program. There are lots of versions of the program out there, but it is a recognition that the government has a responsibility to do something about the persistent problem of unemployment.

What I’d like to do today is basically address some of those seven deadly fears. As the program has discussed, there’s a lot of response, both on the right and on the left, and a lot of it is quite alarmist, frankly. I’d like to ease our fears by addressing each one of them.

First, what is the job guarantee? Essentially, it’s a public option for jobs that offers decent work at decent pay. The public sector acts as an employer of last resort, if you will, when people seek work and they’re unable to find good work at decent pay.

It is a permanent program. The unemployment problem is an ongoing problem, and thus, this program is a standby option for jobs. It’s federally funded but locally administered. It’s voluntary. Nobody is asked to work for their benefits. It’s open-ended. You can go to the unemployment office, and you seek work. There will be a list of options for you. The way we propose it is that those list of options will largely focus on public service and the neglected areas of public sector work. It’s open to all people irrespective of their labor market status, race, sex, color or creed.

The way I think of this program is that it’s an employment safety net, the way we have safety nets for various other problems. If the problem is that you don’t have retirement insurance, we guarantee it; we have Social Security. If the problem is access to food, we guarantee that there will be access to food.

It’s also a transitional program where people essentially get their starter jobs if they need to. They get their stepping stone. They enter into this program and then transition out of it if they so desire.

Overcoming the spending myth

Let’s discuss the fears. The first one that we normally have to address is the fear of spending. It’s based on a deep misunderstanding of what money is and what it does. Again, Stephanie explained how normally there are images that are conjured in our mind that, “Gee, my hard-earned money. I’ve been saving it, and now the government wants to tax it away from me so that it can pay for these policies. Who knows if they’re going to be good or bad?”

We just need to give up this myth of the taxpayer money because this is not how actually the public sector spends. I want to add one other purpose of taxes to the list that Stephanie provided: taxes create demand for money; for the dollar, in a sense. Just think of it this way: If the government tomorrow decided to tax you in Canadian dollars and April 15 you have to deliver Canadian dollars or euros, what will you ask your employer to pay you? Will you ask them for dollars or will you ask them for euros? The tax in this coercive way, if you will, creates demand for the very thing that the government issues: the dollar. The reason is the government needs to be able to spend something that we value to be able to fulfill its various public service objectives.

Here’s one way of thinking about it. The government is the monopoly issuer of the dollar. It is the ultimate source of dollars. Unemployment in a way is people seeking dollars but not able to find them. Whatever the other arguments for addressing the problem of unemployment, and we can discuss that, there is one key aspect to this problem. It is that there is only one sector that can actually choke up the demand for dollars. There’s only one sector that can actually provide it to those who need it, and that is the public sector.

Another piece to the story is that the unemployed are already in the public sector. The government is already responsible for the unemployed. We do the right thing. We provide unemployment insurance, as inadequate as it might be. We provide various other income supports, even though those programs are also underfunded. We have this understanding that we have to provide for people who don’t have access to decent employment or decent incomes.

We provide a slew of programs, but we don’t provide the one that many people need, and that is employment. We are not only responsible for the unemployed, but we also bear the costs of underemployment poverty. If you think of virtually all social, economic and political problems, in one way or another they are connected to communities that have lost their economic life, people who have lost economic opportunities. The distress that families feel not being able to provide for themselves. These are large invisible but very real costs that we already bear.

The fear of spending is the first fear that we need to debunk. This is a bit of an esoteric point, but I want to put it out there. If the government sector is the monopoly issuer of the currency, and it provides the currency in exchange for employment in the public sector, public sector work, then there is an exchange. We establish some sort of baseline value for that currency. We anchor the value of the currency and labor power. We know exactly what it is worth. It is worth $10 or $15 for one hour of publicly useful labor. In a sense, it’s our gold standard. It uses not gold, but it uses labor to anchor the value of the currency.

Big numbers and big government

The next fear is the fear of inflation. I think that that is really the fear of big numbers when we estimate what a job guarantee would cost. We have a proposal that you can find at the Levy Institute website that estimates a job guarantee would cost between $300 billion to $500 billion a year to employ 50 million people. A lot of people have said, “Oh gee, this is an enormous program. It’s going to be very inflationary.” Is $300 billion really inflationary? The Department of Defense, including the war budget, is about $900 billion. Social Security is upwards of $1 trillion. Medicare is $700 billion. Medicaid is $600 billion.

