Wednesday, June 29, 2011

Short- versus long-term radicalism: On mediation, timing, and the tactics of transition

The more radically-minded visitors to this blog may have experienced a sinking feeling while reading the previous post (dated June 25, 2011). Isn't the agenda set out there a massive retreat from the ambitious principles and goals offered in Parts 3 and 4? Well, I wouldn't call it a retreat, but it certainly is a step up in terms of realism -- and, therefore, a step down in terms of radicalism. The reason is simple: If we want to be serious about the ultimate transition we seek, we simply can't avoid putting into place what we might call mediations. The utopian often writes as if her vision could be implemented im-mediately -- a word that literally means "without mediation." Utopians usually neglect the inter-mediary steps through which we might wriggle out of the strictures of the status quo and start heading in a different direction -- a direction indeed oriented towards a utopian horizon -- since etymologically, ou-topos in Greek means "out of this place," or even "in no (known) place."

The art of mediation -- because an art it is -- consists of striking a careful balance between short- and long-term radicalism. Only very rarely, if ever, is a new set of radically new principles and/or practices implementable as such immediately. A change mechanism has to be found by which initial, very low-grade radicalism (perceived by most incumbent actors as nothing more than "innovation" or "new opportunities") will set in motion a sequence of changes leading, eventually, to high-grade radicalism in the long run. What is needed, therefore, is a gradual drift in principles and practices -- probably practices first, and principles later, when the initial new practices gain supporters -- and this means that, as I had announced in the very first welcoming post back on April 15, there will need to be several transitions rather than just one large one, so that the word "transitions" in the name of this blog is, indeed, aptly put in the plural. As a result, it's crucial to focus on the timing and sequencing of this long change process. Part 5 of this blog is, among other things, about how to conceptualize, spell out, and phase a three-step sequence:

1. Long-term goal: The continual operation, through free decisions by citizens, of a plural economy in which various modes of production, consumption, financing, working, etc. -- let's call them various "eco-logics" -- coexist within a world economy ruled by a socioeconomic constitution ensuring continual equality of opportunity, for each citizen, to move between eco-logics (without exorbitant systemic sanctions, although there might be associated costs) as his/her existential situation and worldview changes. This is, in essence, a genuinely free economy -- an economy peopled by reflective citizens who are able to determine for themselves which eco-logic they choose to submit to, and who are helped in that choice by a set of rules that ensure fluid circulation across eco-logics. The long-term goal is simply to have a (finally) just, durably sustainable, and humanly fruitful economy -- one in which only the truly unavoidable hardships of the human condition remain and can be shouldered without additional hardships coming from the economy.

2. Medium-term goal: The implementation of the framework conditions -- six of which I discussed in Part 4 -- that would ensure that this genuinely free, plural economy becomes a true possibility. Not, mind you, that it will immediately be put into place, since as we saw citizens will move at varying speeds depending on many parameters, with "pioneers" starting out first and later waves following them as the actual conditions for a coexistence of alternative eco-logics improve over time. The basic idea when creating the right framework conditions is that we thereby create a new "sustainability frontier" which -- similarly to the Western frontier in 19th-century North America (with apologies to native Americans for the analogy) -- can gradually fill up with people who, through a mixture of free choice and circumstantial pressure, decide to emigrate away from the increasingly unsustainable mainstream economy. The medium-term goal is to have in place the general conditions that will maximize the likelihood of the long-term goal of point (1) becoming reality -- without there ever being absolute certainty, as this would consist in violating citizens' basic freedom to choose.

3. Short-term goal: The "next step" -- which I have flippantly formulated as: "What do we do next Monday morning?" -- has to be such that system-maintaining changes in behavior can create small "cracks" through which enterprising citizens can (somewhat in the manner of small plant shoots in a cracked tarmac sidewalk, or of slight water infiltrations in a cracked concrete wall when the winter comes) set in motion a cumulative dynamics towards system-changing changes in behavior as well as in economic evaluation criteria. Let me give an example. Neither employers nor, for that matter, trade unions are going to support an Economic Transition Income (ETI) as long as prevailing employment and production conditions within the capitalist logic haven't changed sufficiently so that they realize that a truly plural economy will actually provide better business opportunities than the current mono-economic logic. Of course, radicals might claim that this perception could be generated in good part by the State creating specifically targeted taxes that would make most mono-economic activities less profitable for shareholders. But the question bounces back: Who, in the current economy, would support a government that would do this? Clearly, it would be a more expedient and convenient solution than citizens and intellectuals having to tediously "work on" mentalities in the corporate world -- but in actual fact, given the political economy of capitalist social democracy, even a radically modified tax scheme would require that corporate mentalities change. So there appears to be no actual choice, whether some of us like it or not: Unless a way is found to hook up the short-term pushes towards "cradle-to-cradle" production, "natural capitalism," sustainable Wall-Street investment, and employee participation in capitalist profits with the medium-term goals of an ETI, a World Transition Organization, a global de-growth compact, a new monetary system, an economic democracy, and a new political governance structure (all of which are necessary for the long-term transition towards a genuinely plural economy), we simply won't have a case. We may have a vision, we may have a good rallying call amongst radicals, but we still won't have a Next-Step case.

None of this means that we are to uncritically swallow the rhetoric in the management literature about all that's shiny and new and "revolutionary." Most of it isn't, and just serves to stop any medium-term, let alone long-term, change. Critically-minded citizens and scholars need to actively engage the political and business world in order to create genuine debates. My experience has been that this isn't at all easy -- and I suspect the inevitable difficulties linked to "telling the truth to power" while still depending on that power to effect the needed changes are what leads many radical citizens to despair and revert to angry and frustrated ideas loosely (and often lazily) connected to "revolutionary" rhetoric. I have been prone to such reactions myself when confronted with unyielding or closed-down businesspeople whose basic claim is that anything they hear needs to be done is already being done... so that the capitalistic bottom line is broadly sufficient -- even in the medium and long term -- and simply needs to be allowed to produce its beneficial "incentive" effects. As I wrote in the previous post, one of the main short-term shifts that need to be operated if we are going to build up a new social compact in the form of a Green New Deal is that our business schools start being serious about teaching genuinely alternative (although still system-maintaining) management, investment, marketing, etc. -- and this they will only do if there is pressure not only from students, but from the media and (surely a long shot) the business community itself. So it's down again to identifying the handfuls of "pioneers" who, while working inside the system, have the ability to act with low-grade radicalism now for the sake of high-grade radicalism later. Such businesspeople exist, but they need to be supported and also kept from slipping back into the status quo.

By the same token, none of what I say here disqualifies the more immediately radical downshifters portrayed by Juliet Schor or, perhaps more to the point, by survivalist or self-sufficiency-oriented thinkers such as John Michael Greer, Dmitry Orlov, or Sharon Astyk. (All these people's websites can be found here in the right sidebar.) Of course, at least Greer and Orlov argue that there is bound to be a "long descent" towards "collapse" which will, inevitably in their eyes, force all of us to scramble rather quickly for radically new solutions to old problems: How to get food, how to have heated shelter, how to cure basic disease, and so on. Astyk and, even more so, Schor display more confidence in a transition that might -- in the same fashion that Warren Johnson claims is necessary -- combine hands-on pioneers (Astyk is one herself; I urge you to read her fascinating Depletion and Abundance) and more hesitant latecomers in a gradual process of change in which current capitalism tries to invest in new "green" market niches, to create "green" business opportunities, and thereby generates the conditions for a more radical shift.

Clearly, the jury is out on who will, in the end, have been right about this. Perhaps my three-step process vastly underestimates the force of capitalism's resistance to being subverted from the inside -- certainly a claim that isn't devoid of plausibility. In which case, yes, there will only be irrelevant "next steps" that merely safeguard the system's status quo, or even a deepening of the system's bio-environmental externalities and anthropo-environmental internalities -- to the point where collapse will be the only re-equilibrating mechanism available, as Greer submits. While I do honor this view as a possibility that can't be brushed aside easily, I choose a different route here. The transitions that might lead us through a (3)⟶(2)⟶(1) sequence require a lot of critical vigilance, and they certainly aren't predictable in a deterministic fashion, but as a liberal and a democrat (in the European sense, though perhaps also in the US sense) I choose to bank on citizens' ability to embrace short-term steps for the sake of a radical long-term vision.

To act radically too early is often self-defeating. But to act non-radically in the short-term without a very clear view of the medium- and long-term radicalisms in whose name one might justify immediate compromises is just as bad. Like it or not -- and there are days when I, too, don't like it all that much -- short-term radicalism needs to be traded off against long-term radicalism. The whole art of mediation is never to lose the critical thrust of the long term, so as not to lose the raison d'être of one's short-term compromises and tactical alliances. The recent history of the labor movement and of trade-union involvement in the mere regulation (rather than subversion) of globalized capitalism shows that the task is far from straightforward. But perhaps today's progressives -- in the labor movement itself, but also the in the business world and in the sphere of political decision-making -- can regain some of the clout they have lost by focusing on the tough but exhilerating task of steering today's urgent eco-transitions, starting with a much-needed critical discussion about the Next-Step Economy in the name of the genuinely plural economy we need for the long run.


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This post from the "Eco-Transitions" blog by Christian Arnsperger is licensed under a Creative Commons Attribution-NonCommercial-NoDerivs 3.0 Unported License.

