Joined: Sep 30, 2004 Posts: 975 Location: On one of the blades of the fan
Posted: Mon May 30, 2005 10:06 am Post subject: Co-operatives, local currencies, as recession proofing
Co-operatives, local currencies, credit unions as a bulwark against recession
Many people, including Richard Heinberg and Colin Campbell, and our own MonteQuest, believe the result of Peak Oil will be a recession, or possibly a crushing economic crisis on the lines of the Great Depression. As we know, oil price hikes cause recessions, and we should be heading for one around now. There are plenty of grim economic indicators around.
I certainly feel that there is a whiff of it in the air: when I left college in 1981 I survived the unpleasant post 79 “Thatcher Recession”. I don’t particularly want to go there again if I can avoid it: in this post below the forum examined the Great Depression (or not so great, one ) :
My feeling is that this board undervalues the options of co-operative endeavour. During times of economic crisis, a variety of things happen, many people lose their jobs, homes, businesses, pensions; radical political movements spring up….some of them espousing ideas I know I’m going to loathe, but it is also a period of rediscovery of the strengths of community and solidarity.
By examining the past, we can prepare by taking the best, most effective ideas, and have them ready to apply when the time is right. Even if they are hard to get off the ground at the moment – don’t worry, their time will come.
I’m going to have to use the S word: socialism.These initiatives come from the bedrock of historical socialism. I know this word makes some of the people here see red. But consider this for a moment:
Where would you find an organisation which individuals contribute freely according to their resources: intellectual, time and/or financial; receive according to their needs; with a flattened hierarchy, where there really isn’t a boss class, and no profit is taken.
This board. You are already involved in a socialist form of organisation!
Now some of you have lost your socialist-virginity, and it hasn’t been too painful, though in some cases I can understand it was a bit of a shock, I hope you will at least consider what I have to say below, without dismissing it outright.
Historically, people suffering hardship have come together, for example in the depressions of the late 1800s, (which were the impetus for the formation of political parties like the UK Labour Party) in Germany in the 1920s, and many places after the 1929 Crash. We can learn from their lessons, and cherry pick what worked and avoid what didn’t. In the English-speaking world, the “social capital” - organisations gluing a society together, which include trade unions, buying clubs, PTAs, neighbourly self-help, volunteer projects, have been much reduced…some people even think they are laughable, contemptible.
Though it seems most extreme in the English speaking world, this is happening in other places too: a Norwegian Peaker(and PO.com member)I met at the Depletion Scotland conference said that his rural town was full of apathetic couch potatoes: Cross-country ski? The younger generation is lucky if it can wobble to its car.
It wouldn’t surprise me to find that social networks worldwide are being depleted.
I am going to detail a number of converging avenues to sustain and empower communities during times of hardship. These are all actual examples that have worked in the past. Some of you may well be already putting these ideas into practice, but in other areas it may not be possible to find much enthusiasm for them until they are really needed.
I am going to summarise them with pointers for further reading as I think this is the best way to approach this large subject.
These social structures can be broadly categorised as bottom-up co-operative strategies for mutual benefit, not external profit distribution.
For example: work or retail co-operatives, credit unions, building societies (UK term for locally owned mutual banks), local complementary currencies. All these can mesh together to ameliorate our slide down the razor blade of the Hubbert slope.
Even in a depression there will be jobs and services needed, but the capital and national currency to pay for them will not be there, even while there will be a ready workforce lying idle: these strategies will help combat this. I’m not proposing this idealistically, but in a self-interested way: I don’t expect that there will be a great need for digital media consultants like myself in the Long Emergency, so I’ll need to do something useful instead
These ideas are not my own, they come in particular from Richard Douthwaite and Bernard Lietaer, among others.