Somehow $300 billion is supposed to generate this massive inflation that will erode the value of the currency. This is not really the problem. A lot of people are actually worried that this actually might push up wages, that it might actually provide wages at a decent living level. We understand that the job guarantee will be the effective minimum wage for the economy, so why would you work for $7 an hour if there’s a public option of $15? The private employer has to match this. We have modeled this, and we find negligible impact of this very bold program on inflation.

The other thing that virtually everybody misses in this discussion is that a one-time adjustment in prices and wages across the economy, across the board, is not inflationary. Inflation is when prices keep going up. If the wage goes up from $15 to $16 to $20 to $25 to $30, then the private sector will have to match it. Yes, that will be inflationary, but no, we are anchoring the floor. We are raising the floor, and we are anchoring it at $15.

The second piece that everybody misses is that the job guarantee actually shrinks when the economy is growing. When the economy is growing, when private employment is growing, when there are ”inflationary pressures” in the economy, the program shrinks. Actually, it’s a dampening effect on inflation, not a fueling effect to inflation.

There’s a fear of big government, of course, but most people ignore the fact that we already have big government. What I already pointed out is that government has devoted enormous amounts of financial and real resources to deal with the fallout from unemployment, underemployment and poverty.

In this sense, the way to think about this is that the job guarantee actually reduces the costs of unemployment.

Whatever you discuss, whatever your policy priority is, always separate the financial cost from the real cost.

When you defend Social Security, don’t fall into the trap of this discussion of how will we pay for it. The question is what would we do with a whole bunch of people who are retiring who don’t have the goods and services that they might require to live a decent life. It is not a matter of financially providing for them but providing for them in real resources.

It’s the same thing with unemployment. It’s not the problem of paying for unemployment, but the problem is, do we really want to maintain this paradigm of neglect, of abandoning our public spaces, of abandoning our public purpose, of allowing people to suffer all the consequences that come with unemployment.

Double standards

There’s also fear of the administrative burden. This is a unique double standard that the job guarantee faces. We never hear that we can’t go to war, we can’t engage in nation-building because it’s going to be an administrative nightmare. The job guarantee uses the existing institutional infrastructure to simply expand the number of jobs out there.

Is it really so difficult to employ 50 million people? Is this really the biggest problem that the government is facing? Well, public education serves 50 million students. Nobody is saying we have to take it away because it’s an administrative nightmare. Social Security, 50, 60 million people. Medicare 44 million. Medicaid 70 million. Yeah, it’s easy to sign a check, but all of this involves a fair amount of administration, and we don’t discuss these.

Fear of boondoggles. This was the fear during the New Deal that somehow the government is going to create bad jobs. Well, just go to the Living New Deal map, and you will find what we did and the legacy that we left. Don’t fall into the trap of productivity. What’s the productivity of these jobs? It’s a natural impulse to say, “But what will people really do?” I can give you a very long list of what they can do. Good useful jobs. The way to answer this question is what is the productivity of the unemployed today? It’s negative productivity. You have malnourished children that go to school because their parents don’t have income to provide for them. That is the productivity you need to be focusing on.

Finally, there’s the fear of political revolution. This was raised by Robert Samuelson in The Washington Post. He says, “Imagine people who work in the private sector who suddenly realize the public option provides Medicare and child care, and they don’t have it. This is going to be enormously disruptive to the business as usual model.”

Look, in information technology, disruptions are considered great, right, progressive. In public policy, disruptions are awful, terrible. This is a defense of the status quo. It is the defense of a model where firms are only profitable when they pay poverty wages. We don’t want to defend this model. We want to disrupt it.

Finally, I think all of this amounts to pure change, but Americans are really not so afraid of it; a recent survey showed that the job guarantee had overwhelming support, and even in deep red states upwards of 70 percent of respondents supported it.

Those of us that have been working on this project are very encouraged, excited that it is in the mainstream, but my cautionary note is that we put way too much on the shoulders of the job guarantee. We have had decades of neglect of the public sector. We have enormous environmental challenges. We are suddenly putting all of these problems on the shoulders of the job guarantee and saying, “Hey, look, see, this is the program that will solve these problems.” It will not.