Saturday, June 25, 2011

Making sense of the "Next Step": Sustainable investment, eco-preneurship, European integration, international trade, and a Green New Deal

It's been a quiet three weeks since the last post of June 5, partly because I had other business to attend to and partly because, as I had announced, the blog's rhythm as well as structure are now going to change somewhat. The big question that looms after the 11 posts that make up Parts 1 to 4 is: What's the next step? In what direction to start looking for actually feasible, realistic steps that don't require a complete overhaul of the existing system, but that aren't going to close down the horizon, making the framework conditions offered in Part 4 forever illusory? In other words, before we can actually be on the new horizon, we first need a transition towards it (since the revolutionary model is all but dead and buried, except in dwindling rhetoric); but before we can even spark that transition, we first need transition-enabling shifts within the currently prevailing logic -- that is, shifts within globalized, financial-industrial capitalism, shifts within the system of world trade and planet-wide investment, shifts within the logic of rapid and wide-ranging mobility and of fossil-fuel-driven circulation -- shifts that both (a) remain sufficiently compatible with today's capitalistic bottom line and return-focused financial thinking and (b) make it possible for enterprising citizens, through the judicious use of existing institutions and existing modes of thought, to gradually "tweak" the incumbent thinking towards the conditions required to spark a genuine transition.

So let me be very clear here. Part 5 of this blog -- which, as announced, is going to be more extended in time, more varied, and also more "messy" than Parts 1 to 4 -- is not going to be directly about transition, and not even directly about the six framework conditions identified in past posts. It's going to be indirectly about them, but the indirectness has to be such that it can be rooted in what exists today. It's a long-term strategy, and given prevailing power relations it's a gamble, too -- some might say, a long shot. But we simply have no other choice -- none whatsoever. The path dependency of institutional and philosophical change is so heavy that we can only aspire to see genuinely new, deeply innovative, and truly "alternative" modes of working, producing, selling, consuming, sharing, saving, circulating money, and so on, emerge from within the institutions and the economic logic that prevail right now. This can be a deeply frustrating thought, but it's purely and simply factual nonetheless. Short of a revolutionary explosion and/or implosion whose historical instances have all been, without exception, catastrophic (many changes that have come to be called "revolutions" were, in fact, not quite that, but rather well-engineered transitions under exceptionally favorable structural circumstances) -- short of a revolution, the only option we have is to painstakingly produce piecemeal changes with the final horizon of deeper progress always in mind. And "piecemeal" doesn't necessarily mean ridiculously small or laughably negligible; at its best, it means homeopathically adequate doses of well-oriented change, carried out by enterprising citizens at the right places within the network of social influence.

The framework conditions for a transition will only become thinkable, and then feasible, if there are strategically and tactically wise citizens capable of using the existing logic (political, economic, cultural) in order to gradually reorient the existing criteria of evaluation and performance measurement, as well as the existing practices of production, work, trade, and consumption, in the "right" direction -- rather than merely using the existing logic to
reinforce their own power, wealth, and prestige within it. Such new enterprising citizens may or may not exist. If they don't, then the conclusion is clear-cut and bluntly simple: the status quo will prevail and the conditions required to eventually spark a transition will never emerge, regardless of how many of us wish they would or would want them to. The good news is that such enterprising citizens do exist. Some are pretty visible because they sometimes dress in slightly offbeat ways, make radical changes in their lives, and adopt new practices they hope can inspire others -- they're the so-called "downshifters" who embrace self-provision and voluntary simplicity, cutting back on many practices linked to consumerism, competitive production, and hyper-mobility. They make huge overhauls in their daily lives in order to attain what the social theorist Juliet Schor from Boston College has called "plenitude" -- and, as much as it pains me to say this given my own past research on downshifting and my deep sympathy for such movements, such huge micro-shifts have minute macro-effects. In fact, the deeper and more momentous the changes made at a very micro-level (in personal lives or in family lives), the less relevant they are at the macro plane unless they are inserted in a very broad -- hence, a very broadly supported -- movement for structural change. The changes we have most control over in our daily lives are those which have the least overall impact; when it comes to creating broad macro-shifts, we are powerless on our own. (I take this idea from the introduction to Feasta's excellent book, Fleeing Vesuvius.)

In today's vastly unequal economic system, with huge parts of the population scrambling for the basics and aspiring to enter -- yes, enter, not exit -- the consumerist treadmill, "plenitude" offers truly inspiring vistas for the well-to-do, but virtually no clout or leverage when it comes to overall, globalized political influence. In Europe at least, voluntary simplicity movements have not been able, over the past decade, to gain any political visibility whatsoever, and when they have it was only because more mainstream actors got interested in them and, inevitably, kept of their demanding objectives only what could be used for immediate purposes. In some cases, these purposes included mainly making more money -- and so, predictably, "greenwashing" and "social-washing" have become favorite activities within high-flying industrial, financial, and political circles. Grassroots movements often despair of the European Commission or the global business community (which includes up-and-coming representatives from China, India, Brazil, and Russia) ever shifting towards genuine sustainability goals. Those who despair can't be blamed in the short run.

Nevertheless, until some highly influential actors start to actively embrace what I would call a "Next Step" perspective oriented by our six crucial framework conditions, grassroots citizen activists will remain powerless to change things. This is a crude fact of economic and political life, regardless of one's deeper political options or utopian aspirations. Like it or not, in a massively globalized system such as ours, ruled in good part by large national, international, and supranational entities as well as by larger-than-life industrial and financial conglomerates, whatever change can happen will have to start from within that system. So I am truly wondering whether the actors of a structural shift in consciousness and practices, one that would actually shake up the current system and would usher in a shift towards new framework conditions, shouldn't instead be sought in more influential places -- places the downshifters are reluctant even to think about because they see them as part of the problem rather than as part of the solution: the corporate world (including large multinational groups) and the world of State-level and -- in the case of the EU -- European-level decision making. In other words, the world of attache-case-wielding, tie-wearing, iPhone-juggling, jet-plane-flying, board-meeting-attending businesspeople and bureaucrats who people our international airports and our city centers.

And lo and behold, in that world -- so alien to the downshifters and not devoid, let's admit, of arrogant and callous personalities -- there are individuals who do aspire to deep change but who believe, for ideological reasons or simply because they see no other realistic path, that such change will have to be tweaked out of the existing system. I've met quite of few of them over the past decade, women and men, older and younger, at informal lunches in between Commission or Directorate-General meetings, at family gatherings amongst otherwise exasperating small talk, at plush dinners after a business school seminar, in well-lit offices where time-out is taken from pressing functional duties in order to discuss "radical change" for an hour or an afternoon, or at late-night get-togethers in my university office to reflect on possible change from within. I have also been around quite a lot in the sphere of grassroots downshifting, in the heroic arena of radical disconnection, in the world of bike-riding, Indian-textile-wearing more-with-less-ers. Frankly, I've met irritating people (and I have surely irritated people) in both worlds, and I have also encountered luminous hearts and minds on both "sides." In fact, the binary vocabulary of sides and camps betrays an old, dying way of thinking -- one to which I have myself adhered for a long time but which, I am now more and more convinced, has become obsolete and even counterproductive. Citizen activists and economic and political decision makers are, to say the least, potentially complementary: The former should have the role of gathering grassroots momentum so as to channel the right demands towards the decision makers, and the latter could be uniquely placed to listen, hear, translate, and implement those demands via the existing power mechanisms. That for the time being neither "side" is coherent (since even "green" or "social" businesspeople fly jet planes and even "downshifters" have bank accounts and pay mortgages) is simply a sign that both are living within a system that makes coherence more and more difficult. Casting cheap blame -- which I've done myself on various occasions, much to my regret -- is useless; and so is leaving the incoherences as they are and keeping on chanting the TINA mantra that "There Is No Alternative."

So what might the Next-Step Economy, remotely but powerfully inspired by the new framework conditions we need to have a genuine transition, take root in? I'll need many posts to spell this out to satisfaction. But let me just start out by positing what I believe to be one very realistic, though not by that token necessarily easy, starting point.
  • To the extent that we're set, ultimately, on ushering in new ways of working, producing, and consuming, we need to gather momentum for what has been, in various documents recently published by the OECD or the UNEP, called the "Green Economy." And within that very broad project of reforming capitalism to make it more sustainable both environmentally and socially, one key aspect is green (or sustainable) investment -- that is, financial and industrial investment which, while still capitalist in nature, increasingly obeys the "triple bottom line" idea put forward by John Elkington: not just financial profitability, but also ecological and social sustainability. Only if this happens now, however unsatisfactory to the "radicals," will there be any chance that, one day, cooperatives and other social firms might be seen as broadly legitimate, rather than as mere freaks.
  • This tweaked vision of business has, of course, to be protected against various instances of "greenwashing" and "social-washing," and much critical vigilance is needed in that area. It also requires that, right from this moment on, our business schools build and constantly reinforce programs of alternative management -- not just as a facade to attract students (although this is already, in itself, a good thing, actually) but as a genuine laboratory to produce cohorts of more and more genuine "eco-preneurs": not just businesspeople who vaguely care about carbon emissions and want to replenish forests but, more fundamentally, leaders and decision makers who, assisted by technicians developing new models of non-financial and qualitative accounting as well as new business models that generate deep "social innovation," come to realize that triple-bottom-line activities -- even if, and because, they entail less-than-maximal returns on investments -- are fully legitimate and economically reasonable. Which also means that the rules of international investment protection might have to be modified gradually so as to allow eco-preneurial investment to thrive rather than be competed out by unduly "protected" mainstream investments.
  • To the extent that we seek, ultimately, new governance structures along the lines of participatory coordination and subsidiarity-based municipalism, we first have to start to reflect on existing political structures so as to make them gradually more congenial with the broadened equality-of-opportunity principle defended in Part 4. I want to focus mainly here on two aspects: (a) the EU and its integration process, to see how seeking to strike the right balance between centralization and decentralization, between closer a-integration and more federalism, might make post-Lisbon treaties more transition-friendly; and (b) the WTO as well as the multiple regional trade agreements, to see how international trade regulations might be very gradually made more congenial to the emergence of a global de-growth compact and an accompanying WTransO.
  • Overall, the conditions for a Green New Deal need to be investigated -- in the sense of a new social compact between governments, employers, workers' organizations, and citizens' organizations, so as to make sure that the three previous reform streams don't degenerate into a reinforcement of capitalism's current unsustainability. In other words, the forces and energies set free by sustainable investment, by alternative management and eco-preneurship, or by new methods of European integration and of international trade regulation, need to be harnessed towards a more, rather than less, sustainable system -- even if it remains capitalist for an indefinite time. And this will require that various actors, but first and foremost citizens' organizations and NGOs, become more conscious of the large-scale technical challenges that need to be grappled with if a more equal-opportunity-oriented system is to gradually emerge out of the "green capitalism" that is currently taking shape. In a sense, the question is: How to regulate "green capitalism" so that society can gradually reorganize itself in the direction of the six framework conditions required for transition? Without such an effort, the creation of an Economic Transition Income (ETI) or the gradual emergence of a Social and Solidarity Economy (SSE) sector will once again be halted by the "single bottom line" requisites of an unreformed (green) capitalism.
I have mentioned some of the six framework conditions again here, not because they should be the main direct focus of economic, legal, or political reflection, but because they ought to be the background motivation (however remote and, for the moment, theoretical) for the reform efforts to be carried out. The ultimate horizon of a fully-fledged economic and ecological transition should, as it were, act as a distant -- and, on a daily basis, largely imperceptible -- "attractor" for whatever changes we might realistically introduce as an immediate next step. For instance, to the extent that the very nature of investment can be modified, or that the principles of European integration or of international commercial integration can be tweaked, such reforms should be carried out in ways which don't preclude the deep overhaul of the capitalist monetary system at a later stage, or the emergence of a WTransO in the more or less distant future.

