It's like Capitalism... except that it's Fair!

The next ten years are the prelimaries for our species' final exams, in which we discover whether this bold evolutionary experiment of combining a large forebrain with opposable thumbs was really a good idea.  Practically, that means: can we get our act together enough to do what we know how to do to solve our environmental problems or, better still, eliminate and avoid those problems, not at a cost but at a profit, in a way that is trans-ideological, attractive to everybody, and with no, or hardly any, losers?

-Amory Lovins

Economics is a topic far and cheap to my heart. This is because traditional economics only sees the environment as a source of raw material, and therefore as a part of the greater economy. As my heavily German-accented TA from one of my graduate seminars in international relations put it: "[economists] worship a false God". From a guy who started out his academic career in Economics, that's something of a grand condemnation. Our current economic trajectory is set by an economics of endless growth:

"The current system is broken," says Bob Watson, the UK’s chief scientific advisor on environmental issues and a winner of the prestigious Blue Planet prize in 2010. "It is driving humanity to a future that is 3-5°C warmer than our species has ever known, and is eliminating the ecology that we depend on for our health, wealth and senses of self." (emphasis mine)

Economics itself is, at best, a pseudoscience. It is a dark art that attempts to explain complex, multidimensional, and cyclic behaviour through simple, monovariable, and linear means. It is better explained as part of the ecology rather than with the ecology as part of the economy. The problem is that many people conflate the word economy with money, or Capitalism - as if all economies since the Cold War are Capitalistic. Money economies have the problem that they tend to need to grow in order to survive, and that infinite growth has an inevitable run-in with a finite planet.

Capitalism today abuses the people, environment, politics and culture in equal measures. It has fostered new extremes of wealth and poverty inside most countries, and such extremes always undermine or prevent democratic politics. Capitalist production for profit likewise endangers us by its global warming, widening pollution, and looming energy crisis. And now capitalism’s recurrent instability (what others call the “business cycle”) has plunged the world into the second massive global economic crisis in the last 75 years. Manifesto for Economic Democracy and Ecological Sanity  

Economies are not all money-based, and it has taken a huge economic downturn - that is to say, a gigantic failure of Capitalism to do its job and spread the wealth equitably - to bring alternative economies to the fore. The Occupy Gift Economy is a prime example of the genre, but there are others. In Greece, for example, alternative economies are emerging to free the people from the yoke that money imposes. Such debrouillard economies - Systeme D - are growing like an economic superpower across the world. Their adherents know - just like your mechanic knows - barter is nigh impossible to tax. They also know that the purpose of the economy is not to amass the most green pieces of paper, it's to redistribute wealth. Accumulation is about the ego, redistribution is about the community. It's hard going in Greece, but they have been given an opportunity to show the world that the birthplace of Democracy - a force far more important than cash - can democratise economics, too.

Ironically it is in the gaps of a broken system that the shoots of a different, new economy get a chance to grow. ... But while disaster reveals a society’s economic and social weaknesses, it also reveals where true resilience and real value can be found - in the ability of people to cooperate at the local level to meet a community’s needs.

-Andrew Simms

The change into a local economy, based on barter and a local - informally issued - currency, can actually serve to revitalise the economy without need of money. Europe, especially Germany, has been experimenting with local currencies for years now. They are complete fiction, just like any other currency, but they get buy-in because they can be spent locally. Local merchants make excellent first adopters because they realise no big-box store would ever accept such stuff. In Canada, we have the brilliant idea of Canadian Tire Money, which some local bars even accept on the occasional special promotion night. Canadian Tire knows that Canadian Tire Money keeps people coming back. Parts of Greece are now using the Local Alternative Unit to purchase goods. Does money have to be centrally issued? No. In Canada, you can settle a debt for goosefeathers if both parties agree. You can't pay taxes with them, but contract laws allow you to barter anything for anything, so long as both parties agree to the transaction.


People are even considering new ways of making business equitable. Co-ops are growing in popularity. There is a plethora of startup information online for creating co-ops, and analyses of how a cooperative economic system might develop.Other systems exist, such as a "Circular Economy" based on recycling; Holonic credit networks that are holographic groups of groups of groups that trust one another and are willing to extend one another credit based on their relationships; and Sharing Economies much like the gift economy discussed above. These are all viable ideas that fly in the face of the monetized "everything has a dollar value" paradigm. 



Economies that run on money work, but they don't work equitably. Certainly they drive all sorts of interesting social and industrial forces... but I'd rather be assured by my economy that I can eat than be assured by my economy that I can keep my teeth white and hair tangle-free. The goal of an economy is to redistribute wealth fairly. A even a free market can distribute wealth fairly - if we construct it with that aim in mind.

More Jane Jacobs

I was just finishing off my latest Jane Jacobs book, and it led me to consider the utility of local currencies for major cities as being a good way to regulate price signals within a national economy.

