[p2p-research] Will big business privatise the monetary commons again?

[Michel Bauwens]

hi thomas, as it is post-dated to the 25th, it's not online yet, here's sepp
summary:


Will big business privatise the monetary
commons?<http://blog.p2pfoundation.net/will-big-business-privatise-the-monetary-commons/2010/02/25>
[image: photo of Sepp Hasslberger]
Sepp Hasslberger
25th February 2010

 Michel Bauwens asked me to summarize a discussion that started with a
question, posted by Richard Douthwaite, a UK-born economist and activist who
lives in Ireland. Douthwaite posted on the Feasta
<http://www.feasta.org/>forum, asking whether the alternative
electronic payment system that is
being readied for implementation in Dublin and Kilkenny, Ireland, is in
danger of being taken over and captured by private interests, such as a
large retail chain, once it is started. The question gave rise to an
interesting discussion on the ins and outs of credit-based complementary
currency and the credit commons.

I will introduce the discussion by including some of the wider view that
isn’t quite obvious from reading the
discussion<http://www.feasta.org/forum/viewtopic.php?t=910>
.

Feasta is concerned that the Irish economy may suffer badly from a lack of
liquidity, since European economic and monetary policy puts certain spending
constraints on national governments. So it is promoting *Liquidity
Networks*(see
brochure<http://theliquiditynetwork.org/wp-content/uploads/2009/11/Liquidity-Brochure-V4.pdf>)
to overcome the monetary bottleneck by supplementing official EU currency
with local credit that can circulate electronically to promote local
economic activity, even as official Euro currency is becoming scarce.

According to the Liquidity Network FAQ<http://theliquiditynetwork.org/faqs-2/>,
that credit is similar to what elsewhere has been established as paper-based
local currencies, LETS etc. but it is electronic, depending on internet
access, mobile phones or POS (Point-of-Sale) machines used to process credit
cards. A particular feature of the proposed credit “currency” is that local
authorities co-operate with local business and consumers to make it work.
Local Councils will issue the credits or “Quids” to pay businesses for work
performed and staff salaries, after which the liquidity can circulate in the
community.

What makes Quids acceptable in the community is the fact that the local
Council will take them back in payment for local taxes and fees. There are
also bonuses to be had for helping establish the circulation of the new
local means of payment. The issue of the new currency would be in the hands
of a “governing trust”, but things are still in the planning stages. As you
will see from the discussion, things are still far from settled. So this is
the background against which to see Richard Douthwaite’s question: *Will big
business privatise the monetary commons again? *

***Specifically, Richard points out that…*

*Initially, it is very important for the establishment of an LQN [a
Liquidity Network] that the big retailers come in. If they have to be given
big bonuses to convince them it’s worth the trouble that setting up a
parallel accounting system and training their counter staff involves, so be
it. But once they are in the system, there is no need for these bonuses to
continue as they will stay within it provided that they consider that their
leaving it would cost them a significant amount of trade. So, once the
traders have got over any teething problems, a greater proportion of any
bonuses given out could go to ordinary people, with the smaller users
getting relatively more.*

**

*If we get a system working well in Kilkenny, it will attract a lot of
publicity around the world. What is to stop a commercial company – Zapa even
– taking the idea up and rolling out systems itself with no local trust
running each in the interests of the local community?*

*‘Geoff’ agrees that this is a concern. *

*I have been concerned all along that LQN looks so much like the kind of
money they are already familiar with, that they are sure to find ways to
hoard and abuse it. I think the solution might be to issue credit on a
different basis, not with the only goal being to increase liquidity and
trading volume. I think it’s fair for communities to express additional
criteria for access to their credit commons (and to any other commons, for
that matter). Access could be based on how much good someone is doing in
various ways within the community, contributing to forms of common wealth
that the community wants to enhance, contributing to improving the
health/wealth of various commons that the community cares about.*

*‘Emer’ stresses the importance of the commons in the approach to currency,
citing the work of **James Bernard
Quilligan*<http://onthecommons.org/content.php?id=2585>
*, adviser to several high level decision makers. He says:*