Grassroots citizens' vigilance might very usefully be maximized around such long-term, tactical issues. Indeed, such strategic surveillance of reform programs is going to be of paramount importance if the transition-horizon is to be kept open as the Next-Step Economy emerges. Citizens' organizations as well as NGOs should see it as their role to monitor immediate reform programs, not so much to demand immediate radicalism but to make certain that ultimate radicalism is kept as the basic orientation of systemic changes. This is certainly no easy task and requires collectives of very well-armed citizens, not just busy with localized downshifting and "plenitude"-seeking, but seriously and competently embracing the sometimes difficult technical issues linked to investment, trade, business models, European integration, and so on. Capitalism needs to be made more sustainable, in its various components, before the framework conditions for transition can be made to emerge, and only then will the pluralistic mixture of capitalist and non-capitalist ways of life (with the gradual demise of the unsustainable capitalist economy, hastened by the ETI and the reform of monetary creation) be seen as legitimate and, therefore, be supported by the actors who today -- not all with bad intent -- hold the reins of power.

The immediate task of the advocates of transition is to think of ways in which, as quickly as possible, sustainable investment can be fostered, eco-entrepreneurs be educated in our business schools, EU integration be reoriented and international trade as well as international investment be regulated in new ways, on the background of citizens' and NGOs', as well as politicians' and entrepreneurs', efforts to build a new social contract, a Green New Deal. This does not -- I repeat: not -- mean that research on basic income, monetary reform, or participatory coordination is thereby made irrelevant today. Such research still needs to be carried out and pursued, but mainly with the idea that we are building up intellectual and technical resources that will only become directly relevant once green capitalism has been reformed and harnessed -- and this requires those more immediate, apparently less radical, measures that I have just listed above, along with the technical expertise to make them both realistic and visionary.


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This post from the "Eco-Transitions" blog by Christian Arnsperger is licensed under a Creative Commons Attribution-NonCommercial-NoDerivs 3.0 Unported License.

Sunday, June 5, 2011

What transition? Part 4: Renewing the framework (Installment #6: Re-thinking money creation and fostering a new "ecology of currencies")

This last post of Part 4 draws heavily on my ongoing discussions and collaborations with my two Belgian colleagues Bernard Lietaer and Marek Hudon. Both of them, and especially Bernard, are recognized worldwide as specialists on parallel currencies, alternative finance (a.o. micro-credit), and "new human wealth." I discovered Bernard Lietaer's ideas -- encapsulated in his well-known and alas out-of-print book, The Future of Money (Century, 2001) and in his remarkable analysis, in German, of the archetypal "mysteries of money" in Mysterium Geld (Riemann, 2000) -- while I was desperately searching for new vistas on how to make money and finance work for the common good and for a renewed economy. (See his website in the sidebar.)

The 2008 crisis has rocked the foundations of the free-market idea according to which private commercial banks are the best agents to allocate capital across economic activities and to decide on who should get loans. Being the remarkable free-thinking man that he is, Bernard generously introduced me to his ideas about an "ecology of money" (some of which he shares, albeit with different accents and emphasis, with other thinkers such as Richard Douthwaite and Tom Greco), and these ideas came as a true revelation for me. I quickly discovered what many, if not the overwhelming majority of citizens aren't even aware of -- namely, that the money that circulates among us today via our bank accounts is privately issued: It's so-called debt money, having its origin in credit loans by commercial banks. Therefore, monetary resources mostly get allocated to ventures that generate a large profit as quickly as possible, and with little concern for sustainability (both with respect to externalities and to internalities). In forthcoming books with Stephen Belgin and Gwen Hallsmith, as well as in his own self-named publications, Lietaer has been expanding and recasting his ideas, in order to refine his advocacy of currency diversification as a major structural tool for change. One of they key virtues of his approach is that -- in congruence with what I have in this blog called "muddling through" and "pluri-economy" -- he doesn't advocate a wholesale abandonment of traditional, bank-issued currencies, and neither does he argue in favor of relocalization or de-globalization as a matter of dogmatic principle. Bernard is a visceral pluralist, and so his take on money creation is truly transitional: World currencies will still be needed for international trade; the dollar and the euro aren't set to disappear any time soon (except perhaps if further financial and banking crises, fueled by inadequate policies and ideologies, drive the last nails in the coffin of the current financial system); local, regional, and municipal currencies are set to become increasingly important -- but as complementary currencies rather than as wholesale replacements for what already exists.

I found this approach to currency circulation and money creation utterly fascinating, and as I was discussing this with Bernard I came to realize how much it coheres with the overall transition project that I want to spell out. Lietaer's, Douthwaite's, and Greco's work (as well as that, for instance, of Frances Hutchinson in a different tradition) has made me realize how very much the future sustainability of our economic system hinges on a new understanding of the role of money and on a new monetary architecture. That's why I have chosen to close this Part 4 with a discussion of these issues, technical and arduous as they might appear at first. So hang in there, you may find some of this stuff pretty technical. But having looked at some of the really technical economic literature on these topics, let me assure you: You ain't seen nothing yet!... I, for one, have tried to keep things very simple. (Bernard, Marek, and I have plans to further develop these ideas in joint publications over the coming months, but here's a first shot at some of them.)

*

6. Creating and circulating money differently, constructing a plural currency system, and helping people generate wealth in new ways

When I ended the previous post with the idea that capital ought to be seen as a loan from the democratic community to its social entrepreneurs, I wasn't just joking. I do believe that, if the transition to a sustainable pluri-economy is to take place gradually, there needs to be a new worldview where capital, and hence also money and finance, becomes a concern for communities as a whole -- in a democratic manner, and not just in the way it is done today, that is, not just by proclaiming the market-liberal faith that certain private actors (investors, bankers, stock market brokers, traders, etc.) will, by pursuing their private-profit interests, more or less cohere with the common good. This "invisible hand" argument still has some limited validity when it comes to ensuring that there is enough competition and that we can, in the last resort, use "exit" as a way to protect ourselves from cronies, bad suppliers, mediocre workers, and so on. However, to base a whole society and its economy on merely this article of faith has turned out to be a grave error -- and the financial crisis of 2008 has made this rather plain. Private banks have simply not been able to demonstrate what many mainstream economists have so long and so vehemently claimed -- namely, that the profit motive is a sufficient guide for the judicious and efficient allocation of real and financial resources. Significant components of "voice" should be introduced into money and finance (as well as into industrial relations, work relations, customer activism, and so on), and this is what I mean when I say that capital should be considered more as a collective-democratic variable than as a purely private one.

Let me hasten to add that this does not imply a return to centralized planning. I've said this repeatedly in past posts and want to emphasize it again. Decentralized exchanges and the free flow of monetary resources and financial assets is of paramount importance, but the rules and regulations within which this free flow occurs are subject to occasional revision. Postwar social democracies represented a momentous change in the framework rules surrounding the "freedom" of markets. It is my view (as well as that of more and more economists and social analysts) that a similarly momentous revision is called for today. We need a new wave of social democracy, and the status of money and capital in this new wave is absolutely crucial. That prudential rules for banks need to be tightened or made more adequate is certain. Continuing to reform the Basel Accords even beyond Basel III will undoubtedly be a crucial part of the immediate transition. That new financial-regulation institutions need to be created, or existing ones reformed deeply, as claimed in the recent Stiglitz Report on reforming the international monetary and financial systems, is equally certain. That Report even makes forays into participatory ideas when, for instance, it suggests (on page 106) that "Regulatory institutions (...) must ensure that the users of finance -- such as small- and medium-sized businesses, pensioners, consumers, and perhaps other stakeholders -- are given voice." This is, of course, laudable and certainly not to be scorned. However, none of it deals up front with the question of whether the private banking sector's virtual monopoly on money creation through debt finance is the best engine to drive a financial system. The implicit answer to this question seems to be a resounding and uncritical "Yes." But when it comes to the transition to a genuinely pluri-economic world, based on a notion of genuine equality of opportunity for all citizens to choose the economic mechanisms they agree to submit to, perhaps the issues of who creates the means of payment, puts them into circulation, and with what motivation, are more important than appears at first.

Be reassured: I don't intend to engage in any "banker-bashing." (Or maybe some of you will be disappointed. Well, I guess it can't be helped...) What is at stake here is a systemic logic, not the personal motivations, character, or failings of individuals or even of a "class" of economic agents. Private commercial banks are a centerpiece of any capitalist social democracy today. The way they generate money as a sector actually eludes even most of the people working on the branch shop floor. The credit multiplier mechanism, which sends any single loan reverberating across the whole banking system and generates a ten- or twenty-fold mass of scriptural money, is not a mechanism that can be detected at the level of any single banker's decision to make a loan. So there is evidently no conspiracy at work on a daily basis -- except when banks, as a sector, lobby governments in order to cover their risky or losing positions, as was done in most bailout programs throughout the world after 2008, as the German banks did with the Merkel government when it came to Greece's public debt, or as banks may do again if the stratospheric U.S. debt creates a dollar crisis. In today's monetary system banks simply do their business, managing their risks and trying to generate maximum shareholder value like any other private firm.