This program provides jobs for all. This program is a very crucial piece of the progressive agenda, but we need so much more than that.

Rethinking the monetary system

Gar: I want to introduce Raúl Carrillo, who’s the staff attorney at the New Economy Project and a member of the board of directors at the Modern Money Network, and he’s going to talk about actual on-the-ground projects that he’s working on and how they relate to this theory.

Raúl Carrillo: What I’m going to try to do, depending on your opinion, is synthesize or bastardize some of the ideas that were just presented by three of my heroes here and articulate those in a language that is useful, I think, to organizers, activists, people who are in this economy trying to heal the wounds, trying to take care of other people, trying to actually introduce some of these intellectual paradigms to work on the ground.

I’m particularly going to focus on two movements that I’m a part of. The first is the Modern Money movement. I’m affiliated with a number of modern money organizations, but principally Modern Money Network, which a few of us started several years ago when we were law students at Columbia and activists. We started thinking how does this kernel of what we consider to be factually correct analysis of the economy connect to law, organizing, technology, all these other things? How can we build bridges? How can we create packages that are useful for activists and organizers to use?

Over the last five years or so we’ve held about 70 symposia in the United States, United Kingdom, Germany, Australia, Brazil and a few other places, trying to connect MMT (Modern Monetary Theory) to other things.

The other one is that I work for the New Economy Project, which is a 20-year-old nonprofit here in New York City, and we do two things. One is we fight corporate power. I personally operate a financial justice hotline where folks can call when they have problems with banks, debt collectors, landlords, etc. They come to the office. We try and help them out on a very individual level. We also bring some impact litigation.

The second thing that we do is community economic development. We try to build community land trusts, financial cooperatives. We work with co-ops, all the good stuff that I know a lot of people in the audience are involved in already.

What is “the New Economy movement”? The essential idea is we’re trying to move out capitalism, but we have a very, very strong focus on environmental sustainability. The production system with FIRE (finance, insurance and real estate) on top of it, as Michael mentioned, is tricking us, so how do we get out of here?

The New Economy Project has a particular focus on something called the “just transition,” which arose in the 1980s and 1990s. The idea here is that we don’t just want to go to an economy that’s more sustainable. Along the way we want to heal some of the wounds that have been caused. We want to help people who face the biggest threats from ecological disaster. That means a particular focus on racial justice, gender justice, all the various forms of social justice that need to come along with a push to an environmentally sustainable world.

How does Modern Monetary Theory help? I’m actually going to borrow a quote from one of the organizers of this panel: ‘What MMT and PK theory does is it concentrates our minds on the real limits, on the real things we need to make more sustainable.” That means we’re focusing on the real: What’s happening to people, what’s happening to communities, what’s happening to the planet.

The dig-burn-dump economy

If we’re talking about an economy with limits, money is not necessarily the enemy. In fact, a lot of MMTers agree. A dear friend, Fidel, often says our economy runs on waste now. One of the fears, fear of waste for the job guarantee, fear of financial waste, fear of fiscal waste. That’s nothing. We make that stuff. It’s a legal construct. It’s a social construct. Really, the problem is when money is used to burn up a planet.

This is how an environmental justice group in Oakland called the Movement Generation Justice and Ecology Project describes the process that the industrial production system applies to our planet and thus to us: We dig up resources, we burn them, then we dump the waste, we churn it up.

Not only does the industrial production system do this to nature, but the financial system does this to people. FIRE burns people. It’s right there in the name.

What does the FIRE system do? It converts a participant in the economy, you or I whether in our capacity as a worker, a tenant, a borrower, a debtor of some sort, and it turns us into nonrenewable participants. It treats us like it can draw money out of us and then discard us, whether that’s in a place of employment, whether that’s in the credit system. It treats us like we’re disposable. We are waste.

How did we get here? Again, lots of different leftist stories on how this is done, but I think that MMT adds a particular element to this. We all know the story of enclosure, property rights, etc. People become dispossessed. They become part of a labor force that is roving. We don’t have property. We can’t work just for biophysical resources. We can’t just find some land and grow some food, even if we wanted to. We have to pay taxes. By taxes, what we really mean is any kind of fines, fees, obligation with the state. That means the fees you get for walking while black in Ferguson. That means student loan interest. That means a wide variety of things.