*James Bernard Quilligan writes usefully on money as a commons. His system
is rather too elaborate and too far ranging for our purposes - but it
situates the complementary currency debate smack bang in the Commons
discourse where I believe it has a natural home. I suggest that the LQN
should recognise common ownership through a distribution of units to
residents using the local government voters register, either cash or
electronic, replenished by a rusting algorithm within the whole system.*

*‘Dan’ does not agree with Quilligan, and states:*

*In my view a monetary system which truly represents a commons is one which
should be able to accomodate both positive and negative interest rates,
since anything else favours one sector of the commons over the other (i.e.
borrowers over savers, buyers over sellers, or vice versa).*

*According to a second intervention by Richard Douthwaite,*

*… the idea that quid can be given away in the circumstances in which local
liquidity networks are likely to be launched is mistaken.*

*. . . *

*The quid will have no value unless people are prepared to accept it in
exchange for goods and services. As a result, the algorithms we are planning
to use will give any new quid required to those people who are expanding the
amount of trading they are doing in the system - it is they who are creating
the need for the new money. Thus, if I agree to take an increased proportion
of my salary in quid, or my business is doing more and more business in
quid, I will be given a bonus by the managing trust as my reward for helping
develop the system.*

**

*I can see no room for giving quid to people to spend purely because they
happen to live in the community.*

*‘Phoebe’ comes back to the original question, saying:*

*In our currently highly connected world, any good idea that is potentially
profitable will be exploited by business, that is what they are supposed to
do. To prevent business taking over, we can seek to put controls in place
but since this would be government controls, that is not likely to protect
the commons, we can try and create friction in the system to discourage
business, but they are likely to override that, so that leaves us with
trying to make it really easy to setup a money system, giving communities a
chance to compete with business.*

*. . . *

*Is there a monetary model that allows a number of different money systems
to interact and share a common grid? Suppose you have just one ‘money’ card
and that holds your euros, quids, coops, supervalue points etc. When you go
to pay you can choose which unit to use or let the system automatically
works out which is the best deal, and using a ripple like system, every
transaction is eventually settled. This could allow both business and
community to start their own competing money systems, each choosing to
reward it’s users as they choose. *

*‘Emer’ then clarifies:*

*There will have to be an initial distribution of units to traders and
indeed some mechanism for them [to] get more units if they need them. The
distribution of free units to residents is over and above that issue - an
add on - but an important one. It would only ever represent less than 5% of
the total units in existence at one time. It will be like cash is to the
current debt based money system. *

*. . . *

*I suggest that the Liquidity Network has a greater chance of success and
rapid expansion and replication if the commons aspect of exchange credit is
built into its DNA. I also suggest that this fundamental controlling concept
will tell us how to manage the credit units expansion/contraction in the
system.*

*How ?*

*1) The LQN should be defined as a exchange credit commons owned not by (or
for the benefit of ) traders but by all citizen/residents equally in the
project area. Ownership/benefit according to use is like grandfathering
emission rights in the ETS which Feasta correctly condemned. Just because
the atmosphere is used mostly by industry and utilities does not mean it is
their property. The same could be said of the enclosure of the land commons
in the 14-16Cs; taken from the commoner and freehold given over to barons
who required (it was argued) ownership rights to reliably raise and
provision armies to defend the kingdom.*

*2) Like the annual land tax which Feasta campaigns for, a rent for use of
the exchange credit commons or LQN should be charged. This equates to a
negative interest rate on credit sitting unused in an account. This rusting
aspect would invigorate the network businesses, spurring quick payment to
settle accounts.*

*3) This rent (less modest expenses to run the system) in turn should be
paid to the rightful beneficiaries of the commons - all residents equally in
the LQN area. This can be paid in scrip / notes with a die-by date. The
notes can be exchanged as notes without going into the IT system but only
for so long. By using them in shops, they would be transformed into virtual
credits and given a new lease of life in the accounts of business members.
Therefore there is an incentive to get them out of cash into a form where
they can be tracked.*

*4) Residents should also be able to opt to have their credits issued
electronically. It should be made impossible to convert electronic credits
back into scrip again. Scrip will then only ever be a small percentage (less
than 5%) of the total and therefore never an accounting problem.*