The problem with this is what most bankers themselves don't see unless they take a big step back, or attend a "Modern Money and Banking" course in an economics department -- namely, that the criteria used by private commercial banks as a whole to make loans have a significant macroeconomic impact on the overall orientation of economic activities and on their substantive content. In a nutshell, debt-money is only created when some bank, somewhere on the planet, decides that the economic project X or Y is likely to generate sufficient profit (or, more generally, to be backed by sufficient future net income flows) so that interest payments will be forthcoming over the whole duration of the loan. And these interest payments, of course, along with the bank's own proceeds from speculative or longer-term investments, make up the bulk of the profits to be redistributed to shareholders (after wages, as well as some huge bonuses, have been paid to employees). One way to look at the world economy is to see it as a huge beehive in which everyone is busy raking in sufficient profit so as to pay back loans over and above functioning costs and other financial expenses. All trade in goods and services all over the planet, as well as the production that precedes it, has as its ultimate goal the generation of numbers on bank accounts -- so that employees and suppliers can be paid, contributors remunerated (among which, shareholders), and profits kept for reinvestment or mere accumulation. But interest and capital have to be repaid to lenders, too. That is also a big component of the money that needs to be obtained through trade. Thus, it seems plainly obvious that the amount of interest to be paid, the lenders it needs to be paid to, and the criteria these lenders use to make loans, have a powerful impact on the orientation and intensity of world trade. For instance, if you need to pay a lot of interest charges (while already having to pay your employees and your suppliers), you will necessarily be inclined to want to sell (a) on the most dynamic markets, (b) producing whatever products or services will get you a quick buck, and (c) in a currency that will make it possible for you to hedge against risks of future loss of value. This is, in a nutshell, the portrait of today's trading system with its indiscriminate exports and imports of whatever sells (regardless of environmental or working-conditions content), its massive transportation networks (which have long relied on cheap fossil fuels) and its equally massive financial mechanisms designed to channel, say, dollars, euros, and yuans to where they can generate the largest and quickest profits.

One can't say that this system hasn't worked. In fact, it has functioned brilliantly. The whole postwar period, which saw the advent of the Bretton Woods institutions and all manner of regulation designed to foster trade flows and to create efficient institutions to transfer capital -- this whole period contributed to an amazingly dynamic trade and investment environment unlike any the planet had ever seen. After a half-century of butchering and horror, "making globalization work" for all and replacing nationalism and war with free trade and investment certainly was a noble and humanistic project. The achievements of the builders of Bretton Woods and of the European Community should not be diminished by the fact that, as it has turned out, the industrial-financial-capitalist brand of social democracy which Roosevelt, Keynes and many others envisioned generated massive bio-environmental externalities and equally, if not more, massive anthropo-environmental internalities. I emphasize this because I truly believe that the whole project of transition today has nothing to do with wanting to move backwards to some "good old time." None of the past systems worked better than the one we still have today, and most likely all of them were worse. That's not the issue. But neither can we use the great achievements of the past seventy years to now just stop further progress. That the post-WWII world has been able to build up a trade and financial system unlike any other doesn't need to imply that we can't, in the 21st century, build an even better one. It's ironic that many of those who have -- quite rightly -- hailed industrial-financial capitalist social democracy as a major progress of humanity are among those who accuse today's progressives -- who seek to overcome some of the major defects of the incumbent logic by ushering in a new logic -- of being regressive. In pure logic, just because today's system is better than any that preceded it doesn't imply that it's also better than any that might come after it. Sure enough, this needs to be argued and demonstrated, and there are also powerful interests at work today to discredit further progress -- but this has always been the case, and was the case as the structures of capitalism were being ushered in by 18th- and 19th-century progressives. It's in this spirit that I write this blog, and that I now want to discuss monetary reform.

One of the wellsprings of the transition model is the emergence of enterprising citizens who, with the help of the Economic Transition Income and supported by a whole new vision of what entrepreneurship means, would gradually emigrate as type-3 social entrepreneurs (see installment #5) to the sustainable niches opened up by the slow demise of the "brown-and-gray" economy. Clearly, all the framework conditions we've been discussing up to now are, each in its specific way, going to provide essential support -- in more or less direct fashion -- to these enterprising citizens. However, hard-line realists might brush all this aside by demonstrating that these pioneers and social entrepreneurs who gaze out towards the "frugality frontier" will, at the end of the day, succeed only in creating small and ephemeral pockets of alternative activity. These precarious ventures would, so the realist argument might go, last only as long as enough of their members still earn enough money in the dominant economy or can draw sufficient surpluses from existing capitalist investments. Such realists could even claim -- and they wouldn't be wrong -- that a viable but modest (and hence frugality-supporting) Economic Transition Income (ETI) would never suffice to finance all the costs connected with launching activities within the sustainable niches, such as the purchase of a plot of land and the construction or bio-climatic refurbishing of real estate in the case of an ecovillage, or the borrowing of funds to build up capital in order to launch a small organic farm, an industrial or craft micro-enterprise, or a larger-scale cooperative, and so on. Isn't this what, even today, explains why the "alternative" landscape is so sparsely populated and littered with the remnants of failed attempts, and why so many "downshifters" who have little money in the bank (and most of them aren't that rich, precisely because of their life choices) simply can't start or stabilize their projects?

What accounts for such failures? Aren't they blatant proof that frugalists and transitionists are, on average, poor entrepreneurs and that, on the whole, there's little redemption to be found outside of the great circuits of world trade and of global finance? Well, in the current state of affairs with the system as it is, the answer is actually: Yes. Alternatively-minded people can't get bank credit easily, and existing alternative finance institutions certainly don't have the critical mass or the donations or deposits that would make them capable of offering financing to a large enough number of enterprising citizens for it to make a difference. So it does look as if these alternative, sustainable niches are a hopeless case. As I explained above, most entrepreneurs, even the micro-entrepreneurs in the Third World who might have access to micro-credit, end up depending more or less directly on existing world trade and global finance. And that's why, indeed, I'm more and more convinced that little is served if we try to become enterprising citizens too early and start too quickly to focus only on the creation of alternatives for whose durable success the structural conditions aren't yet present. That sounds harsh but it is, in my view, an absolutely crucial aspect of a genuine transition: Sure enough, behavioral changes are indispensable and a deep change in worldview has to be brought about, and this can only happen through individual shifts in consciousness. However, a significant part of today's citizen activism ought to be devoted to creating the right framework conditions rather than rushing to realize one's dreams of "another world" in an actual world that's still too structurally hostile to them being realized... In other words, a lot of transition activism today has to pass through pretty classical channels of political militancy and advocacy. This might be sobering for the would-be ecovillagers among us, but I believe that a minimally detached analysis of the current situation shows it to be true nevertheless. Being "right" too early often leads to our alternative vistas not being able to become fully-fledged political projects.

One of the areas which transition activists need to invest in urgently is the area of money creation and the circulation of currency through bank credit. Sure enough, as many alternative economists from Herman Daly to Douglas Booth and Tim Jackson have emphasized, today's growth imperative is intimately connected with the allegedly insatiable desires of consumers. However, as many analysts of monetary mechanisms have argued (among whom Michael Rowbotham from the social-credit movement, whose book The Grip of Death I very warmly recommend despite its unappealing title, and also Margrit Kennedy, Richard Douthwaite, and Bernad Lietaer), in today's economic system the consumer is, after all, only the last link in a chain that has its roots in the necessity for all firms to make profits (over and above natural and human resource costs) in order to remunerate their shareholders... and their banks. According to an estimate by Margrit Kennedy in her book Geld ohne Zinsen und Inflation (Goldmann, 2006), interest payments on the private debts of firms make up between 15 and 25 percent of total "production" costs. Because of this logic of interest-bearing debt, there's a permanent inflationary pressure written into our system. But as Michael Rowbotham argues persuasively, since households are also deep in debt (especially in the U.S. where consumer spending makes for nearly two thirds of annual growth), in part because of increasingly exorbitant mortgage payments on their own or their landlord's real estate, their purchasing power is constantly being eroded and they become completely dependent on the wage-earning employment that the unsustainable mainstream economy is still able to offer them -- although it is less and less able to do so, since sizable chunks of profit are being used up to pay back creditors rather than to create new jobs. (Add to that the drive to economize on labor costs by creating less and less jobs that pay less and less well, and the picture of self-defeating wage dependence is complete.) Under such adverse macro-structural conditions, contemplating leaving the dominant economy in order to explore sustainable alternatives (as an employee or as an entrepreneur) is, for most citizens, akin to madness. They can't be blamed, because actually, it is.

Okay, so shouldn't there be more public assistance to remedy this situation? For instance, couldn't the government step in and finance a sufficiently substantial ETI (partly in replacement of existing conditional social transfers), as well as subsidizing the investments of the transitioners (for instance via zero-interest long-term loans)? Well, perhaps, but the bottom line is that taxes will have to levied -- since in our monetary system governments aren't allowed to issue by themselves, even under stringent democratic control, the money they need -- or, alternatively -- since prevailing rhetoric has it that taxes put a "stranglehold" on the private economy and create capital flights -- there will have to be an increase in the public debt in euros, pounds, or dollars, ultimately implying rising indebtedness with private commercial banks (since the money to buy government debt is itself created through banking debt somewhere in the system). If the government doesn't stimulate real and/or nominal growth by attracting investors and boosting the competitiveness of the country's capitalist firms, it won't be able to pay back its creditors and its credit rating will be degraded by (private) rating agencies such as Fitch, Moody's, or Standard & Poor's. This will ultimately compromise its longer-term capacity to finance the ETI and the transitioners' investments in sustainability infrastructure.