The point is the system is set up so we have to get money, and people take advantage of that. Now capitalists are not only trying to control the means of production. They’re trying to control the means of the means of production, the FIRE system, as well as the industrial production system.

How does this system keep going? It acts like the money comes from the users, from the resources that are being used rather than by the system itself. We talked about the taxpayer money frame, how that’s particularly harmful. When we think that the money to keep a machine running has to be extracted from people, we get some really terrible political dynamics.

The other lie is that banks are just either making money wildly or they’re using our deposits and turning back around and the banks rely on us. I would say that the banks are rogue public utilities. They have been chartered by the government, licensed by the government, regulated by the government, and they’re out here not doing their job. When we talk about pushing them to do particular things, we have to recognize that it’s even worse than we thought. They’re powerful. They have the money power. They can create and generate credit at the point of lending. They can do a wide variety of other things that are very, very terrible.

Austerity makes room for financial extraction. If the government is not putting money into the economy, the banks are controlling the borrowing process, and we’re all going to die if we don’t stop it.

Money doesn’t grow on rich people, not on wealthy taxpayers, not on banks. What we want to do is get the money power away from the banks, away from rich people by making claims on the state. You’ve got that giant piggy bank, call it what you will, money can come out of the state. Monetary sovereignty means that you can spend on people, on planet, on communities.

The way that we stake our claim and make the state do that is we establish rights to the things that we want. Then the dynamics for fiscal spending become repooled. We pull money out of state coffers, depending on how much we need based on each eligible individual instead of waiting for whoever in Congress, rich folks, to write that check and change the dynamics.

Basically what we’re talking about here is that MMT allows activists and people to, once they establish rights, pull money out of the system rather than wait for them to push.

What does that mean for activists, for organizers, for leftists? We’re establishing rights. We’re marching for jobs. We’re marching for various other freedoms. We want the entitlements. Fiscal austerity is the enemy even though we might want to be austere towards nature and other sorts of respects.

The plant-nurture-thrive alternative

Now I’m going to go out on a real, I think, new limb here. I’m going to suggest that MMT combined with a new-economy focus on environmental sustainability can take us away from the dig-burn-dump model and into a plant-nurture-thrive model.

Plant. We establish rights with this right to housing, with its right to jobs. We free up space to grow, to pool funding and to have a space outside of the profit motive, even outside of the revenue motive. We can start to do new things within that space. We fertilize the space with more of that sweet, sweet money from the public government. We can start to heal wounds, start to do things more equitably. People from bad sectors will leave to new jobs and a job guarantee. People from bad buildings will leave to new houses and new forms of shelter with the home sprawl movement that’s going on.

I’m just going to do a little bit of implementation here and talk about how MMT can potentially change things. I think that public money for public purpose is awesome, and that’s going to give us a platform to do new things. Eventually, it can be public money for public power. We can do even more. The way that dynamic works is by reversing essentially the dig-burn-dump cycle that we have going on here.

We can eventually move on to even stronger things like unions, to collective bargaining. People leave spaces that are extractive. No one wants to be a part-time prison guard anymore. No one wants to work in fast fashion. No one wants to work in fast food. Not necessarily everybody is going to leave, but it provides people with the opportunity to do so, so we can move again towards a regenerative economy, towards people leaving extractive industries.

Eventually, you can layer on democratic processes into the job guarantee, into the new space that’s been created. Participatory budgeting and worker co-ops can fold into the job guarantee.

Just two more examples of implementation. Extractive finance in housing is dispossessing people, either through the initial capture of land or gentrification. The landlord is in charge. The landlord kicks you out. The landlord doesn’t like you. The landlord segregates people. You get redlined. You get gentrified. You get surveilled by all these crazy consumer reporting systems. Then the threat of homelessness keeps you in line. This is true even for the middle class who’s enthralled to the banks, if not to landlords.

With MMT, what does it look like? You establish a right to housing. MMTers don’t necessarily believe in that, but I do. The point is that you can establish a right. You create a space. Once it’s guaranteed that everyone gets this thing, now you have room to maneuver. The rights pull the money down to tenants. You can have things like social housing projects. Then you can start doing things that are more democratic over time. Community land trusts, mutual housing associations. These things can all be contemplated once we have the funding and public capital. Again, that sweet, sweet fertilizer.

