The Credit Commons is not a proposition for radical discontinuity, and still less an artefact of wishful thinking.
Whatever the urgency of a transition to an economy that interacts healthily with the biosphere, no proposal can succeed that does not present as a beneficial ‘adjacent possible’ for some significant fraction of the billions of pragmatic economic choices that are made each day by people with perfectly reasonable desires for security, dignity, and agency.
Much ‘new economy’ thinking is infected by ‘shoulds’ and ‘oughts’; these translate, crudely speaking, into moralising pressure and policy impositions. These are of course valid social mechanisms, and have their place, but when we look at the context of those daily billions of choices, we see that they are conditioned most immediately by the underlying protocols around how money works.
It is these basic ‘rules’ that lie at the foundations of all economic relations, institutions, and customs (broadly, these rules are: money understood as a commodity, centrally issued as interest-bearing debt, subject to both systemic and imposed scarcity) – and they constitute a kind of artificial ‘physics’, impervious to both moral and policy prescriptions. Upon this physics has been constructed the vast and complex edifice of modern economics and finance.
Two of Mutual Credit Services’ core tools – which can alter these underlying ‘rules’ without changing the immediate ways in which money is used for exchange or investment – are mutual credit and use-credit obligations. Although based on a profound understanding of money as credit (and therefore a promise, rather than a commodity or ‘thing’), neither require strange new language or deep study of monetary theory to provide immediate and obvious benefits to ordinary economic actors in a wide range of circumstances, and in fact have close analogues in long-standing use in the financial, corporate, and state sectors. The former offers an alternative to the underlying physics of the short-term exchange function of money, and the latter to the long-term saving and investment function.
However, the speed and scale of the transition that is required in the face of the existential threats facing our civilisation is such that we cannot simply offer beneficial new mechanisms into the economic landscape and wait for these to be adopted, adapted, and evolved. MCS’ work is therefore to actively co-design appropriate implementations of them with on-the-ground partners in specific contexts, demonstrating that ‘collaborative finance’ can underpin new markets, new incentives, and new choices.
Those who (for whatever reason) have significant asset holdings in the current economy are also needed – their active and voluntary participation in this transition is required, to ensure its rapid development – and this participation must translate into the assets of the new commons economy, as well as offer desirable environmental and cultural outcomes. We therefore need to fashion the two ‘planks’ of mutual credit and use-credit obligations into a ‘bridge’ into the commons economy for those who hold assets in the old.
This idea of a bridge is inspired by a section in Yanis Varoufakis’ Talking to my Daughter about the Economy, in which he writes about the birth of capitalism through the lens of the wool trade in England. Feudal landlords had the assets – the land, the serfs, and beasts that lived on the land. And they acquired and held them by exercising power. Land was not for sale, and neither was labour. Wool merchants, though, convinced landowners to throw the serfs off the land and to rent it in exchange for gold so that the merchants could grow wool and then sell it for even more gold.
The lords thus gave over control of the key asset of the feudal economy – land – in exchange for the key asset of the new economy – gold. In order to realise the value of that gold, though, they had to spend it back into that same new economy. The feudal lords both funded the development of market economies by providing land, and then helped to expand their scope by spending investment returns into them. Thus over time the new asset became more desirable than the old, because it was useful in many more ways, until eventually land itself became a saleable asset – enabling it to be allocated to more productive uses through peaceful trade rather than violent struggle.
The key outcome of MCS’ work is that our two planks – with appropriate social and governance layers – build an equivalent bridge from the current, extractive economy into the new, collaborative, commons economy. If we raise investment in pounds and dollars, and use it to (re)build the commons whilst paying fair returns on those fiat currency investments in collaborative finance assets, then in order to access their value the investors will have to become participants in the commons economy. As with the transition from feudalism to capitalism, this will be a welcome move for many – the simple fact of being wealthy does not mean that an individual does not care about the damaging impact of an extractive economy on others and the biosphere as a whole.
The most obvious use for fiat investment is to finance the work necessary for adoption of our tools by existing exchange networks and the development of new, collaborative enterprises and commons infrastructure. We have a variety of projects at various stages around the world, each of which are carefully designed to support community wealth building and circular economy outcomes, providing the evidence and inspiration for widespread adoption and adaption.
In addition, the Credit Commons Protocol provides the technical underpinnings for federating these collaborative finance networks into the emerging decentralised structure of credit issuance, accounting, and redemption that constitutes the Credit Commons. Because the protocol allows each group to simultaneously remain small and trust-based and trade with a large range of partners, Elinor Ostrom’s commons governance principles can be applied even in the context of the scale and diversity necessary for a modern economy. Local economic empowerment encourages the development of new participatory institutions, with the principle of subsidiarity (whereby decisions are made at the most local level possible) becoming a meaningful reality.
All the projects that MCS instantiates and supports are therefore constituted as mutuals, owned by and for their members, and underpinned by simple members’ agreements that encapsulate these principles. MCS franchises are contracted as service providers to these networks, providing expert technical, strategic, and governance support. We also work closely with the Credit Commons Society to promote our work as a core part of the wider movement to bring the economy back into the commons.