Alternative currencies should be considered an essential part of every communities tool kit for discovering and declaring a greater degree of economic sovereignty over their lives but are localised alternative currencies enough to challenge the power of a financial system that is global in its reach? Can the lessons learned in these communities be taken from the local to the global?
When we use local alternative currencies we place our trust in the community, as well as supporting the local economy personal relationships are reinforced through the use of the currency and it is these relationships of trust that essentially ground and back the value of the currency. Issues arise when alternative currency systems scale. The more people that use the currency the more difficult it is to maintain the kind of face to face relationships that secure trust in local communities. The state offers a solution to this issue of scale by providing currencies that are guaranteed through legal means. Trust moves from the community to the state.
You might ask doesn’t money issued by the state also support exchange that can foster trust and relationship building in the community? Well yes it does to a degree but this is secondary to the function of the currency as an instrument of speculation that puts communities in a vulnerable position to the dictates of financial powers who control the levers of the money supply. There are cases where local government issue complementary currencies and there are movements for positive money to take control of money creation away from private banks, but in the absence of enlightened politicians and effective change at the level of the state what more can we do?
Love it or hate it Bitcoin has had a huge impact in terms of challenging conventions and introducing a generation to new thinking about money. It’s important to distinguish between Bitcoin as a currency and Bitcoin as a technology. The Bitcoin technology as it has been implemented as a currency has a number of problems that will be addressed later. For now I will focus on Bitcoin as a technology to highlight two of its key innovations.
Bitcoin is the first successful implementation of a peer-to-peer currency. As software it is a purely technical currency solution and it enables people to make direct transfers without the need for a trusted third party such as a bank to manage the transaction. In this sense Bitcoin can be considered as a kind of trust-less system. Instead of placing trust in financial institutions or the state, trust is placed in the technical implementation of the algorithm—an open source code that is available for rigorous scrutiny and testing by the bitcoin user community to insure that it operates in a secure and transparent fashion.
The blockchain is a central component of bitcoin. It is essentially a distributed database that acts as an accounting system to publicly record all exchanges using Bitcoin. As the blockchain is distributed across the computer network of bitcoin users, the accounting system can’t be interfered with or corrupted by any one powerful user. In this way the Blockchain offers a reliable and secure technology for transactions. As Bitcoin is software this means anyone, anywhere on the planet with a computer or smartphone can use it. Clearly bitcoin has shown it has the capacity to scale globally and since information is borderless it represents a very real and public challenge to traditional finance and the state as it’s very difficult if not impossible to regulate.
To give a sense of the scale of the Bitcoin economy according to Blockchain.info the current market value, as of June 2015, is over 3 Billion Dollars—that’s more than 2 Billion Pound Sterling (down from a peak of almost 13 Billion in 2014.) This brings us to the big flaw in how Bitcoin has been implemented as a currency as it is clearly not immune to speculative bubbles. The currency has proved to be highly volatile and, while it has overcome many of the trappings of conventional fiat money, it also reproduces the speculative culture typical of capitalist currencies. Some have also argued that the distribution of Bitcoin—with over 30% of the currency being held in as few as 100 wallets—not only mirrors the extremes of inequality that we see in fiat currencies but is in fact much worse. Recent efforts to estimate the Gini coefficient, a statistical measure of inequality based on income distribution, placed Bitcoin at 0.88—comparable to the extreme inequality in countries such as North Korea.
So returning to my earlier question, could the lessons learned from the experience of local alternative currency communities be taken from the local to the global to really challenge financial power? Now consider this. What if the technology of bitcoin could be implemented in such a way so as to support the scale required while at the same time placing human relationships at its core thus bringing together the best of both worlds. This is exactly what FairCoop have set out to do.
FairCoop describe themselves as the Earth Coop for a Fair Economy (https://fair.coop). Its name is clearly inspired by the Fair Trade movement and is an indicator of how it sees itself. FairCoin is FairCoop’s implementation of Bitcoin technology and while it is a core component, it is but one part grounded by an ecosystem of tools, services and, most importantly, a community aimed at bringing about an Integral Revolution—the construction of an alternative economy networked at the global level.
The founder of FairCoop is Enric Duran infamous in his home of Catalunya, Spain as the Robin Hood who borrowed around 500,000 Euros from the banks at the height of the bubble and donated it to social movements in the region in what he declared a public act of civil and economic disobedience. Duran is now in exile and pursued by the Spanish state for refusing to pay back the banks. His actions are a direct provocation aimed at exposing the hypocrisy inherent in a system that confers the privilege to create money on private banks to the benefit of wealthy propertied elites whose speculation has subsequently been paid for at the expense and impoverishment of ordinary working Spainish people who suffered disproportionately the results of the economic crisis.
FairCoop builds on Duran’s experience as one of the founders of the Cooperativa Integral de Catalan (CIC). The CIC represented the first steps in what Duran calls the Integral Revolution. “In Spanish, “integral” means holistic, complete. That is to say, it concerns every single facet of life, and that’s what it means to us. The CIC’s objective is to generate a self-managed free society outside law, State control, and the rules of the capitalist market.” – Enric Duran
FairCoop’s approach is not simply a technical fix, as a democratically structured and open cooperative organisation, they reintroduce the human element that puts Faircoin at the service of the common good.
Anyone can buy and sell FairCoin, it is not exclusive to the members of FairCoop. However being bought and sold on the open market exposes Faircoin to speculative traders. FairCoop recognise this and take a number of steps to bring greater stability to the currency. The most significant is that FairCoop and its supporters hold a controlling stake in the currency, perhaps 40% or more of all FairCoins. FairCoop members are encouraged to save and with a large enough group this counters the negative impacts of speculation. Instead of spending FairCoins members of FairCoop will soon have the option to use FairCredit, a mutual credit system. Both FairCredit and FairCoin can be used to buy and sell goods and services through the coops online FairMarket which aims to be a kind of ethical ebay.
FairCoop is more than simply a means by which communities can buy and sell. One of the greatest barriers to the development of ethical projects that serve the Commons and the Cooperative Economy is access to finance. Venture capital demands that start ups conform to the conventional shareholder model with control of copyrights and patents part of the deal. Finance and investing in projects that further the construction of an alternative economy are a core part of FairCoop’s mission. They have created the Commons Fund and the Global South fund specifically for for this purpose.
Alternative currencies are nothing without a community who accept and trust them. It is the human element and the power of a community committed to principles of solidarity and cooperation that FairCoop brings to FairCoin. This is the strength of FairCoop and what makes it stand out as a grand experiment pioneering and challenging thinking about how we organise and construct much needed alternatives to capitalist economy.
This article was first published in the Summer issue of STIR magazine you can order it here – http://stirtoaction.com/stir-summer-issue10-pre-order-discount/