In East Harlem, the New Economy Project is helping to build a community land trust where you take land off the market, the residents own it. These things can be helped by MMT.

Finally, everybody is familiar with the access to credit scenario. I think that in and of itself is a problem that we think that people don’t have enough loans. Really what we want is for people to get more money, for people to get money from the state and from benefits. More people will get higher wages whether that’s through a job guarantee program or something else.

In the instance that people need credit, right now they’d be set with a bunch of predators, whether that’s payday lenders, whether that’s banks acting terribly, whether it’s this new fintech stuff from online, which actually turns out to be just as predatory as the analog version. What you can do with an MMT framework is again, establish public infrastructure. Establish rights. You can do some forms of postal banking. You can do public banking. From then on out the threat of you having to go to a payday lender is gone, so you have room to maneuver. Again, political room and fiscal room. You can start doing things like complementary currencies. You can start doing things like public banking. You can start doing all these more democratic things once the public sector is putting pressure on the private sector and giving civil society room to grow.

As you see here, there is a regenerative model for all of these things. You just need the public money. My friends in Reston, England have a complementary currency program. They generate money, or you could say their own forms of IOUs, which they use in the local community so that people only do business with local business. They’re keeping what they call “clone town London” out of there. These are acceptable in receipt of taxes, which is very interesting.

Finally, Gar mentioned the public banking movement. The New Economy Project and a coalition of other grassroots groups are launching an effort to create one here in New York. The idea there is that the public bank will generate credit to lend to democratic enterprises, ideally we would want federal money, but this is something that is powerful that municipalities can do, and in the process we can highlight a lot of what money really is. It’s a public feature that should be used for the public good, and we can do a lot of political education with this as well as whatever material healing help to organizations throughout New York City. Public money for public power.

Gar: Let me just say one thing. I’m from Racine, Wisconsin. I had an aunt who ran a little tiny Jewish bakery. She used to say, “You know, during the Depression there wasn’t any money around. Then they decided to run a war, and there was all kinds of money around. Why can’t we do that when we want to do that?” That is probably the point.

Photo by kevin dooley

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The School for Civic Action in collaboration with Commons Rising are inviting commons initiatives and commoners to come together to initiate a UK wide Commons Assembly. This is an open platform to meet others, exchange knowledge and to see if there is an appetite for an ongoing UK Commons Assembly.

The Commons discourse is informed by an idea, which has been around for hundreds of years. In a contemporary context of much inequality, the Commons discourse introduces models of sharing. The Commons are about the assets that belong to everyone, forming resources that should benefit all, rather than being enclosed to just a few.

The aim of the day is to put on an exhibition showing the wealth of Commons projects happening in the UK. There will be discussions as well as workshops to inform the public about the commons. It is also an opportunity to vision how the commons might work beyond the individual projects and to set up practical outcomes going forwards.

You will see commons initiatives from each of the following areas Health, Food production, Food distribution, Housing, Economy/Money, Energy, Culture, Waste, Commons Law and Charters, Digital Commons, Governance of the Commons, Land use/ownership, Transport and Technology.

The ambition of this event is to continue beyond this event in formats decided by the participants and contributors on the day.

Register through Eventbrite

@publicworksuk Facebook

Programme PDF:

Uk Commons Assembly_tate Exchange Programme by P2P Foundation on Scribd

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Excerpts from Stefan Heidenreich‘s new book on the post-currency future, republished from Transmediale.

Stefan Heidenreich’s book recently published by Merve Verlag is titled Money (2017). What it presents is not exactly a polemic against money, but rather a convincing speculation that soon we may not need money at all. While the notion that currency might soon become obsolete sounds like science fiction to many, Heidenreich argues that we are likely already within the first phase of a media transition leading to that point. Given the complex information infrastructures that have already been developed for documenting transactions, tying consumer habits to identities, and accurately predicting future exchanges, the substructure of a new kind of economy is now in place. In the following excerpts from his book (translated from the German), Heidenreich explores the potential ways this system might function, based partially on sophisticated “matching” formulas, leading to an age that could be more fair and equitable, but that might also produce monopolization and co-option in entirely new ways.

Introduction

One purpose of money is to distribute goods and labor. In the future, we will be able to solve these tasks differently, without money, instead relying on the help of networks, algorithms, and artificial intelligence.