*5) If more credit is needed - as evidenced by appreciation of the unit
against a real measure of value - more scrip should be issued equally to
residents - not to businesses. Business should have to earn them from
customers as in the real world. But as there will be sufficient units
burning a hole in the pockets of residents, that should not be a problem.*

**

*6) A real measure of value or yardstick should be identified, say a unit of
electricity, against which the LQN would fluctuate and be monitored by the
Trust acting on behalf of beneficiaries. This would allow for an exchange
rate between LQN based in different areas.*

*‘Dan’ says to this: *

*Emer, *

*there is no non-debt cash in the current system. Its all (including cash in
circulation) government debt since it all shows up as government or central
bank liabilities. That makes cash unequivocally debt, not money. if it were
the latter it wouldn’t show up on any balance sheet as a liability.*

*. . . *

*The reality of modern economies is that they are wholly credit economies,
and in practice have been so for a good deal longer than we might imagine.
If that is the case then credit rating is the essential bit of economic
machinery.*

*After a question of ‘Fabio’:*

*What do you mean by a “self determined request”?. I understand this to work
in the sense that transactions get rated by users, and that new units
allocation would be done based on this reputation “currency”. In fact, this
would also include some of the original LQN approach, in that more trade
would increase the probability of good reputation, while also including
qualitative elements and not only quantitative (compare with ebay, where big
traders get trusted more easily, provided their rating is reasonably close
to 100% positive). *

*‘Dan’ adds:*

*… there is in my view only one way a non centralised LQN system can work,
and that is by having new quids lent into existence by system participants
at their own risk.*

** Participants make the decision of such new lending according to
assessments made available by the common credit rating system.*

** Lending participants take the full credit risk, and as such may only lend
like this when they have sufficient equity in the system to absorb some
losses. (Whether the credit bears interest of positive and/or negative sign
is a design choice. Interest is not required or precluded.)*

** Because the system is P2P with no intermediary there is no need for any
kind of clearing process.*

** The system as a whole can be viewed as a single fractional reserve bank
(LQN) in which :*

*- credit extension results in a new quid debt liability immediately
re-deposited back into the LQN*

*- only those with LQN equity may extend credit. LQN equity does not earn a
dividend.*

*- a lender suffering default takes the loss from his personal equity
capital account*

*- all individual capital accounts are aggregated and compared to total
outstanding quids to assess system leverage. New credit extension by any
lender will be prevented when system leverage exceeds specific limit.***

*- individuals have individual leverage limits based on past history
(velocity, successfully completed loans, successfully completed borrowing
etc)*

*- new users may need an initial small float of equity if they are trading
partners or contributing to promoting the network.*

**

*- LQN participants form nodes in a network like facebook or linkedin. As
they complete transactions with other nodes connections are formed. credit
rating can be based on a nodes connection status - with each connection
having velocity and credit worthyness attributes. Many algorithms could be
developed to leverage this network information. Each node is therefore a
node through which wealth and trust flows. from this information on
connectivity, velocity and quality, the ratings of each node for lending
(e.g. permitted leverage) and borrowing can be determined, and the result
could be different depending on how you ‘connect’ to that node which is
being rated. *

*Chris Cook then joins in, saying:*

*I think that when it comes to the provision of liquidity - ie the credit
needed for the circulation of goods and services and the creation of
productive assets - then the key understanding is that the **source **of
this credit is the individual (either alone or collectively as an
enterprise: public or private).*

*It is possible to monetise this ‘trade’ credit if a system can be built
where an IOU issued by an individual or enterprise is accepted by another.
Such a monetary system requires accounting records; a Unit of measure or
Value Standard; probably, but not necessarily, units of generally acceptable
‘money’s worth’ or currency; and most of all, what I refer to as a Framework
of Trust.*

*The Swiss WIR has a central issuer - the WIR bank - of a complementary
currency which is not the ‘fiat’ Swiss Franc, but is its equivalent in
value. In other words, the Swiss Franc is indirectly the Value Standard for
transactions. Proprietary barter systems, such as Bartercard and Ormita,
which incorporate credit are also complementary currencies in precisely the
same way.*

*The reason why the WIR is still around after 75 years is that the framework
of trust relies upon security taken over business assets, which are
available to meet debit balances in the event of default.*