So here's the inconvenient truth: The monetary logic of capitalist debt which rules the day makes any collective transition project towards a pluri-economy based on a broadened equality-of-opportunity principle virtually impracticable. As it stands, our monetary system will get in the way of any "muddling through" process of gradual transition. This has nothing to do with any sort of conspiracy theory. Commercial private bankers aren't any more "anti-transition" or reactionary than any other agent in the economy. In fact, on an individual and personal level, they may be all in favor of a transition. But the systemic logic which their activity reinforces de facto makes a transition difficult. That's the reason why re-thinking the financial system is so crucial today for transition activists.

Now, status-quo realists may counter that States should simply be forced to extinguish their debt altogether: pay back past public deficits, create no new ones. Wouldn't that solve the problem? Not at all. In fact, another part of the inconvenient truth of this system of ours is that, if there were no longer any outstanding debts (public or private), there wouldn't any longer be a single dollar or euro in circulation in the economy! (This was one of the main reasons why the Fed encouraged a boost of mortgage debt in 2007 and why many institutions went soft on supervision, because public and consumer debt was all but saturated already, meaning that liquidity had to be created through other debt mechanisms -- one of them being household debt linked to real estate purchases. Many of the loans were sub-prime, but for a short time they sent credit multipliers rippling through the banking system. This created new money and the hope was that the whole economy would thus be jump-started and the bad loans paid back thanks to the rising housing bubble and a new surge in macroeconomic growth. The Fed's gamble was lost, as we now know.) The dollar and the euro are privately created currencies emitted by the commercial banks, under the "control" of a central bank whose main roles are (a) to ensure that the banks will keep enough reserves so as to be able to face potential cash withdrawals and (b) to look out for "too high" inflation so that debtors (households, firms, and the State) don't get away too easily with nominal rises in asset values -- since inflation basically benefits debtors and the owners of real assets and hurts the owners of financial assets. In such a system, there is a constant pursuit of debt rollover (i.e., new debts being reissued as outstanding ones are being extinguished) and, therefore, a constant pressure for growth, if possible in real rather than nominal terms.

Although perhaps needlessly polemical, Nobel laureate Maurice Allais's quip that the money creation mechanisms embedded in bank debt are akin to "counterfeit" does capture a crucial aspect of what's going on. In her remarkable book The Web of Debt (Third Millennium, 2008), Ellen Hodgson Brown recounts the pronouncement of one U.S. judge who, on behalf of a house owner who had been dispossessed by his bank, ruled that the bank had in fact been guilty of counterfeiting because it had lent and created money (through a mere scriptural operation) for which no prior wealth existed, not even in the form of deposits (since banks routinely lend more than the deposits entrusted to them). Moreover, the principle of interest-bearing debt generates a strongly competitive, rather than cooperative, economy. Here is how Bernard Lietaer describes the process:

"...interest is woven into our money fabric, and (...) it stimulates competition among the users of [the] currency. (...) When the bank creates money by providing you with your £100,000 mortgage loan, it creates only the principal when it credits your account. However, it expects you to bring back £200,000 over the next twenty years or so. If you don't, you will lose your house. Your bank does not create the interest; it sends you into the world to battle against everyone else to bring back the second £100,000. Because all the other banks do exactly the same thing, the system requires that some participants go bankrupt in order to provide you with this £100,000. To put it simply, when you pay back interest on your loan, you are using up someone else's principal. (...) In summary, the current monetary system obliges us to incur debt collectively, and to compete with others in the community, just to obtain the means to perform exchanges between us."

(Bernard Lietaer, The Future of Money, pp. 51-52, © Century, 2001)

Basically, we're living under a system where debt-money, as the only legally sanctioned means of exchange, is created and circulated by commercial private agencies (banks) under supervision of frequently semi-private agencies (central banks, many of which aren't public institutions, despite what their names seem to indicate) so as to create an optimal "business climate" for investors in financial capital and for providers of capital-driven private and public employment. Money is not fully anarchic, we do have institutions that "manage" it and that steer the current monetary system (from national or regional central banks all the way up to the International Monetary Fund and the Bank for International Settlements), but these institutions are mainly designed to uphold and maintain industrial-financial capitalist social democracy -- precisely the system which is getting dangerously close to unsustainability because of the persistent externalities and internalities it generates by its very logic. If we really want a transition towards a sustainable pluri-economy, with the help of all the framework conditions discussed in the previous installments, we need to address the alternatives that exist to this monolithic, private-monopoly money system.

The basic idea is that means of payment should exist in proportion to expenses that we deem adequate -- not just in order for miscellaneous private actors to reap maximum profits, but in order to reduce the multiple instances of crippling environmental and human stress produced by the economic system. Since the global de-growth compact (or economic Kyoto protocol) would require developed economies to become much more selective in the way they trade with each other, local currencies would quite likely become relevant again. As the spectrum of local economic activities becomes broader over time, locally earmarked means of payment would gain in stable and durable purchasing power, making it more and more rational for local economic agents to hold part of their money balances in local currency. One way this could occur, as Michael H. Shuman has suggested in his fine book Going Local (Routledge, 2000) [see his website in the sidebar], is for banks to have local branches that commit to dealing with local actors and not to siphon off the money of local depositors towards national or international investments. There are instances where this has worked, but usually it means some sort, and probably a substantial dose, of public intervention. Why would any private commercial banker in his right mind accept to forgo profit opportunities outside the local community? In other words, most local currencies are likely to be emitted either by the democratic community itself (as is the case in most Transition Towns -- see Rob Hopkins's blog in the sidebar) or by locally anchored non-profit financial institutions, which may either be private (as part of the Social and Solidarity Economy sector) or public.

In all cases, however, such local currencies would have the same status as the local currencies of European countries prior to the euro had with respect to the dollar as a world currency: They would be complementary local currencies, coexisting with the euro and the dollar, not replacing them. This is, in fact, sensible because we saw that selective relocalization and reasonable de-globalization are not abrupt, revolutionary moves -- they have to be compatible (via the crucial notion of subsidiarity) with a plurality of trade regimes, with most regions or municipalities developing both a stronger local economic fabric and lasting commercial links with other regions located as near to them as possible (or as far from them as necessary). As fossil fuels become more expensive, as climate change impels more and more countries to look for new options, and as local economies get revitalized as a result, increasing volumes of trade may stop being global and there might be a partial return -- for bioregional reasons of sustainability rather than for opportunistic reasons of nationalism or dogmatic regionalism -- to more restricted trade agreements. Bilateralism and its opaque power plays should, whenever possible, be avoided, but a "bull's eye" logic in trade, where you get what you need as close by as you can get it rather than scanning the whole planet for the very cheapest bargain (even if it implies a negative return in terms of net energy), is likely to be a new reality. Still, none of this would imply a disappearance of world trade. There should certainly still be a world currency, though more and more numerous voices are calling for the U.S. dollar to stop assuming that perilous function. Lietaer's and Douthwaite's idea of an "ecology of currencies" doesn't imply that there would only be local currencies. There should be, roughly speaking, as many currencies as there are legitimate trade areas: There is localized trade within a city, localized trade within a region, inter-regional trade within a broader but still circumscribed area, and international trade. In each of these cases, there are difficult technical issues as to how to actually delimit the optimally-sized trading area in an operational way. Whatever the case may be, there would be several complementary currencies, each performing a specific role in irrigating trade (and hence also production, work, investment, etc.) at the appropriate bioregional level. Each currency would need its own emission and regulation institutions, but there would be absolutely no reason why these should all conform to the current private-monopoly principle whereby commercial banks create money under the supervision of a (more or less private) bankers' bank, the central bank. In fact, as I explained above, there are good democratic as well as ecological arguments why such a monolithic logic should not prevail.

Local "economic communes" could, eventually, use the local currency to collect local taxes, which would give all local economic actors an incentive for holding at least a minimal amount of that currency, hence for trading locally with the people who have some of it to spend. (I am indebted to Bernard Lietaer for this idea, which is linked to the so-called "Chartalist" school of monetary theory, represented a.o. by L. Randall Wray's book Understanding Modern Money, Edward Elgar, 1998.) As a result, a fraction of the Economic Transition Income could end up being labeled in local currency, and thus spent on local goods and services, further contributing to a local revitalization. This would not imply that a citizen would lose his/her right to a full ETI if he/she moved to another place. The corresponding fraction of the ETI would simply be relabeled in the new local currency.

But how would local complementary currencies be put into circulation? I emphasized in the previous post (installment #5) that capital should increasingly be seen as as a loan from the democratic community to its social entrepreneurs, who in turn will use it to produce and sell as locally as possible, to employ local labor whenever feasible, and so on. (To repeat once more, local citizens would also hold national and/or world currencies, and would perform trade accordingly at higher levels, too. Local currencies are to be complementary, not exclusive.) This in itself implies that the criteria for financing investments would have to be modified substantially, since as we saw, the current logic almost forces all innovators and investors to skim world markets in the hope of reaping sufficient wealth (labeled, if possible, in dollars or in euros) so as to honor their own interest-repayment obligations. One way to have the democratic community decide is to replace private by State monopoly. Let me say immediately that neither I nor Lietaer really believe in this option. But it has an audience within alternative circles. The idea would be to snatch money creation completely back out of the hands of the private banking sector -- for instance, by imposing a 100% obligatory reserve rate or by making lending more than one's deposits illegal. Money creation would become a State prerogative again, under tight democratic control (so that no one here is advocating a discretionary right for government to use the printing press whenever it feels like it). The quantity of money would be calculated so as to correspond closely to the needs of the real economy, not the needs of private banks for profit (nor the central-bank mediated needs of financial-asset owners for low inflation). Economic activities would be financed through public credit institutions, or the equivalent of public banks. There would still be interest payments -- so that the growth imperative wouldn't be completely eliminated -- but they would accrue to the community rather than to the private banking sector. Rather than being the late counterpart of bank credits that were lent out while never even having been deposited, these interests would be sort of a tax that would allow to publicly finance a "social dividend" or social credit, an equivalent of the ETI. The State might therefore even be able to correspondingly lessen fiscal pressure on incomes, to the extent that both the ETI and transitioners' infrastructure investments could be financed through the social dividend. (For a discussion of social credit and basic income, see chapter 14 of Rowbotham's Grip of Death.)