Why do without money? The medium of money combines three functions: payment, value, and storage. In every money economy, the function of storage tends to overshadow the other functions. This tendency is unavoidable because it is inherent to money. The command “More!” is inscribed in it from the very start. The command drives toward a state in which all economic activity is forced to pay tribute. Each valuation of goods and professions shifts in favor of assets and their accumulation. Increasingly, income and property are distributed unequally. This should come as no surprise, since the measures taken by central banks after the crisis in 2008 were limited to the continuous salvaging of assets.

Designing a non-money economy would pose a fundamental utopia in opposition to the money economy. This economy would do without money, abolish the storage of value and assets, and replace the functions of value and payment with the algorithmically supported distribution of things and activities. Technically speaking, this is possible because all transactions are already digitally recorded and enough data can be calculated to enhance and replace the market’s information function. In this sense, the concept of the non-money economy represents a radical leftist utopia: an economy that strives toward equal economic distribution by changing the current system in a fundamental way, because it pertains to money’s nature as a medium.

(…)

1. Distribution

The task of the economy is to distribute money and labor. But money is not necessary for this task. Historically speaking, the medium of money came to be used to bundle necessary economic information and to communicate it. Today, almost the entire economy runs under a money regime. But neither the end of history nor an optimal solution for distribution has been achieved with this scenario. Since data and computers are now large and fast enough, we can envision alternative, moneyless, and probably better techniques of distribution. We need to begin with questions of distribution and allocation and not with markets and their monetary orientation.

The task of distributing many different things among many different participants represents a typical problem for networks, which is how to deal with a variety of connections. The core element of these connections is to form a social relation, be it through a gift or help or communication. Whenever something is distributed, a link is activated.

(…)

With the increasing amount and density of information, the relationship between prices changes radically. Prices only retroactively express what we already know about the behavior of consumers in the market. Whenever we book a flight, we can see how prices are set using algorithms. This data head-start applies not just to final consumers, but also to large sites of trading. Sporadic flash crashes show what happens when algorithms speculate on stocks and other securities.

When our profiles, our likes, and our consumer histories are used to calculate who will buy what and where, the entire market becomes condensed to a singular moment for each transaction—that is, if a profiling algorithm can determine the price one is willing to pay for a specific product at a given time and place, there exists exactly one marketplace for that sale. In that case the price of the item conveys no additional information outside of this single market. Formally speaking, distribution is still depicted in prices and calculated in terms of money, but data currents today already represent the technological foundation of a non-money economy.

(…)

2. Transactions

Transactions form the foundation of every economy. The simplest of all transactions is a gift. One person (A) gives something (x) to another person (B)—noted as a tuple (A, B, x). 1 The term “person” here refers to any kind of active agent, not just human beings, but also robots, programs, machines, or other living beings.

A gift is anything at all that can be given, not just commodities, but also information, events, access, actions, assistance, and the like. Giving, rather than labor, should be considered the foundation of economic relations, for the simple reason that one can indeed work without being part of the economy—that is, entirely for one’s own good and without any effect on others. In contrast, a transaction always represents a social relationship of some kind. This means that, with the division of labor, the foundational act is that of division, not labor. We need to take a closer look at what economic activity means. Labor is part of the money economy and relies on the concept of paid, productive activities. In a non-money field, the economic value of an activity would be decided by whether and how it is shared.

All formats and structures of giving and exchange, like payments, prices, values, purchasers, consumption, supply, demand, and markets, can be traced back to simple transactions. The entirety of all economic relationships can be understood through the elementary transaction of giving. The act of purchasing, today seen as something quite ordinary, emerged rather late in the long history of economic relationships and the advent of money. Previously, simple transactions were the rule: gifts, even forced ones, in the form of taxes, for example. Measuring and noting gifts in numeric form began not with money, but with systems of inscription that were usually linked to temples. All the stories of money that suggest the economy began with exchange are not just historically incorrect; they also refuse to recognize that an economy before money existed, and thus are not suited to conceive of an economy without money today.

(…)

3. Media and Networks 

Reaching the point when data can take over the tasks of money depends on the relationship of computing capacities to transactions. As soon as computer networks are large and fast enough to process all acts of payment, technically speaking it is possible to algorithmically emulate the function of money. We have now reached this very threshold, and are likely to cross it in the course of a few years.