**

*The architecture I advocate does not have central issuers at all, but uses
clearing and settlement algorithms to ‘net out’ balances wherever possible.
ie obligations may be used in settlement of other obligations.*

*. . . *

*I believe that the ‘Guarantee Society’ concept I advocate is the best way
to create a framework of trust. This requires (in addition to the system)
only an agreement between participants that they will mutually guarantee
bilateral credit.*

*Finally, ‘Mike’ offers some important observations on the concept of
‘debt’:*

*A defining term in the LQN concept is ‘debt’. This loaded word habitually
conjures up a negative response. The concept of debt however, when taken out
of the context of exploitative banking practices, has a neutral and
independent meaning. To illustrate, in the expression “I owe you a debt of
gratitude”, or “I am forever in your debt” the word debt is genuine and
useful. Indeed, human inDEBTedness is a natural state, since “no man is an
island” and the give-and-take of everyday human interaction requires
indebtedness at every turn. I think the LQN has until now been equating
‘debt’ with ‘debt exploitation’ and should examine this again.*

*The following may appear simplistic, but its important to get the
fundamentals right.*

*In simple bartering, debt occurs where an exchange remains incomplete. e.g.
unless you and I exchange items at precisely the same moment in time, a
moment of debt or indebtedness will occur. Debt occurs naturally in most
transactions. Into this scenario we now introduce the Promissory Note, a
very practical invention, since it allowed a flexible time gap in the
exchange process. When the promissory note is accepted by a third party in a
further exchange, it becomes money. i.e. Money is a circulating promissory
note (or token, coin, number, etc)*

*Many theorists in the field of alternative currency accept the theorem:
Debt = Bad. When Paul Grignon used the title ‘Money as Debt’ for his DVD on
the history money, he meant it as pejorative, implying Debt = Bad. This is
misleading, since it is: ‘The exploitation of debt by private or partisan
interests = Bad’. Debt itself is a natural occurrence in human transactions.
A promissory note is a token acknowledgment of a debt. So, far from being a
pejorative equation, “Money as Debt” is actually correct and philosophically
sound, because Money = Debt.*

*Into this scenario, introduce the idea of private banks as the sole source
of promissory notes, and the idea that a single limited / manipulated and
controlled commodity (i.e. gold) as the sole backing for money, and it is
easy to see how debt, by association, has earned such a bad name. But this
must not cloud our reasoning. We cannot simply magically issue promissory
notes: such a project - however well intentioned - is conceptually unsound;
and (like the social creditor’s plane never got of the ground) its
manifestations will flounder. The general public have a common wisdom and
instinct and are rightly hesitant and suspicious when asked to accept money
issued of out of nothing, backed by nothing, (however well intentioned the
authors)*

*If this simple analysis is correct, the notion of ‘debt free money’ is
self-contradictory and therefore invalid. If money is not in essence a
promissory note, it is not money. Money which is ‘debt free’ is worthless
paper. Debt is part of natural exchange processes at every level; it
provides money with the dynamic ‘tension’ which defines it.*

*‘Debt free’ money can only succeed by piggy-backing onto an existing debt
based system, since it has no dynamic tension of itself. How long such ‘debt
free’ money might survive independently is a only a question of time.*

*But if debt is a natural, necessary phenomenon, debt exploitation is the
unnatural and unnecessary cause of our woes and the curse of our epoch. We
must replace exploitation with a balanced emphasis on the social commons,
and carefully measured issuance for the common good, balancing individual
debt with collective debt, and using various forms of money destruction in
balance with money creation in order to maintain a healthy dynamic tension
in the overall system. Furthermore, money must be democratised, with
structures put in place for local budgetary control and representation at
neighbourhood and community level, district and regional level. This is the
key to the systems long-term functioning stability.*

**

*In conclusion, the problem is not debt but the exploitation of debt for
private ends. We must begin with the fundamentals i.e. putting people and
collective values back at the centre of the system, and issuing credit where
it is solidly backed by trading record, trading reputation, real collateral
and/or community taxation.*

*Although I have quoted liberally from the discussion, there is more and
some might prefer to go to the original (located
here<http://www.feasta.org/forum/viewtopic.php?t=910>)
to get the full picture.*