Bernard Lietaer The Future of Money Century Press 2001
Future of Money summit
(apparently Lietaer thought up the Euro, bet that makes some of you ecstatic Note these summits happen in NY – PO.com should send someone with nothing better to do…oops I mean a worthy delegate)
I’m going to ignore national government and trade unions, as I think the former is fossilised in denial and cannot help us, and unions - who deal with people in work, are often ill-equipped to cope with recessions, as the demands of the unemployed conflict with the unions’ prime purpose to defend their members’ jobs.
1. Co-operatives
There is a long tradition of co-operative endeavours where the workers (and sometimes the consumers) own, organise and manage their production, and any profit is distributed among the members or ploughed back into the organisation. The Mondragon Co-op in the Basque Region of Spain is an example of a formidably successful uber-co-op. It was formed in 1956 by a far-sighted Catholic Priest Fr Arizmendiarrieta, and is still going strong, the biggest business group in the Basque region, and ninth largest in Spain, its skein of many co-operatives still owned by the workers.
Further info on Mondragon:
Mondragon article
Co-ops have the advantage of building mutual responsibility in a community, instead of destroying it (e.g.Wal-Mart) as the people working there (who of course vote on how they want the profits distributed) typically want any surplus monies to be used to build schools or clinics locally rather than being sent to the nearest tax-haven, as is the norm with many capitalist organisations (e.g. Rupert Murdoch’s News International doesn’t pay any taxes in the UK, despite generating huge profits).
The Antigonish Movement of impoverished fishermen in Nova Scotia (Canada) in the 1930’s formed a co-operative: the United Maritime Fishermen, initially to avoid being ripped off by middlemen and to build a local canning factory so they could sell their wares directly. The profits then spun off into the local community where they could save money on nets by buying in bulk and reselling, invest in the tools to establish rug-making cottage industries, and set up schools and (importantly) adult education classes for the poorly educated fishermen.
Although co-operatives are generally dated in the UK from the Rochdale pioneers in 1844, who formed a consumers co-op, which is now called imaginatively, The Co-Op; if you think about it you can see that many endeavours pre-Capitalism were co-operative: in fact it was the norm, e.g. farming communities who distributed their produce amongst the family or clan members.
Further information:
The University of Wisconsin Center for Co-operatives
UWCC
Here’s a znet article about co-operatives in Argentina after the economic crash in 2001
Znet Co-operatives article
2. Complementary currencies
Quote:
Douthwaite/ Short Circuit:
“The establishment of a local money system is absolutely fundamental to greater economic self-reliance.” Chapter 3
Bernard Lietaer has demonstrated that national currencies, being highly mobile – particularly the dollar – can easily just disappear away from a community. If you think of your nearest supermarket being a huge Hoover, sucking up your money, and piping it into a bank a thousand miles away you can see that your money is not benefiting your local community – especially as the jobs created by the supermarket will be low-paid, and it inevitably destroyed more local retail jobs than were created. Compare that, if you will, to a currency that has to be spent in your community – you literally get more bang for your buck in terms of the energising effect of more transactions (see Douthwaite’s Short Circuit). They are commonly called LETS, for Local Exchange Trading Systems. Computerisation makes the administration of such a system much more practicalble today.
Lietaer calls “alternative” currencies “complementary currencies” because he believes they are not likely to displace the convenience of national currencies (or supra national like the dollar or the euro), but work in parallel with them.
One important factor that I have discovered is that the most successful Complementary Currencies have an incentive to spend, not hoard, for example the original German 1919 Wära: you had to pay a 2% fee to have a special stamp to revalidate them after each month – today this cumbersome method could easily be dispensed with and a “hoarding disincentive” added via internet transactions.