If we don't just want to replace a private monopoly by a public one, we need instead to think up bottom-up solutions so that money gets created more or less endogenously when it's needed for specific types of transactions. One obvious solution is so-called mutual-credit currency, such as is being used in Local Exchange and Trading Systems (LETS) or in the Swiss inter-firm trading system known as the WiR (in German, Wirtschaftsring-Genossenschaft). There, without any intermediary and with a minimal amount of administrative coordination, non-interest-bearing credit lines are automatically opened and extinguished as individuals or firms engage pairwise in transactions. There are currently researchers and practitioners developing large-scale mutual-credit networks with elaborate compensation mechanisms so as to be able to broaden the scope of trade beyond small neighborhood or city communities (see http://communityforge.net/resources). Lietaer has thought up, and actually contributed to implement, other complementary currencies in municipalities or regions desiring to further specific environmental or social priorities. (See, for instance, his "C3" or Circuito de Crédito Comercial scheme experimented in Uruguay, designed to boost employment when there is a dearth of mainstream currency in times of financial or banking crisis. Website: http://www.c3uruguay.com.uy/. See also Lietaer's contribution to the WAT system in Japan, where a parallel currency is used to foster environmentally sustainable activities and ecological restoration by local NGOs. Website: http://www.lietaer.com/2010/05/the-wat-system-in-japan. See also: http://web.archive.org/web/20070302172021/http://home.debitel.net/user/RMittelstaedt/Money/watto-e.htm.) Another relatively decentralized and bottom-up way of creating non-banking currency would be to foster cooperative -- private or public -- financing networks within the Social and Solidarity Economy. (In Belgium, there is a Réseau de Financement Alternatif that studies and implements such solutions. The New Economics Foundation in the UK -- see website in the sidebar -- has also been very active in this area.) The idea here is that not-for-profit financial institutions would offer a service to the community and could charge much lower interest rates than the commercial banks who are being strangled by the disproportionate profitability demands of the investors who place their funds with capitalist financial institutions.

If you think I haven't really spelled out a very coherent picture here, you're quite right. I haven't. Research on parallel, complementary currencies is still in its infancy. After so many decades of private-bank monopoly on money creation, and after just as many decades of misleading most citizens into believing that money is created by the State, re-thinking money creation as a plural, decentralized, citizen-driven and democratically controlled activity is really difficult. We're struggling to discover the right mixture of top-down and bottom-up for each instance of a currency. Much will depend on the transition-related objectives -- better care for the fragile and elderly, more humane employment opportunities, greener production, more cooperatives, more "voice," etc. -- that we wish to assign to our various currencies. Lietaer and Douthwaite are both insisting on the fact that the more diverse our "ecology of money," the more resilient will be the various subsystems of our sustainable pluri-economy. I agree with them. And this means that monetary reform is most probably -- along with the global de-growth compact discussed in installment #1, with its fair and differentiated growth guidelines -- the most urgent framework condition in favor of which transition activists should militate, even before we engage in any actual transition initiative, which under current conditions is likely to remain almost invisible and to miss its full potential. The first steps of the transition will be political, to be sure.

*

CONGRATULATIONS! You have just arrived at the end of a long and grueling Part 4. We've spent six whole installments on some of the main framework conditions that I believe would be needed for a genuine transition to a sustainable pluri-economy to get off the ground:
  • "De-growth" and an economic Kyoto protocol
  • Fostering new governance through the creation of a World Transition Organization
  • Fostering new governance through participatory coordination and communalism
  • Introducing an Economic Transition Income
  • Deepening economic democracy and encouraging new forms of entrepreneurship
  • Re-thinking money creation and fostering a new "ecology of currencies"
These six conditions seem to me to be components of a desirable and not unreasonable worldview. Still, to believe they could be introduced next Monday morning would be madness. Well, okay, it's probably the case that to believe that anything at all could be changed next Monday morning (such as the kids starting to clean up their rooms by themselves) would be madness... But you know what I mean.

What, given the horizon traced out by these six central framework conditions, might be things we could start changing soon? What are the actual next steps we might take, not in order to instantly implement these six conditions (as if they could be suddenly couched into a new economic and social constitution), but in order to create changes which, although perhaps still far removed from the ideal, might put the needle of our compass in the right position or, at the very least, might help us not to forget that these conditions are the ones we're ultimately aiming for? Those are questions we now need to ask ourselves. Part 5 will deal with them as well as possible.

This means, however, that we're (finally) going to be moving into a different time frame for this blog -- and I suspect most of you will be relieved. Part 5 will extend over months, with regular eclipses as I also now look at, and debate with, other people's ideas encountered in books, in articles, or in comments sent to me. After this mad period of piling up long posts, we're now going to relax... breathe... take our time... I hope you enjoy the coming ride. I, for one, sure am looking forward to it. (I can't promise, though, that I won't ever again be posting long entries. Alas, I'm too long-winded to be able to commit to that.)

Thanks for having gotten his far, and for now embarking on the "Next-Step Economy" journey.


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This post from the "Eco-Transitions" blog by Christian Arnsperger is licensed under a Creative Commons Attribution-NonCommercial-NoDerivs 3.0 Unported License.

Thursday, June 2, 2011

What transition? Part 4: Renewing the framework (Installment #5: Deepening economic democracy and encouraging new forms of entrepreneurship)

As we embark upon the two last posts of Part 4, let me emphasize that all this is much less definitive and self-assured than it may perhaps sound. Sure, I've thought about it a lot, but nevertheless it's still work in progress -- an attempt to contribute to a wide debate that nowadays involves hundreds of scholars and thousands of citizens. No one in his right mind could claim that he or she is offering the "one and only" right synthesis of all the work that has been and is being done. In the end, the only thing that a blog or a book or an article can truly achieve is to become a determinant source of ideas and arguments for those who are in the daily business of muddling through the political and regulatory processes -- that is, those who are, day in and day out, dealing with the complex issues of the real world. Intellectual contributions have, I believe, a duty to reduce complexity -- not in order to mislead people or to oversimplify things, but so as to offer guiding orientations for the democratic and institutional debate. We can never avoid what philosopher Charles Taylor has called "strongly evaluative frameworks" (that is, ideas and orientations that offer us some sort of path through the thicket of reality). But neither can we avoid the fact of complexity and ambiguity, and this means that our guiding ideas and ideals will inevitably need to be confronted and mixed with others. "Political" is the name of the game of reality, and a sound political process is one in which each citizen and decision-maker has clear ideas as to what he/she is aiming at. To offer one set of such guiding ideas is my aim here. Nothing more.

In terms of the very enlightening taxonomy offered by Jennifer Clapp and Peter Dauvergne in their book Paths to a Green World: The Political Economy of the Global Environment (MIT Press, 2005), I would locate my work in a zone at roughly equal distance from the Institutionalists, the Social Greens, and the Bioenvironmentalists -- probably with a somewhat stronger weight put on the two former ones than on the latter. Like many institutionalists, I strongly believe that institutional reform at both a global and a local level is crucial, but that such reform can't possibly boil down to making markets work more "efficiently." Like most if not all social greens, I am convinced that ecological and human questions are deeply intertwined (so that purely technological fixes are, if anything, rare) and that we will probably not save the planet if we don't do something about the inequality-generating, structurally unfair features of the current economic system. While I obviously also share many bioenvironmentalists' concern for reducing global growth and for dealing with the pathologies of overconsumption, as well as for relocalization, I have become rather wary of too strident calls for across-the-board de-globalization as a panacea. Rather, I'd like us economists, along with our colleagues from international economic law, to be able to work out regulatory schemes that maintain some degree of international trade and international capital flows, but harness these powerful mechanisms in favor of selective relocalization and reasonable (as well as democratically sound) footprint and growth reduction -- a concern that is surely shared by most institutionalists, though not by the overwhelming majority of what Clapp and Dauvergne call market liberals.

So I guess we might identify this blog's basic orientation as, roughly, one of institutionalist social ecology, tainted by bioenvironmental concerns given the difficulties which decades of mostly market-liberal ideas and practices have not been able to fully resolve, and have sometimes even created and aggravated.

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5. Deepening economic democracy, re-thinking capital, and fostering a new entrepreneurial class

It's likely that growing sections of the alternative pluri-economy we're investigating here would not be capitalist in nature. Helped by the Economic Transition Income (and also, as we will see in the next installment, by new modes of monetary creation), the successive waves of pioneers and transitioners on their way to the "frugality frontier" may have neither the actual economic means, nor the psychological motivation, to merely re-create a system that would operate on capitalistic incentives. In a political landscape where participatory coordination and subsidiarity-based governance occupy center stage, ETI-supported citizens might be more prone to trying out new types of economic organization encompassing novel ideas about work, management, consumption, investment, saving, and so on. These citizens might be more open to the realization that while capitalistic incentives can be tweaked to a certain extent so as to deal with bio-environmental externalities (most notably, pollution), they are virtually incapable of dealing with the increasingly pervasive anthropo-environmental internalities, precisely because capitalistic incentive structures rely mostly, if not exclusively, on "exit" (i.e., the threat of losing one's rewards because other agents arbitrage away from us) rather than on "voice" (i.e., the possibility of cooperatively determining the constraints we wish to submit to). The anonymity of the market, which has been hailed as a major virtue of the modern economy, has become a handicap because of both externalities and (even more so) internalities. (I would encourage you to delve into the remarkable body of research built up over decades by Albert O. Hirschman -- a towering genius of political economy sadly deprived of a much-deserved Nobel prize.)

