People in the know always advise us to “follow the money.”
Thanks to the Occupy movement, it’s become plain to a lot more of us that huge amounts of money are concentrated in a very few, very influential hands. Big business interests control politics at every level, and the name of the game is profit for the top managers and owners, with the bare minimum allowed to “trickle down” through taxes and philanthropy.
Nothing new in that picture. But there are some provocative new ideas arising about how to change a system that seems so entirely entrenched that most of us don’t even bother to think too hard about alternatives.
Last night I had dinner with some folks who are working on an alternative local finance program, called Common Good Finance. The idea is somewhat similar to local currencies like, for example, our homegrown BerkShares. But instead of paper money, Common Good will be an electronic credit system, based on R-credits.
One R-credit will equal $1 US, but the use of R-credits will be incentivized: if I spend R-credits rather than dollars, I’ll get a 5% rebate on every purchase, and even better, the merchant will get a 10% kickback for accepting my R-credits. That sure sounds win-win! What’s the catch?
There doesn’t seem to be a catch as far as the ordinary consumer and local vendor is concerned. The ultimate goal of Common Good Finance is to create a local, democratically governed credit union, to which businesses and individuals in a community could apply for low-interest loans and grants. The main criteria for approval would be: would extending this credit line be in the interests of the common good?
Forget about bankers getting rich on those exorbitant interest rates attached to every debt. Forget about too-big-to-fail banks preying on consumers in every town and city in the nation. Forget about municipalities cutting back on social services, including health care, education and affordable housing, because there simply isn’t enough money.
The people behind Common Good Finance believe that scarcity is a convenient fiction created and upheld by the central bankers who control the Federal Reserve. It’s convenient because it keeps the pace of debt constantly accelerating, and it’s the interest on all these debts that provides the profits that line the bankers’ pockets.
Common Good would create a monetary system where money circulates locally, and any surplus in the form of interest is plowed right back into the local community in the form of loans and grants to worthy individuals and causes. The local members of the R-credit system would be the ones to decide democratically, by facilitated consensus-building, who would get what.
As we talked about these intriguing ideas over dinner, the question came up of cronyism and conflict in this collective decision-making process. But as John G. Root Jr., one of the founders of the Common Good initiative, put it, “We know the system we have now is not working well for the majority of Americans. Why not try something new?”
In making his case for the R-credit system, John referred often to the American revolutionaries who decided to throw off the yoke of British tyranny and strike off on their own, founding a new country. Now, going on 300 years later, Americans find ourselves under a new yoke: multinational corporate interests that may make judicious grants to communities and non-profits through their well-heeled foundations, but would not want to see communities empowered to divorce themselves from the thrall of big business.
Having R-credits would encourage people to shop local, and it would encourage businesses to source locally too, since they could keep their R-credits in circulation that way and keep earning those 10% kickbacks on every R-credit exchange. Pricechopper and WalMart wouldn’t like this–but who knows, maybe they could be drawn into this network too! Maybe the idea of democratically controlled local finance is an idea whose time has come, an idea could even go global!
As an example, take the Grameen Bank, which was founded in one of the poorest countries in the world to provide poor women with low-interest micro-loans to start local businesses. It has grown exponentially; its founder, Muhammad Yunus, won a Nobel Prize in 2006; and its model is being replicated in many other parts of the world. Why not in the U.S.?
Common Good Finance is not alone in searching for outside-the-box answers to our current financial predicament. Economist David Korten has been working on what he calls “living economies” for about twenty years now; he is one of the leaders of the New Economy Working Group, which includes free thinkers like Gus Speth and Gar Alperovitz. The New Economy mission statement sums up the vision quite well:
“Effective action will shift the economic system’s defining value from money to life, its locus of decision making from global to local, its favored dynamic from competition to cooperation, its defining ethic from externalizing costs to embracing responsibility, and its primary purpose from growing individual financial fortunes for a few to building living community wealth to enhance the health and well-being of everyone. We humans face an epic choice between the certain outcome of continuing business as usual and the possible future it is within our means to create through conscious collective action.”
It does feel like an epic moment, a transition time pregnant with the possibility for positive change.
Let’s follow the money and let the revolution begin!
Transition Times 
mato48
/ January 14, 2012The phrase: “Follow the Money” for me means, that with every purchase I’m benefitting someone and I have to be careful with the money that I spend. It is not easy to find out where the money goes, because companies are owned by other companies and pay subcontractors or simply import the goods (from China for example).
I agree that counter currencies, barter trade, time banks, local credit unions have to replace big financial institutions like Banks (including the Federal Reserve), Casinos, insurance companies, and the Russian Mafia.
The Grameen Bank unfortunately is not a good example:
Grameen has done well in Bangladesh and several other countries, but it charges interest at rates of between 24 to 36 percent and levies service charges.
The interest rates in adjoining West Bengal, India, are much lower. Even the traditional Bania moneylenders charge between 24 to 30 percent. Bangladesh’s state sector banks, whose rural spread is wide but not as deep as Grameen’s, charge just 7 per cent.