This is the effect of the currency on the very depressed town of Schwanenkirchen in the 1930s:
Quote:
Short Circuit
“Nobody in authority took much notice of the Freiwirtschaft [Wära] currency until 1931 when the purchaser of a defunct coal mine at Schwanenkirchen, a village with a population of five hundred in Bavaria, was able to re-open it by paying the miners in Wära which he had arranged they could spend in the village shops. In their turn, the shopkeepers forced their wholesalers to accept Wära and the wholesalers passed them back to their suppliers, who spent most of the notes they received on buying Schwanenkirken coal since there were few other ways in which Wära could be used. According to an account published in August 1932 in an American magazine, New Republic, the effects on the village were dramatic: "One would not have recognised Schwanenkirchen a few months after work had been resumed at the mine. The village was on a prosperity basis, workers and merchants were free from debts and a new spirit of life and freedom pervaded the town....Reporters came from all over Germany to write about the 'Miracle'" . The article pointed out that if Reichsmarks had been used in place of Wära, they would have been hoarded because of the uncertain times and the venture would have failed. Moreover, even if they had not been hoarded they would have dispersed all over Germany and there would have been little likelihood of their returning to Schwanenkirchen and increasing demand at the mine.”
Chapter 3
NOTE: I think that if you are going to start an alternative currency it should be called something different than the Green Pound, or Dollar, or Euro , something that suggests it is not merely a substitute - for example in Brighton the currency is called the "Bright", which I think sounds much more positive.
3. Credit Unions and Building Societies
During previous hard times, local credit has been hard to obtain by the poor. Obviously that isn’t the case at the moment where virtually anybody who can sign a piece of paper can get a credit card. However this may not always be the case, and credit unions and building societies (dunno the US term for them) are locally/mutually owned banks which give out loans for the poor (and many of us, however well-off we are now, might end up being poor post peak).
Usually you have to save a certain amount to get access to low interest loans. Obviously they could use local currencies, or national ones as appropriate.
Douthwaite says, discussing conventional banking institutions and their effects:
Quote:
“This means that the economic system has positive feedback: prosperous parts of the world get more investment because better returns can be had from projects there, which makes them still more prosperous, while poorer areas have what capital they possess taken away. As a result, the poorer areas fall further behind and people living in them are forced to leave to seek work wherever investment is going on. They take up residence in the expanding areas and add their spending to its rising income flow, generating further investment possibilities. A major cause of the emigration of young people from rural Ireland is that their parents have allowed their savings to be invested away from home.” Chapter 4
And:
Quote:
“The existence of positive feedback means it is not just movements of capital across national boundaries which are harmful. Substantial, continuing capital flows from one part of a country to another are destabilising too, leading to prosperity in one area and decline in another. However, in the absence of any political recognition of both facts, endangered communities are going to have to limit such flows themselves if they are to survive.”
He’s talking about poorer communities – but I think post peak endangered communities may include over-qualified, redundant techno geeks like myself…and other persons on this forum.
Quote:
Douthwaite /Short Circuit:
“For example, the farmers who lent £943m. to the Irish banks in 1993 would have been paid about £10m. in interest, while farmers borrowing the same amount would have paid perhaps £113m. for the privilege, making a net loss of around £100m. to the farming community. Not all this difference would have left rural areas because some would have gone to pay the bank staff and thus been returned to the local flow of national currency. However, since branch operating costs are usually less than half a bank's income, using outside banks to effect a transfer from one group of farmers to another caused a substantial net drain from rural areas.” Chapter 4
He then proposes local banking systems – the Credit Unions:
Quote:
“In many places it is not necessary to start from scratch to set up a local banking system. Ireland and Britain already have almost a thousand independent, co-operatively-owned community organisations busy recycling their members' savings locally at stable interest rates - the credit unions….. Internationally, the movement's stronghold is the United States where 66 million people, almost a third of the population, are members.”
In these times of freely available credit, CU’s value to the community would seem to be reduced; but we’re preparing for a future where things will not be like that. It strikes me that joining a CU is “battery backup” for the mains power of the banks failing. What if a housing collapse meant that members of this board were forced into bankruptcy? Conventional institutions will treat you as though you are radioactive, but that may not apply to CUs. Particularly if you join now in the good times, so you will have a good track record when the fabled ordure meets the propeller.