As mentioned, economic forms without money are not entirely new. Before the rise of money, larger economic units were administered by systems of inscription. Their remains are not only found in the ruins of temples, but also in the myths of guilt or debt (Schuld) in many religions. In one of the most famous of all prayers, Christians demand, day in and day out, millions of times over, an end to all debt: “And forgive us our debts, as we also have forgiven our debtors.” But they have forgotten the economic core of these lines. With the shift from a centralized system of inscription to a decentralized one—i.e., using money—forgiving debts went out of fashion. This was no coincidence, for the many creditors who had taken the place of a central power were then more interested in collecting debts than in forgiving them. Christianity reacted by replacing debt with sin and replacing the forgiveness of debt with individual confession—that is, through a form of control.

Historically speaking, economic relationships did not begin with exchange and certainly not with payment. What came first was giving, helping, and lending. Property was unknown. In small village communities, memory was sufficient to keep track, more or less, of who gave what to whom.

It was only with the introduction of writing that larger economic units began to be organized over a longer term. Recordings of gifts and debts can be found at many excavation sites of ancient civilizations. Ultimately, the invention of writing can be traced back to such archives of gifts and tributes. Together with the first general medium and system of inscription, new economic units grew. The dominance of these economies of inscription, usually around temples and in cities, could expand as far as their power to collect tributes extended.

Money only came later. In a strictly technical sense, money is not a medium but a technique that uses all sorts of media to make notes transportable—and the process is read-only. For the economy, this meant that money was a fundamental innovation, for it converted the simple transaction of the gift into a symmetrical exchange. If somebody paid to acquire something, there was nothing left over. Nothing needed to be noted. Money saves data.

The expansion of money ran in parallel to war and expansive state forms that, with money’s help, established a cycle of taxes for paying and feeding soldiers.

By way of the circulation of goods and labor, a complex structure evolved of money-like forms of notation for payments and promises of payment, from the coin to the promissory note, from paper money to digital currencies.

In the end, we have returned to a system of inscription that not only notes all payments, but also constructs the wildest derivatives and wagers on promises of payment. But the fact that money condenses data is no longer of interest, since we are able to process enough data.

Peer-to-peer currencies and crypto-currencies are nothing fundamentally new to this system. Bitcoins are still a form of money, even if separated from a central institution. On the path towards the abolition of money, they merely represent a detour. The principle of payment itself is maintained by digital and peer-to-peer payment systems. They simply reproduce old money on the new-media foundation of a distributed network. This corresponds to the first step of a media transformation.

In media theory since Marshall McLuhan, it has been a commonplace to state that newly developed media are first used to reproduce old content. Media transformations often take place in two phases. First, there is a reproduction of the old in the new: in the case at hand, Bitcoin is the internet’s replication of money. Only in the second phase will it become clear what kind of new life the new medium can develop. This step is still to come for money. It will lie in the takeover of economic functions of money by way of intelligent networks.

The most important thing about peer-to-peer currencies is the architecture in the background, the so-called blockchain. This represents the foundation for a decentralized technique of administration by which transactions can be communicated anonymously and examined by anyone. The technique works for money just as well as for other moneyless and decentralized systems of notation. Therefore, the blockchain represents a possible building block for an economy after money.

The second phase of a media transformation applies to the question of how a moneyless economy can emerge and how it could replace money. But technological development leaves many possibilities open here. At issue is not a fixed, defined path that follows deterministically set media guidelines. Technological progress opens possibilities for future activities, in terms of the ecology of information affordances. As a rule, these are achieved by way of a chaotic process full of contradictions. What drives transformation are not plans or impact assessments but rather the misuse of possibilities, the counterculture, hacking, and taking advantage of mistakes and gaps. This applies to the non-money economy as well. We will not be able to plan it. It will emerge in the niches and obscure corners of various networks and spread from there.

(…)

4. Matching

Matching is an important operation in a money-less economy. It takes on functions that are otherwise controlled by prices and by the market. “To match” means to classify, assign, or link.

(…)

The process of matching serves to integrate all participants and their desires, needs, possibilities, and abilities. It offers to mediate between transactions, to advise participants in their decisions, to accompany negotiations, and to note the results.