Now, attempting -- despite the difficulties -- to increase the intensity of "voice" in organizations so that anthropo-environmental internalities may be dealt with is, in essence, the project of economic democracy and, more generally, of the whole emerging "Social and Solidarity Economy" (SSE) sector. Cooperatives, in particular, purport to be firms in which decision-making incorporates at least a modicum of egalitarian speech and deliberative discussion. This doesn't exclude pragmatic arrangements where representative democracy might trump direct democracy. But as a matter of principle, the cooperative model relies on the capacities of human beings to agree on choices without them being purely imposed from the top by an aristocracy or an oligarchy -- which is the exact same idea that has driven the whole democratic ideal from the Enlightenment onwards. The idea of involving a broad spectrum of stakeholders in firm-level decisions in a deliberative manner (not reducible to so-called "shareholder democracy"), as well as the idea of applying multiple bottom lines (not all of which can be reduced to shareholder-value maximization), are ideas that have long been developed and practiced on the non-capitalist fringes of our capitalist social democracies. However, overall conditions became increasingly unfavorable to such ideas as the 20th century progressed and "socialism" was more and more identified with Bolshevik totalitarianism, while the consumerism-driven golden fifties and sixties gradually paved the way for Thatcherism and Reaganism by the late seventies.

The fact that economic and political conditions have been deteriorating as far as the viability of post-capitalist alternatives is concerned, has led many of us to portray the situation increasingly as one of total capitalist hegemony. This is, in fact, not correct. As Katherine Gibson and Julie Graham -- under the pen name J.K. Gibson-Graham -- have shown beautifully in their book A Postcapitalist Politics (Minnesota University Press, 2006), the economic landscape is even today filled with niches where citizens are trying out new ideas, or trying out older ideas in new ways. The same has been claimed, quite convincingly, by Colin C. Williams in his book A Commodified World? (Zed Books, 2005): The impression often expressed by critics of the dominant system (including myself) that capitalism is "total" and has become completely hegemonic is not empirically warranted; there have always been, and there still are (now perhaps even more than two or three decades ago), alternative practices within a plurality of visions of the economy. In fact, I don't deny this and even bank on it being the case -- how else would the idea of transition make any sense? The whole question is how to make these myriad islands of alternative practice into an attractive archipelago and, eventually, into a confederation of independent and mutually linked "bio-economic" regions -- not necessarily in the geographical sense but in the sense of providing viable, homogeneous, fully-fledged alternatives to the logic that dominates now? This is the raison d'être of this blog and of all the work that goes on nowadays about transition.

As far as firms and organizations are concerned, there are two main areas in which new framework conditions would be needed: (1) the legal forms of property, combined with new forms of accounting (a private law problem) and (2) the way business schools transmit the notion of entrepreneurship (an education policy problem).

Let me emphasize right up front that when I speak about post-capitalist or non-capitalist alternatives, I am not implying that the idea of "capital" should be scrapped. There can be no modern economy without capital, that is, without a principle by which resources are moved around -- within certain limits -- so as to finance, enhance, and support economic projects. But there can very well be non-capital-ist ways of handling capital. Cooperatives, for instance, have and need capital but are not driven by capitalistic incentives. The way they use capital makes them able, with varying degrees of success depending on managerial skills and on economic context, to fulfill their economic objectives in a way that doesn't generate the same anthropo-environmental internalities as in a capitalist firm. And while there are most certainly problems in cooperatives, some which are specific to the cooperative model, the general hope is that within a participatory economy such as the one I discussed in installment #3, citizens would develop a different attitude towards deliberation and towards each other in general -- not necessarily ushering in a golden age of mutual love and selfless altruism, but realizing that when it comes to facing anthropo-environmental internalities, cooperative attitudes (which don't exclude conflict and argument and might involve emotional upheaval) generally trump non-cooperative, competitive attitudes (which usually involve no open conflict at all but make people feel like they are being sanctioned by a faceless, anonymous force they have no relationship to). If human beings are to become better "environmental factors" for each other -- which is what my rather ugly expression "anthropo-environmental" means -- the right mixture between anonymity and privacy, in the one hand, and relationship and publicity, on the other, needs to be found. And if recent clinical evidence of alienation and suffering in capitalistically oriented organizations (be they private or public) is any indication, the capitalistic bottom line isn't sufficient to ensure this.

Surely, even in a participatory economy there are bound to be anonymous mechanisms such as markets or, in the democratic-planning model proposed by Michael Albert and Robin Hahnel, nested, subsidiarity-based citizens' committees that use calculated prices and qualitative information in order to allocate resources on a large scale. Arbitrage through competition -- or what Hirschman calls "exit" -- is an important part of a free society: Workers, customers, or producers have to be able to arbitrage away from consistently underperforming or corrupt trading or exchange partners, without necessarily having to justify their decision face to face. However, competitive arbitrage shouldn't be viewed as a principled attitude: rather, in a deeply democratic society infused with "voice," exit is to be used as a tool in negotiation and discussion -- as an ever-present threat to be used in the last resort -- but it can't be the primary and certainly not the only tool. A "voice" society is one in which direct or participatory deliberation, complemented when necessary by representative mechanisms, takes center stage in place of competitive anonymity, which gets relegated to the fringes. Thus, while workers' cooperatives never completely abandon the practice of laying off workers, they will approach the firing process in a very different way from a capitalist firm or from a public administration seeking to emulate capitalistic incentives. Similarly, the members of a consumers' cooperative will not at once give up the practice of ending up buying from another producer if the goods offered them are consistently and unashamedly of poor quality, but the way in which they will envision the shift to another producer will be different from the standard grocery shopper in a big supermarket or on an online website. Economic democracy is not about mere niceness: it's about using political voice as a hierarchically superior way of settling problems -- and this, of course, includes the use of deliberative processes in decision-making. (Which does not imply, of course, that in a cooperative economy all innovators, managers, workers, and customers would have to always commit to stay wedded to each other for life when "voice" has run up against unchangeable realities...)

Now clearly, within our capitalist social democracies there are already various setups that point in the right direction, especially in the area of labor relations. In most European countries, workers can't be fired without some modicum of contradictory procedures where unions and the worker himself may have some say. Similarly, employee stock ownership and participation in profits is already being encouraged by some mainstream management approaches so as to reinforce existing incentives towards efficiency and commitment. Zellig Harris's book The Transformation of Capitalist Society (Rowman & Littlefield, 1997) provides interesting insights about this. However, being part and parcel of capitalist social democracy, such arrangements remain squarely within a framework where anthropo-environmental internalities can't be fully addressed. Incumbent power relations, which are linked to the structure of ownership rights and the modes of economic governance associated with the capitalist bottom line, will still usually imply that "voice" can be used only in quite restricted ways (to the point of sometimes being made irrelevant), or that in actual practice it may be almost totally silenced (even if in theory there are legally sanctioned "voice" mechanisms available). As long as "voice" and participation are seen only as management tools to enhance capital's profitability for private shareholders, rather than being an end in themselves (acting as constraints on how far capital's profitability can be pushed), many anthropo-environmental internalities are likely to be poorly addressed.

Economic democracy, and the cooperative logic in particular, does make "voice" and participation an intrinsic end of the firm's operation. Now -- let me repeat -- this does not mean that by some magic trick all human-relations problems are suddenly eliminated. There are also abuses of power and oppressive relationships in cooperatives. The presence of trade unions in cooperatives can be perceived as problematic by even an elected and provisional management team, since often such firms proclaim themselves to be havens of mutual solidarity and reciprocity where everything can be discussed among equals, implying no need for any unions or other "employee" representation. This is even more so in the associative non-profit sector. In actual fact, this imagine of strict equality is frequently belied by concrete power relations and by an excessively patriarchal and much too "family-like" mode of governance. None of these problems (which are common to all "intentional communities" and can become terribly stifling) should be denied or minimized. However, it remains the case that the juridical status of cooperatives and other non-profits allows in principle for egalitarian "voice" and participation -- which is not the case for organizations and firms whose juridical status (e.g., that of an incorporated company) ties them to the capitalistic bottom line. In a cooperative, the breaching of equality can be used in litigation, and equality can be made into a legitimate claim by an employee. In a non-cooperative firm, it often can't.

So one key of the transition we need is a change in juridical status and in accounting principles so that more people can, if they are so inclined (and their ETI may also assist them a bit in doing so), move into a cooperative venture or, more broadly, into activities within a suitably democratized Social and Solidarity Economy (SSE). Assuming that enough people do so, we would see the emergence of a truly renewed economy obeying criteria of governance and evaluation which have the potential for resolving many of the anthropo-environmental internalities that plague today's system. Since, when one looks at the purely capitalistic bottom line, non-democratic firms have -- in today's predominantly capitalistic system -- a clear competitive advantage over democratic ones, an "unfair competition tax" (UCT) levied on the bulk of firms which haven't yet adopted democratic governance practices might well be warranted, so as to minimally shield and protect democratic firms during the transition. This UCT would therefore not be pocketed by the State but would be entirely redistributed to democratic firms as a protective subsidy -- one which would have to be made decreasing over time as the stamina of the SSE increases, since the UCT should by no means become a standing subsidy for institutionalized mediocrity. In fact, ideally the UCT should be distributed differentially to SSE firms and organizations according to how well each of them meets its specific bottom lines, i.e., how well it combines exit and voice in its quest for optimal non-capitalistic performance.

