Three Circles of the Economy

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Heather Young sees the economy as a series of 3 interlocking circles, with the outer globalized circle having usurped the balance:

“With the current economic crisis, we have an opportunity to create tools and structures that facilitate a shift away from wealth accumulation and competition for scarce resources to a more democratic, cooperative, and caring economy. How do we start to make this transition? We must start to decentralize our economy and develop aspects of it that have disappeared after decades of free market and capitalist fundamentalism.

1) If you can imagine, we operate within three economic circles. In the innermost circle, immediate family and friends give freely amongst each other (though less than they used to) – this network of trust is primarily a gift economy, usually with no expectation of direct reciprocity.

2) Our local communities used to provide the middle circle of economy, meeting most of our basic needs that our families and friends couldn’t. This middle circle was made up of local government and also people and business we knew well, trusted and exchanged with regularly, usually reciprocally through barter or exchange of money. Evaluations of who needs what the most, who we trust, and who deserves the most would influence our trading. Today most of this middle circle is gone.

3) Now the outer circle, consisting exclusively of anonymous monetary exchanges in the global economy, determined primarily by the highest market value or profit, has consumed most of the two inner circles. We have very little control over this outer circle of trade and it has done great damage as it is run by businesses and people who have little vested interest in or responsibility towards the communities that they affect.

In order to create a better economy, we need to redevelop the inner and middle circles and reduce the dominance of the outer circle. There are many grassroots projects already underway to develop the inner and middle circles – worker cooperative development organizations, cohousing and cooperative housing projects, community credit unions, land trusts, urban community gardens, bicycle kitchens, free clinics, sustainable local investment programs, ridesharing, recycling stores, and community currencies are just a few examples. Though we can’t completely jump ship right away from the current economic system, we can slowly build alternatives as a transition to the new economy. Community currencies, though not a panacea, can be an especially potent fulcrum point in making this shift. Regional or municipal community currencies that are well constructed can help redirect wealth away from corporations and towards local businesses, local governments, and not for profit groups. They can also provide stability in a roller-coaster market economy so that people don’t lose their jobs and public services don’t need to be cut. Local currencies re -pattern behavior by encouraging local exchanges, relationships and local self- and small business employment, increasing local community self-sufficiency and sustainability. Spending locally results in three times the income effects, three times the wealth effects, three times the jobs, and three times the tax income, before it leaves the community. Community currencies combined with import replacement could drastically increase local wealth and stability. Ithaca Hours and Berkshares paper currencies are two good examples of paper currencies successfully being used in the United States, as well as the Worgl in Austria and the Chiemgauer in Germany. Over 300 alternative scrips issued in North America during the Great Depression.

For other needs and wants, we should create soft currencies within the middle circle that transition us towards the gift economy and indirect reciprocity. We should design these currencies so as to maximize feelings of abundance and trust in communities. Soft currencies include mutual credit systems like time banking and LETS (Local Employment/Exchange Trading Systems). Time banks are based on hour-for-hour exchange that reduces the emphasis on keeping score, creates abundance because we all have some time and skills to offer, and reduces inequalities through a single standard metric, the hour, rather than the market value of that hour. Because there is no interest in this system, there is no incentive to accumulate credits and no problem with being in debt. Wealth then circulates more fluidly throughout the community, which means people are taking care of each other. Time banks and other mutual credit systems now number in the hundreds in the US and in the thousands across the world. The most successful mutual credit system is the Swiss WIR bank, a business to business trading and accounting system, which has captured a significant portion of the economy and buffered it from depressions.

In order to create a more loving economy, we should also create as many opportunities for gift giving as possible. Gifting builds a collective consciousness that we are all in this together and we trust each other to take care of each other. There are many examples of successful gift economies. The entire country of Mali functions primarily on a gift economy. Other examples of gift economy are practiced in Black Rock City by participants of Burningman and in the Pacific Northwest by indigenous peoples during potlatch ceremonies. Spreading around the world contagiously are small events which epitomize the gift economy, called Really Really Free Markets, in contradistinction to the capitalist free market, which actually gives nothing away for free and tries to commodify everything. In a Really Really Free Market, skills are shared, services are offered, music is often is provided, and goods are given away, but no money, barter, or advertising is allowed. Everyone receives reward merely by seeing others benefit from their gifts and they may take whatever they need, whenever they need it, building trust that all will be provided for.

As we grow these inner and middle circles, we will see a shift toward a more democratic, cooperative, caring , and dare I say, loving economy. Our currencies, businesses, banks, and investment mechanisms should all be based on our highest values and the kinds of relationships we want rather than these tools and structures determining our relationships and our values. It is time to move forward consciously, deliberately and and fearlessly to create the new economy.” (