*Pages I visited while making this report:*

*The discussion:* http://www.feasta.org/forum/viewtopic.php?t=910

*Richard Douthwaite:* http://en.wikipedia.org/wiki/Richard_Douthwaite

*Feasta Homepage:* http://www.feasta.org/

*The Feasta brochure:*
http://theliquiditynetwork.org/wp-content/uploads/2009/11/Liquidity-Brochure-V4.pdf

*Liquidity Network FAQ:* http://theliquiditynetwork.org/faqs-2/

*Onthecommons on Quilligan:* http://onthecommons.org/content.php?id=2585

*UISCE Ireland:* http://www.uisceireland.org/


On Sat, Feb 20, 2010 at 7:20 PM, Thomas Greco <thg at mindspring.com> wrote:

>  When I click on that link I get this:
> Sorry, no posts matched your criteria.
>
> Where is it?
> Tom
>
> ----- Original Message -----
> *From:* Michel Bauwens <michelsub2004 at gmail.com>
> *To:* Sepp Hasslberger <sepp at lastrega.com>
> *Cc:* Peer-To-Peer Research List <p2presearch at listcultures.org> ; Thomas
> Greco -- thg <thg at mindspring.com>
> *Sent:* Friday, February 19, 2010 08:05 AM
> *Subject:* Re: Will big business privatise the monetary commons again?
>
> Awesome summary Sepp, I posted it on the 25th ...
>
> On Fri, Feb 19, 2010 at 5:18 AM, Sepp Hasslberger <sepp at lastrega.com>wrote:
>
>> Hi Michel,
>>
>> I did make a summary of the discussion. As a matter of fact, it's more
>> like a clean-up and extensive quote, because in any other way, much of the
>> good thought in this discussion would not have come through in the article.
>>
>> Anyway, I enjoyed doing it, as I learn, going along...
>>
>> The article is ready to preview
>>
>> http://blog.p2pfoundation.net/?p=7495&preview=true
>>
>> and schedule.
>>
>> Sepp
>>
>>
>>
>>  On 18/feb/10, at 10:03, Michel Bauwens wrote:
>>
>> http://www.feasta.org/forum/viewtopic.php?t=910
>>
>> Hi Sepp,
>>
>> could you eventually summarize this debate for our blog?
>>
>> --
>> Work: http://en.wikipedia.org/wiki/Dhurakij_Pundit_University - Think
>> thank: http://www.asianforesightinstitute.org/index.php/eng/The-AFI
>>
>> P2P Foundation: http://p2pfoundation.net  - http://blog.p2pfoundation.net
>>
>> Connect: http://p2pfoundation.ning.com; Discuss:
>> http://listcultures.org/mailman/listinfo/p2presearch_listcultures.org
>>
>> Updates: http://del.icio.us/mbauwens; http://friendfeed.com/mbauwens;
>> http://twitter.com/mbauwens; http://www.facebook.com/mbauwens
>>
>>
>>
>>
>>
>>
>
>
> --
> Work: http://en.wikipedia.org/wiki/Dhurakij_Pundit_University - Think
> thank: http://www.asianforesightinstitute.org/index.php/eng/The-AFI
>
> P2P Foundation: http://p2pfoundation.net  - http://blog.p2pfoundation.net
>
> Connect: http://p2pfoundation.ning.com; Discuss:
> http://listcultures.org/mailman/listinfo/p2presearch_listcultures.org
>
> Updates: http://del.icio.us/mbauwens; http://friendfeed.com/mbauwens;
> http://twitter.com/mbauwens; http://www.facebook.com/mbauwens
>
>
>
>
>


-- 
Work: http://en.wikipedia.org/wiki/Dhurakij_Pundit_University - Think thank:
http://www.asianforesightinstitute.org/index.php/eng/The-AFI

P2P Foundation: http://p2pfoundation.net  - http://blog.p2pfoundation.net

Connect: http://p2pfoundation.ning.com; Discuss:
http://listcultures.org/mailman/listinfo/p2presearch_listcultures.org

Updates: http://del.icio.us/mbauwens; http://friendfeed.com/mbauwens;
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