This implies that alternative measures of economic performance, more suitable for cooperatives (which may have a limited for-profit goal) and for non-profits (which may not be cooperatives), need to be found. This is a very complex area. We would need, in particular, to find a system of measurement in which what the capitalistic bottom line views as human-resource costs linked to value creation would be transformed into a component of the value generated by capital. I do mean a component of value, not merely a source of value. Human labor is already a source of value, and this is often what creates the internality problems, when all it is is a source -- rather than also a component -- of economic value. Indeed, it's precisely because no capital can ever generate any amount of surplus without the addition of human labor that "human resources" become a rather burdensome commodity within the logic of "capitalist capital." For instance, how might a job that was created, or even a wage that was paid out, also be counted as fully-fledged elements of the remuneration of capital? Undoubtedly, this would require that we stop seeing capital only as a means of exploiting natural, hence also human, "resources" with a view to making the highest possible profit, and that we start seeing capital primarily as a means of giving livelihood to a community of human beings and of contributing to the meaning of their lives. Such contributions to people's existence should be seen as results of a firm's activities, and not just as means to get a higher profit -- and, in addition, these contributions shouldn't all be reduced to the firm's accepting to chop off a chunk of its profits in order to grudgingly pay out a wage.

But is such a radical shift really imaginable as long as productive capital (be it industrial or financial) is allowed to remain strictly in the hands of people -- who include you and I as would-be pensioners holding shares of companies we often don't even know -- whose predominant approach to life is couched in terms of the profitable exploitation of the energy and knowledge of other human beings? Shouldn't the alternative pluri-economy instead be grounded in a regime of communalist property of capital in which the community as a whole would -- in a completely democratic, hence not at all "collectivist," manner -- decide on the ways in which human labor and economic capital ought to be combined? I suggested as much when I discussed the participatory economy in installment #3: One of the things the citizens' committees at all levels of decision-making would be busy with is the orientation of productive investment, trying to take into account not just short- or medium-term financial profitability but also various externalities and internalities. To the extent that capital was increasingly channeled towards the Social and Solidarity Economy (including cooperatives), we would witness the emergence of an economic democracy in which capital would no longer -- and in fact could no longer, legally speaking -- be a source of mere personal enrichment, but only a source for producing "communal" wealth that would, by right, flow to those who added their labor to the common capital.

Within this context, so-called "social entrepreneurs" would come in at least three varieties. One would be the Muhammad Yunus-type social entrepreneur, possibly sponsored by Ashoka or some other private fundraiser (as documented, for instance, in David Bornstein's How to Change the World: Social Entrepreneurs and the Power of New Ideas). People like Yunus believe that the capitalistic bottom line can be made to work for social objectives, through what he now calls "social business" (see his 2007 book Creating a World Without Poverty: Social Business and the Future of Capitalism). Such still relatively classic entrepreneurship is important to the extent that -- as we will see in Part 5 -- we want to harness the force of the incumbent economic logic so as to move on step in the right direction. The second, somewhat intermediate, type would be what John Ivanko and Lisa Kivirist have called "ecopreneurs" (in their 2008 book ECOpreneurship: Putting Purpose and the Planet Before Profits). These people insist not only on a "triple bottom line" (ecological, social, and economic) and on the need to always reflect on what "sufficient profit" means. They also move more and more towards small-size green businesses, trying to apply to their economic activities some of the ideas of E.F. Schumacher's Small Is Beautiful and Kirkpatrick Sale's Human Scale. The first type of social entrepreneurship has one strong limitation: Meeting "social" goals can leave the capitalistic bottom line's blindness and deafness to anthropo-environmental internalities unchanged. As to the second type of social entrepreneurship, it keeps wavering between standard, hierarchical modes of labor organization and truly democratic ones. Some -- though not all -- small-business ecopreneurs move towards cooperative types of work organization, going all the way to new juridical forms where managers are elected for limited periods, where workers are actual owners of the firm, and possibly even where various workers perform what Hahnel and Albert call "balanced job complexes" (that is, mixed activities combining manual, intellectual, and coordination tasks).

This, in fact, leads to the third type of social entrepreneur, one who will push the logic of the second type to its final conclusions (while keeping to the triple-bottom-line approach and actually sharpening it within the context of a participatory economy) and who will, in the process, also sometimes recapture one aspect of the first type -- namely, the de-sacralization of the "small." Indeed, some cooperatives or democratically governed organizations are not small-sized, and need not be. Economic efficiency may, in some cases, dictate larger-scale organization -- but this need not and, within the overall context delineated in installment #3, will not lead to the recreation of capitalist "social business" firms. Type 3 social entrepreneurs are the main ones who will create the conditions for the Social and Solidarity Economy (SSE) and, more largely, the sustainable pluri-economy I've been trying to describe in past posts. With additional macro-tools like the Economic Transition Income (ETI), the Unfair Competition Tax (UCT), and the new modes of monetary creation to be outlined in our next installment, such entrepreneurs might well create a new "frugality frontier" that grows while the mainstream economy -- which includes "social businesses" -- gradually contracts.

Of course, none of this will really be possible unless business schools make some pretty radical changes in the way they teach and transmit the notion of entrepreneurship. I am not -- please mark my words -- advocating a totally horizontal view which would deny any specificity to the enterprising spirit and to the ability to lead and direct groups of people. I do agree (and this may sound like a major put-down for postmodern hyper-egalitarians) that some individuals spontaneously have more talent than others for being entrepreneurs, for being successful coordinators, for being innovators, and so on. It's no use to try to deny this sort of fundamental inequality. This does not, however, imply that today's curricula are up to the task of bringing into the circuit a sufficient number of really "new" social entrepreneurs, namely, type 3 ones. Sure enough, while we are on a transition path, type 1s are going to be predominant, and "social business" will be a growing trend. That's not a problem in itself, and it may even be part of the solution -- provided the social business trend becomes, at some point, self-effacing so as to usher in genuinely social entrepreneurs of type 3. And such a deeper mutation can only occur if it is consciously engineered. Business schools have a huge, and still largely understated, role to play here.

Basically, business education ought to be, as much as possible, oriented towards what I'd like to call "neo-Scandinavian" entrepreneurship. By this I mean a form of entrepreneurship that combines a social-business perspective (the only realistic option nowadays, like it or not) with a politically lucid outlook -- an outlook in which the entrepreneur sees him/herself as an agent of the renewal of social democracy. If any sort of "Green New Deal" or, for that matter, any sort of Global De-growth Compact (see installment #1) is going to be implemented, international organizations, national governments, and local decision-makers absolutely need to feel they're being backed and supported by firms. The new social entrepreneurs have to be co-opted into -- and, in fact, have to adhere voluntarily to -- the overall project of transition towards a new form of social democracy. The old Scandinavian model of the 1960s, '70s, and '80s, which has been badly bruised by neoliberalism and the dismantling of the Scandinavian welfare States, might be a definite inspiration for such a renewal. Entrepreneurs (as well as managers, of course) absolutely need to view themselves as part of a collective project that isn't purely market-based and has major cooperative and participatory features. The democratically coordinated, multi-level, participatory economy needs entrepreneurs just as much as capitalism does -- but it needs a very different breed of entrepreneurs. (It also needs a different breed of bankers and financiers, as we'll see in the next post.)

So, needless to say, the new non-capitalist regime of capital formation would be nothing like a planned economy! I'm not advocating any sort of return to nauseous Soviet-type practices (and neither are Albert and Hahnel or Bookchin, whom we discussed in installment #3). There would obviously still be managers. However, being mere employees themselves, they'd be peer-designated, and most likely elected on the basis of a regular campaign platform, by the employees within the firm, as the ones who are going to temporarily perform management and coordination tasks rather than production tasks. (Albert and Hahnel's insistence on "balanced job complexes" notwithstanding, a fairly strong division of labor within the firm seems to be here to stay.) As I said, entrepreneurs would still exist, too, but they would be considered, and given their education would willingly consider themselves, more as sophisticated, high-level public servants or "creative delegates" than as private, market-obsessed pioneers righteously claiming the rights and prerogatives of the self-made man.

The communalist entrepreneur would be an employee like any other, receiving an income for his/her creative labor, subject to the same democratic control that would also rein in and limit the remunerations of employees who produce (blue- and white-collar production workers) and of employees who coordinate (managers). In an economic democracy where firms have access to the UCT-protected realm of alternative, cooperative juridical regimes, there is likely to be less wage tension so that the gap between the highest and the lowest remuneration would probably be significantly smaller than it is nowadays. But wouldn't the incentives be too weak for such a "communalist" entrepreneur? The answer, I think, is fairly simple: Given the new forms of entrepreneurship education in business schools, and given the advent of a neo-Scandinavian mentality within the business classes, only those individuals would remain entrepreneurs who have a real calling, not only at the technical and instrumental level but also at the social and "spirit" level. (Remember that I'm speaking here of the richer countries that need to cap and perhaps even reduce quantitative growth and need to boost qualitative dimensions. In poorer countries who still need massive quantitative growth, more classical forms of private initiative as well as moderately progressive forms of "social business" would still be the way to go.) Such a new entrepreneurial class would derive satisfaction and "wealth" not only from the economic and financial surplus generated by their innovations, but also from the joy and pride of having contributed to the community's prosperity while minimizing bio-environmental externalities and anthropo-environmental internalities. (So Milton Friedman's idea of contributing to society by generating maximal private shareholder value through free-market capitalist ventures would not be acceptable.)

A number of those who are called "entrepreneurs" within the logic of industrial-financial capitalism -- while contributing to the collective effort exclusively through taxes paid grudgingly (and evaded whenever possible) on competitively generated private profits -- would tend to be socially disqualified and would gradually become a dying breed. Others would reveal themselves as being creative, innovative, and dynamic as social entrepreneurs, within a new logic in which capital would be a loan coming from the democratic community, put at their disposal so that they can launch innovations and creative ideas for the benefit of that democratic community, always within the broader context of the new "communalist" global governance system coordinated by the World Transition Organization. That such a fundamental shift would also require a big change in the monetary and financial branches of our economy seems pretty obvious. And that's why the last installment of Part 4 will be devoted to banking and currency issues.

Hang in there, we're almost done with this "What Transition?" part!... Then, in Part 5, we'll move on to the pragmatic, "Next Step" question: What to do with all this next Monday morning?


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This post from the "Eco-Transitions" blog by Christian Arnsperger is licensed under a Creative Commons Attribution-NonCommercial-NoDerivs 3.0 Unported License.