I think that a combination of these various ideas will be beneficial in your local area, if the peak-oil recessions set in as we fear they will. Maybe some are operating already, but I suspect they will be absent or moribund. However they can be revived quickly. It may be providential if members of this forum lose their jobs, to be the first to set up one of these organisations in your neighbourhood, thus guaranteeing your indispensability!
Joined: Mar 18, 2005 Posts: 2570 Location: Minnesota
Posted: Mon May 30, 2005 12:08 pm Post subject:
QUOTE:
NOTE: I think that if you are going to start an alternative currency it should be called something different than the Green Pound, or Dollar, or Euro
Joined: Dec 27, 2004 Posts: 12015 Location: zombie horde wonderland
Posted: Mon May 30, 2005 6:38 pm Post subject:
Eh, I tend to see socialism as something that's imposed on people by government, not something they take up on their own, so, I'm not so thrilled with the idea of socialism per se. I don't think this board is socialist. I'm not deriving any material benefit from it, as I would possibly from a socialist regime. Nor is it tribal, as I'm not working with you all to make our mutual living. Nah, this board is neither of those things.
As far as isms are concerned , I'm personally more in favor of tribalism, the idea of Give Support- Get Support and working together to make a living. It's a proven model. I'm all for local efforts in this direction.
There's already socialism in my area with the phone and electric co-ops, so we'll see how well they do during a recession/depression. I've not been active in them at all except to pay my phone and electric bills.
Joined: Jan 29, 2005 Posts: 362 Location: New Zealand
Posted: Mon May 30, 2005 6:51 pm Post subject: Re: Co-operatives, local currencies, as recession proofing
julianj wrote:
Where would you find an organisation which individuals contribute freely according to their resources: intellectual, time and/or financial; receive according to their needs; with a flattened hierarchy, where there really isn’t a boss class, and no profit is taken.
Sounds like the Open Source movement, sorta. _________________ regards,
Rostov
"Some {} are more equal than others"
Joined: Mar 18, 2005 Posts: 2570 Location: Minnesota
Posted: Mon May 30, 2005 8:11 pm Post subject:
All joking aside...I can see where you're comparing a co-op to socialism. But at a co-op level it's just that, "cooperation"...the problems begin as society begins to grow again & the demands of more hungry people force "leaders" to make personal choices for us.
We need more farmers...YOU will be a farmer! We need a dentist...YOU will be a dentist. Not that's just fine & dandy if you WANT to be a farmer or a dentist...but what if you don't?
Then you have the problem of "why should i do all this work to be the doctor of the town...when a toilet scrubber makes the same amount of "money" as i do?".
For a small nuber trying to survive, a co-op will work fine...as it grows & grows (which it will always do) is when problems start to arise.
Joined: Dec 08, 2004 Posts: 921 Location: 145'2"E 37'46"S
Posted: Mon May 30, 2005 9:14 pm Post subject: Re: Co-operatives, local currencies, as recession proofing
Great summary and links JJ, broadly agree completely. How to make its many aspects happen in time is another thing.
I asked David Holmgren about the role of local currencies, whether time or materially based be better, he said 'let a thousands flowers bloom', meaning i think how should he know, we've got to try all of them and see what works!
julianj wrote:
Now some of you have lost your socialist-virginity, ..
should spark a bit of teeth grinding among the reactionary!
rostov wrote:
julianj wrote:
Where would you find an organisation which individuals contribute freely according to their resources: intellectual, time and/or financial; receive according to their needs; with a flattened hierarchy, where there really isn’t a boss class, and no profit is taken.
Sounds like the Open Source movement, sorta.
While not many receive according to their needs, nonetheless think Open Source is a great model, in the sense that ppl see a need and work to fill it, educating themselves with peer support and experience. Thats closer to Anarchism or Mutual Aid, but i think it'd be wise to avoid too many old labels.