In 1974, two years before Grameen, Ela Bhatt launched the Self-Employed Women’s Association (SEWA), a bank developed upon principles advocated by Mahatma Gandhi.
Renowned Indian economist Jagdish Bhagwati pointed out that, unlike Grameen Bank, SEWA had received no foreign money, and it has distributed dividends of 9–12 per cent annually each year since its founding. Throughout its existence, SEWA has been regulated by the Reserve Bank of India, staying strictly within the law and seeking no special dispensations.
In Grameen’s case, Yunus and his family members are in control (or rather were in control before his removal by the Bangladeshi government).
The company’s diversification into telecommunication (Grameen Phone is Bangladesh’s largest telecom company) and other expansion plans are maybe creating jobs but follow strictly the cut-throat capitalism playbook.
http://www.thefinancialexpress-bd.com/innerpage.php?page_category_id=90&date=2011-02-08
http://www.knowledgeatwharton.com.cn/index.cfm?fa=viewfeature&articleid=2501&languageid=1
What about the idea to reduce the importance of money, of personal property, of wealth, of inheritance altogether?
Jennifer Browdy de Hernandez
/ January 15, 2012Again, thanks for all this great info on Grameen, which I didn’t know–it was just the example that leapt to mind. SEWA is a better one, obviously.
Here in the US people don’t even want to pay inheritance tax, much less give up on the idea of inheritance!!! Property is totally sacrosanct here. Even though the 99% own so little of it….
leavergirl
/ January 15, 2012Mato is right about Grameen. Graeber’s book Debt goes into it… much corruption. And one of the people in Tunisia who burned themselves before the uprising was a street merchant who could not repay a microloan. We always have to dig deeper than the MSM tell us, and more than “green” media tell us too. Too many of them live off hype.
That said, I am glad something is brewing your way. We need people trying these new ways of doing money. There are as many ideas as there are alternative econ people; it would be good to have many more experiments so we move past theorizing.
As far as money goes, though, Graeber says that the periods in history where money was weak and credit systems were strong, worked better. Fraid I don’t quite understand it… read the book! Quite illuminating. He says that the tales of people using barter are bunk. It was gifting, or credit.
Did the people you talked to, Jennifer, have an awareness of the problem of power, and how in the past governments squashed such experiments?
Jennifer Browdy de Hernandez
/ January 15, 2012Thanks to leavergirl and Mato for the correction on Grameen. It was the organization that leapt to mind, but I’ve heard of SEWA too and it sounds like that would have been a much better example. Of course, the fact that Grameen is imperfect is an example of how difficult new economic models are going to be to implement. I will see if I can find Graeber’s book, I don’t know it.
The folks I was talking to seemed to think that what they’re proposing is legal, and therefore would not be reacted to harshly by the powers that be. But I have a feeling that if it got bigger than just a few isolated communities, it’s the banking community, rather than the government per se (though can we separate these spheres?) that would raise hell.
We also have a time bank here, which I have not yet tried, but it seems like a great idea. Definitely, we need to start living these experiments, not just theorizing about them!
leavergirl
/ January 15, 2012I am not saying it’s not legal. I am saying… if it works and starts spreading, it will be a threat. Discretion is the better part of valor in these waters…
IntuitiveLeap
/ January 16, 2012this is great to see 🙂 a group of people at the edge of ‘thinking outside the box’. it encourages me that conversations about new ways to provide the ‘means of life’ and new ways to manage the allocation of resources are happening, even within the USA. it seems to me that any social interface that has the effect of reducing the ‘GDP’ enjoyed by the current status-quo system will have beneficial effects on the society (even though it will certainly cause discord within the existing power structures and traditionally maintained national ‘norms’). it is simple enough to see that rising ‘GDP’ is not a measure of social health, rather, it is a measure of social inefficiency. take the example of the ‘health care’ sector. as the population spends more on health care, the ‘GDP’ rises. this leads me to believe that the more ‘sick people’ that society has, the better it is for ‘GDP’ (as currently understood). this is quite obviously inefficient from the perspective of ‘general human health’.
hats off to all the people who are trying their hardest to see the current box of thought for what it is and seeking alternatives.
leavergirl
/ January 16, 2012“The folks I was talking to seemed to think that what they’re proposing is legal, and therefore would not be reacted to harshly by the powers that be.”
To dwell a tad more on this. This is naivete put into words — if that is indeed how those money activists see it. The way the system works is… if it’s illegal those in power will do it anyway if it suits them, and employ stables of lawyers to either mask it or change the rules. Conversely, just because something is not illegal for the rest of us does not mean it will not be targeted. A law can always be slapped on as needed, later. Read Jensen’s Strangely like war. It shows how the forest activists started to get somewhere. Then those in power changed the rules, and the forests go mowed down anyway. This is, btw, not a new sort of corruption. That is how aggrandizing elites have worked, since tribal and village days. We gotta get savvy, grrlz and boyz.