'Complementary' Economics Won't Do It

Dil Green, 10th February 2021.


I’ve been involved in what I and others have typically labelled as ‘complementary’, alternative’, or ‘radical’ approaches to currency and economics since the mid 1990s – intensively for a few years, before a gap where I did less but thought more, and then increasingly intensively again since 2017. Through all this, I’ve heard of, been introduced to, worked with and explored the work of many, many excellent, creative, clever, thoughtful, wise, and humane people – names too numerous to mention. There is no shortage of excellent work to learn from, both historical and contemporary.

When we are asked for real-life examples, too, we have things to point at, solid, viable working systems – WIR Bank, Grassroots Economics, Sardex, the International Reciprocal Trade Association, the global network of community LETS groups – all helping people and businesses better manage the cruel realities of an economy run on systemically scarce money by using some version of self-created purchasing power, within a bounded context, on the basis of trusted value-creating capacity.

With the best will in the world, though, it must be accepted that all these – the academics, the writers, the inventors, the systems, the impact – remain at the margins, more or less ignored by governments, economists, businesses, bankers – even by most people working for radical change.

There are real and practical reasons for all this, of course – I could write at length about them. But in the end, if there is anything to the work we do in this domain – if an economy that is powered by collaborative finance really will benefit real people and real businesses in a straightforward way, then it should speak for itself. Seeing it in action, people and businesses should be saying – ‘I want in!’, and it should be spreading organically – the examples we point to would be spawning new instances, connecting together, and the approach would begin to seem ‘obvious’.

This is not to say that the projects linked to above are not dynamic – each is an amazing success story in and of itself – but nevertheless, the question; ‘if this is as good as you say it is, why hasn’t it gone mainstream?’ – is a valid one, and not one I have been able to give a simple answer to. Instead, I find myself rolling out a series of detailed explanations of one issue after another. These issues are real (communication, onboarding, usability, governance), but these aren’t fundamentals; they’re design problems – issues which it is our responsibility to solve. And ‘design issues’ can’t be an answer to the question – the details of the approaches referred to already differ markedly, and while these differences certainly result in different outcomes, they don’t appear to be responses to fundamental issues.

A new paper, though, by Tomaž Fleishchman, Paolo Dini, and Giuseppe Littera; Liquidity-Saving through Obligation-Clearing and Mutual Credit: An Effective Monetary Innovation for SMEs in Times of Crisis, together with further conversations I have had with Tomaž, has given me some new and useful answers to the ‘why not mainstream’ question. Three answers in fact: 

At the same time, by considering ourselves as providing ‘complementary’, ’alternative’, or ‘radical’ approaches, we have failed to understand that the range of legitimate technical ‘moves’ possible with accounting units, counter-parties and time is in fact relatively small, while the incentives for innovation have been high for centuries – making it unlikely that anything truly novel exists to be discovered. This has made it hard for us to see the parallels between our propositions and implementations of the same mechanisms in different contexts.

Tomaž’ paper, which I’ve written a separate post about, comprehensively demonstrates and robustly quantifies the kinds of benefit which have always been claimed by complementary currency advocates, showing that an SME network can reduce its need for hard cash in respect of its internal trade by around 50% through simple mechanisms. The work shows that our core proposition is valid; that it is both beneficial and practical for any community of value producers to manage its own internal means of exchange, and that this will improve people’s lives by better matching money supply to production and by increasing returns for collaboration.

The fact that efforts over decades to bring into general use easy-to-implement approaches which can provide such significant value have not succeeded must give cause for reflection and careful analysis. This is exactly the task Dave Darby, Oliver Sylvester-Bradley and I set ourselves when we set out to develop the Open Credit Network, which we launched in 2020, just before Covid hit. In the teeth of the crisis, we realised that if our work meant anything, it must address itself directly to the economic turmoil which the pandemic was creating. We began increasingly to realise that what matters is not the financial mechanisms themselves, however cool and geekily impressive, but how they are made relevant and applicable in particular contexts.

It turned out that explaining to potential users the workings of clearing and mutual credit – the mechanisms which produce these benefits – we succeeded mostly in raising more (and yet more) questions about how money works. These are interesting questions – profound questions, often, that of course we were interested in too; the conversations were excellent – but didn’t drive membership or dynamic engagement with the platform.

In the summer of 2020, with a wider group of collaborators that became Mutual Credit Services, the Trade Credit Club model was developed. With this achieved, we believed we had developed a package which could be easily understood in mainstream terms by its target audience (SMEs in developed economies) and which unites the powerful tools we’ve been advocating in a way which makes trading very simple – and will deliver significant immediate benefits to users, reducing trading risk and cashflow volatility.

At the same, all of the feedback loops which tilt the playing field a little more in the direction of collaboration, which incentivise relocalisation of trade and the circular economy, which emphasise flow and velocity of value-producing trade rather than hoarding of money units – all of the ‘new economy’ outcomes which drive us to do this work are firmly embedded in the model, without dilution. What we still lacked, though, was concrete data with which to demonstrate and quantify the benefits we promised. Tomaž’ paper, which we encountered a month or so later, provided this in abundance, to our great delight.

Working with Tomaž, now at Informal Systems, our focus is on identifying niches which will find immediate benefits and launching pilots in those contexts. These will be connected together through the Credit Commons Protocol for increased variety and network effects. This is our route-map for taking this work into the mainstream economy.