They may a) put off many people who think they know what they mean & b) trigger reversion to political/social thinking/thinkers that was created prepeak, when limitless (or at least substitutable) resources was still the operating assumption. I've yet to read anything convincing me that the theories of Marx or Adam Smith can be usefully applied in postpeak world, and IMHO there are now an awful lot of redundant/useless political science texts floating around misleading the unwary. I'm certainly not calling for new turgid tracts, just saying be very cautious with the old.
Thinking about the diff social enterprises JJ reviewed above, what would be nice is if Odums Energy systems language could be applied to describing those enterprises. Why? So that we could develop a library of enterprises: e.g. Food co-op model B needs inputs of x,y,z, the internal stuctures a & b, and can produce e,f,g outputs (those aquainted with ESL please overlook my complete bastardisation).
A community could then go thru said library, with list of their own resources in hand (some will have lots of labour but no transport, others lots of refrigeration but no cash reserves) and choose the best model for their situation.
Same might be done with local energy generation, with child & elder care, etc.
Even putting aside ESL, some standardised descriptors for diff social enterprises could go a long way towards making the many diff SE models (and there are v.many) more transperant and conceivable, and so do-able, to ppl across the country/world who have similar needs.
Joined: Apr 03, 2004 Posts: 6375 Location: My Grandkids' Farm
Posted: Tue May 31, 2005 7:53 am Post subject:
Not to get into a political argument, but instead of
“individuals contribute freely according to their resources: intellectual, time and/or financial; receive according to their needs;”
I prefer, “produce according to their abilities and receive according to their production.”
Certainly there must be someone(s) to decide what “their needs” are, so it seems counterintuitive that there could be a “flattened hierarchy” in such a system. I do think there are many roles for government bodies large and small, but administering everything isn’t one IMO.
The main problem in my mind with a system where everyone owns everything, is that no one owns anything – like the adage; if more than one person is at fault, no one is to blame. Our current corporate system is the perfect example, I could see reforms to make someone personally responsible for the actions of corporations.
As for local currencies I don’t really see the point – whether you trade in official monopoly money or Ronalds you still must set your own wage according to what the “market” will pay and decide what is a fair price you will pay for the things that you buy.
Having said that, certainly building ties within, and strengthening/diversifying your community is key, the other old adage that applies is:
“That’s what neighbors are for.” _________________ Make a plan and work it:
Joined: Dec 27, 2004 Posts: 12015 Location: zombie horde wonderland
Posted: Tue May 31, 2005 8:23 am Post subject:
In the sharing economy, in my experience, you don't receive "based on production." For instance, in the informal tribe I'm in with a neighboring family, we give them our extra eggs whether they "work" for them or not. We don't expect anything in return. They give us plants, food, and materials they don't need, apparently without expecting any payback. Of course what develops is a kind of gentle obligation - both groups feel that it wouldn't be fair to take without giving - and so the relationship ends up being reciprocal. I don't see why this couldn't be extended to a larger group of people. But to make giving mandatory, no, it wouldn't work. This only works if all agree to it voluntarily.
Joined: Apr 03, 2004 Posts: 6375 Location: My Grandkids' Farm
Posted: Tue May 31, 2005 10:56 am Post subject:
Certainly unless the community included everything that one needed, at some point something must be produced and sold to purchase outside products.
I see two different things here. Saturday my neighbor helped me by trailering my calf to his place to use the squeeze chute for doctoring – in addition to the benefit of his lifetime’s experience. Yesterday I spent 4 hours helping him dislodge net-wrap that had become tangled in his hay baler. A simple “Thanks for the help” was all the payment required in either case – that’s what neighbors are for.
On the other hand, when it is time for me to do a ‘project’ such as remodeling a bathroom or building feed bunks for him or him selling calves to me, these are a business transaction at which we each make our livings – at least in part. I charge him for my skills at whatever the going rate is and he charges me at market value, whatever that might be.