The concept is that currency is supposed to regulate national economies through its very design: good in theory. Economies that expand will have higher demand for their currency, thus valuing the currency higher, thus tempering demand for their relatively expensive products. Economies that contract will have lower demand for their currency hence the value of the currency will fall, creating a greater demand for their relatively cheap products. It works, in theory.

But as a great man once said "in theory Communism works... in theory".

The rub is that nations are not perfectly measured economic regions. With regard to economy, nations are entirely arbitrary constructions of economic regions. Detroit is more economically integrated with Windsor than Butte. The fact that Windsor is across a national border and Butte is not is entirely inconsequential to money - especially in the era of free trade. Can the economy of Switzerland compare to the economy of Sri Lanka? I would rather have 100 Swiss Francs than 500 Swiss Francs worth of Sri Lankan Rupees. Nobody except the Sri Lankan government will buy Sri Lankan Rupees, they are utterly nonexistent outside of their country. The entire currency rests on the fact that Sri Lankan foreign workers send home Sri Lanka's foreign currency reserves in the form of Emirati Dinars and American Dollars. The same goes for the Philippine Peso. The demand for the currency is almost artificial because the produce of these nations is of vitually no utility to the international market. At least not of enough utility to justify buying a float of Philippine Pesos.

If the Philippines or Sri Lanka could produce the range of products that Switzerland does, and have banks as secure, and civil society as advanced, and an income disparity as low... then the use of currencies to even out economic differences might be somewhat justified. As it stands, if I want a good watch, I will buy one from Switzerland at any price, simply because Switzerland will make it better. No matter how cheap a Sri Lankan watch is, it is simply not comparable to a Swiss one. If the products of the markets are not comparable, then the currency value is almost totally irrelevant.

Perhaps, however, Makati (a high-income Manila suburb) can produce a good watch. Perhaps Sri Lanka can cut diamonds just as expertly as Belgium (as they do, in fact - I've toured the factory). When merchandise is of comparable value - or as rigidly fixed as that of cut diamonds - then currency fluctuations can work to the benefit of economies. Rough diamonds are a relatively inexpensive industrial nutrient when compared to their cut and polished end product. With inexpensive Sri Lankan labour, and a curency that floated within the greater economy of Sri Lanka, a diamond cutting factory could make a real go of it. If Sri Lanka maintained the Rupee throughout the country and set up a different bank, mint, and currency (let's call it the Dippee) for the diamond-cutting city region, they could make a real go of it.

Initially, the Dippee would be at par with the Rupee, buying relatively costly raw diamonds but producing far more costly polished diamonds. The price advantages of the inexpensive Sri Lankan labour (earning perhaps $300 USD per month) would make the diamonds internationally competitive. Given the fact that the value of diamonds is more or less set - as it were - in stone, this margin would produce demand not simply for Sri Lankan cut diamonds but the Dippee with which those diamonds are bought. The relative strength of the Dippee would increase the workers' relative salaries above those of the neighbouring regions, and increase their purchasing power commensurately. This would create a knock-on demand for Rupees to purchase everyday necessities such as rice-and-curry and coconuts. The demand for the products that only Rupees can buy would make the Dippee an engine for economic development, giving the diamond-cutters a margin of disposable income with which to purchase imports. With imports comes import replacement, and with it, the development of an economic engine in the form of a city and city region.

Such a thing could be done in Canada for her cities. Consider this: a currency for Toronto, Montreal, Vancouver, and Calgary. Each city would control its own currency, with the bank reserves based on floats of Canadian dollars. I would provisionally call these currencies Hogbucks, Habbucks, Starbucks, and Bullucks, respectively. Each city would be able to float its currency against the others on a Canadian bourse with the reserve currency being the Canadian Dollar. Canadian federal economic policy could therefore be directed at the smaller city centres and rural Canada. This policy would have the intent of protecting rural produce as well as producing other import-replacing cities that strike an economic critical mass and are able, in turn, to float their own currency and support their surrounding city region. Purchases of Canadian regional currencies would be forced to pass through the Canadian dollar if they came from international sources. The Bank of Canada would be able to regulate all transactions between regional and national currencies, charging a reasonable margin on all transactions and earning a hidden tax for additional government revenue. This margin could, in theory, replace provincial sales tax.

Allowing city regions to float their own currencies can have the effect of either a trade barrier or subsidy without either unsustainable government payment or violation of WTO rules. This workaround can save embattled city regions when the global economy has them on the ropes: cities would be able to manage their money supply to produce the economic effects required to combat the influences of global economic fluctuations. This natural regulation of the economies of large cities could therefore be done without any recourse to bailouts from the central government.

And the next time the city of Toronto calls out the army to shovel snow, they can be charged for the service in Hogbucks...