Theories of algorithms and networks use the term matching to refer to every cross-classification of elements from two different sets. For our purposes, these elements can be things or people or events or points in time or locations or objects of any kind. Elements of the same set may be matched with one another—such as in the case of two people connected by a dating agency, a team of programmers brought together for the development of a project, or trucks or containers coordinated for shipping purposes.

Formally, in a network-based environment, matching performs a gift based on conditional constraints. The result of a match can be described as the difference between before and after, whereby each matched transaction has effects beyond all immediate participants, no matter how small. The environment encompasses all links and information that go into the matching, that are processed along the way, and that are noted in the final conclusion. In the process, all decisions made along the way are accounted for, both on the giving side and the taking side, on the side of the good itself that is given, and on the side of the affected third party. The factors that go into making a match include comparable transactions, the history of transactions in the participants’ profiles, and the participants’ desires, needs, and capacities.

Matching processes all of these parameters to suggest one or several possible solutions. The function is not that of an auctioneer, but of a mediator. This means that it is not the goal to calculate the best solution for an ideal price and to leave things at that, but to communicate among a series of interests. Matching is scaled depending on need. Not all options have to be taken. When it comes to daily use, matching would become a formality and take less time than paying does today. If matching were to be applied to a more extensive political process, it would affect all the committees, authorities, and interested parties involved, and would thus unfold similarly.

(…)

Matching procedures would make suggestions on the path towards a decision, show opportunities, and accompany the process of negotiation. It might well be the case that the algorithm becomes active before we even think of wanting something particular. Some suggestive apps already do this, by evaluating our desires and predicting them. Whether we want this influence or not is perhaps a hypothetical question. The more advantages people see in algorithms, the more they will take recourse to them. In this way, socially recognized patterns of behavior arise all on their own. The future, present, and past of media transformations are never foundationally subject to social intention, but driven by a technological dynamics all their own.

(…)

Seen from the users’ perspective, every process of matching begins with a desire or a need. The algorithm then suggests various solutions. If one of them fits, the other participants—producers, suppliers, inventors, machines, or algorithms—are contacted. If an agreement is reached, the transaction is carried out and noted. The impulse to make a match can emerge from each of the four participating sides: from those interested, from those offering, from the product itself, or from the algorithm. Most steps in a match are basically familiar to us already. We carry them out all the time, looking for something online or offering and selling something of our own.

The matching process encompasses an entire bundle of functions around a transaction. Whether these functions are encounters in a unified framework or are divided among a variety of apps is of no relevance in terms of a currency-less economy. The decisive feature is that matching does not operate with money, but organizes distribution directly. This also means that transactions are noted and stored, but not valued with fixed prices and calculated as such.

Matching is also omnipresent within an economy like the current one that operates with money. When we buy things or somebody pays us for our labor, matching is also taking place. But this usually follows different rules than it would in a moneyless world. Without money, the selection criterion of simple and one-dimensional value would fall by the wayside. Instead, an entire series of various decision-making factors become available.

Consider for a moment how matching works under conditions of money. Let’s say we go into a store and purchase something. The product already has a history behind it. Somebody designed it, others made it, and the store has it in its assortment because it could count on customers like us. Our purchase is thus preceded by several decisions that are all linked to the exchange of information. But before we take the product and pay for it, we undergo a more or less intense process of deliberation: weighing the costs, our budget, our desires, and our needs. This internalized matching can take place in very different ways depending on the person and the situation. Some have to consider every single cent they spend, whereas others are largely free of this concern. In a moneyless economy, there is no guarantee that all will be freed of such concerns.

There will continue to be unfulfilled—and unfulfillable—wishes. Even in an economy without money, we won’t be able to possess all that is denied us under a regime of money. Only the conditions and procedures will change, fundamentally, and for the better.

Whether with or without money, our personal decisions are integrated into a broader cycle of information. In today’s economy, a purchase sends the information that more of the same product is needed. It combines with similar information at the point of sale and reaches the producer from there. Parallel to the flow of money and payment, there is always a second current of information that controls how paths of production are organized and goods are distributed. Matching without money would dock directly onto this secondary flow of information.

1. In mathematics a tuple is a finite ordered list.

Translated from the German by Brian Currid.

This excerpt is part of the transmediale journal – face value edition. You can buy a print copy here.

Photo by Dyroc

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