Since we both could spend all our time helping out neighbors with ‘favors’ and there is a limit to what the local community can produce, at some point we need to produce for a profit. It seems to me this payment for services is simply a formalized way of ‘returning the favor’ so that we can each purchase outside goods. There isn’t anything evil, corrupt or demeaning in such a system, just practicality. _________________ Make a plan and work it:
Joined: Sep 30, 2004 Posts: 975 Location: On one of the blades of the fan
Posted: Tue May 31, 2005 3:02 pm Post subject:
Thanks to everyone who responded thoughtfully. I really don't care whether you call it socialism or open source - just thought I might get a rise out of some people on this board, who are proverbially to the right of Attila the Hun
Quote:
Pops
As for local currencies I don’t really see the point – whether you trade in official monopoly money or Ronalds you still must set your own wage according to what the “market” will pay and decide what is a fair price you will pay for the things that you buy.
Perhaps I haven't explained it very well. Short Circuit gives many real-world examples where "complementary currencies" are having an impact. They are not the same as national currencies. As I said I see them operating alongside the main currency. On the subject of pay, using the Time Dollars principle for example, every person's hour is worth the same as everybody else's whether you are paying for brain surgery or fence painting....well, you know what I mean, its unlikely that your brain surgeon will want payment in RonNM's Biggus Dickus currency!!
Also, as far as it seems to work in practice - local currencies are a way of extending the neighbourly obligation without having to build up the bond of trust that some of the posters above have developed
- for example - post peak, I'm unemployed, but someone wants their fence painted (no brain surgery for me); I agree a fee, in local currency, and paint the fence - then I can go to someone who has a small food allotment (who may also be unemployed) and buy some food. I don't need trust or neighbourly obligation just a currency that is worth something. Though after a few such transactions, a trust would have been built up.
Quote:
Pops
Certainly unless the community included everything that one needed, at some point something must be produced and sold to purchase outside products.
I'm not suggesting its the whole solution,or that it will do away with national currencies or outside interactions, just another item in the toolkit of surviving post-peak.
Joined: Apr 03, 2004 Posts: 6375 Location: My Grandkids' Farm
Posted: Tue May 31, 2005 3:41 pm Post subject:
I have to admit I only skimmed your links but I do have some real world experience in these systems. I found that it is very hard to find the things one wants in the network and as a result I wound up with a fat bank account that I couldn’t use.
Unless the object is to get out of paying taxes on your earnings I don’t see the point - there is already a well established US currency.
Further, to buy into the one hour of your time is worth one hour of my time one must assume that all levels of education/training/experience/equity are equal - you and me the fence painters’ time isn’t worth the same as someone with many years of education/training/experience/equity, at least in my opinion as a fair-minded fence painter, that doesn’t seem right.
If it were, then what would be the purpose of striving for education/training/experience/equity in the first place – we might as well all be fence painters.
You said: “I don't need trust or neighbourly obligation just a currency that is worth something.”
My only point is that there is already such a currency and as long as you don’t stash it under your mattress, it can do each thing you mention – of course I wouldn’t stash a local currency under my mattress either.
All I’m saying is not to throw the baby out when there are lots more nasty things in the bathwater. _________________ Make a plan and work it:
Joined: Feb 01, 2005 Posts: 162 Location: Devon, UK
Posted: Wed Jun 01, 2005 4:06 am Post subject:
Pops wrote:
My only point is that there is already such a currency and as long as you don’t stash it under your mattress, it can do each thing you mention – of course I wouldn’t stash a local currency under my mattress either.
What do you do if, due to recession, you lose your job, but still have to pay rent / mortgage? What if all the remaining national currency you have is spent keeping a roof over your head? Wouldn't you like to be able to earn some bread and milk? (at least until your next job).
(It's very worthwhile having a read of those links to see how these currencies helped people out during the great depression of the `30's.) _________________ We have no Plan B. Haven't we?Discuss!
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