Some of you know me for my obsession with community currencies and my second love coops. Today, I joined the Board of the San Francisco Community Land Trust. Why? It is part of my master plan to take over the Bay Area economy with the people and return it to the collective control of the people.
Currencies by themselves will straggle along without collective public management of banks, credit, investment, land and labor and other resources like energy. Currencies are great for supporting local business, but we need to have local businesses with supply chains less reliant on imports and credit less based in large corporate banks in order for them to work. After all, a business can’t repay its corporate bank mortgage loans or buy its Chilean apples with local currency. People can’t pay their rent usually either in local currency. But they could if the land and buildings were truly locally owned.
San Francisco Land Trust is a very cool model. They take land (and the buildings on them) off the market and turn it into an affordable housing cooperative of the current low income renters that live there. If the cooperative home owners sell their unit, they can make very little profit and the unit remains affordable housing. So the SFCLT plan is to take as much land off the market and keep the city an affordable place to live for the working class (and middle class), stem the tide of gentrification, and keep San Francisco the amazing melting of progressive culture that it is.
It would be great for nonprofit and local business as well not to have to pay the oppressive market rental rates that eventually squeeze their budgets to death by getting space in mixed use housing complexes that are part of cooperative land trusts. Many wonderful nonprofits in the Bay Area, my organization included, can’t afford the rent because challenging the capitalist system doesn’t bring in enough money to survive the San Francisco rental market. So many times I’ve heard, “If we could only get a space…” A place for people to be together face-to-face is key in community organizing and building community in general.
We would also be able to have more urban food production if we were able to take arable city land off the market, into land trusts, and away from housing developers. Right now it is entirely cost inefficient to use land for grown food in an urban setting. It is much cheaper to grow food in rural Chile and ship it to San Francisco, despite the environmental costs of such transportation. If peak oil actually comes, as I believe it already has, we will have to start making the transition towards more local food production, but the land to do it on is rapidly disappearing to development. We need to protect as much good city land as possible and put it into land trusts. It is fine to do guerrilla gardening or get short term leases, but growing food is serious business. Often you have to remediate toxins in the soil, nutrients and humus have to be built up, and sometimes sculpting of land, not to mention pulling weeds and moving rock. It’s a lot of work and community gardens and urban farms rarely have secure land ownership, but it is desperately needed if we are not to be toiling endlessly jumping from one toxic abandoned free lot to the next.
For more info about SFCLT or to become a member see http://www.sfclt.org/
Saturday, March 20, 2010
Timebank in the United Arab Emirates?!
You’ve heard of Time Dollars…now there is Time Dirhams
Tuesday, March 16, 2010
From Main Street Cash
For the Eye of Dubai news
Timedirham.ae, the first time bank in the region, has officially launched in the United Arab Emirates. The organization introduces a new medium of exchange known as the ‘time dirham’, a currency which is equivalent to hours of time spent in service to other members of the time bank community.
“The idea is really fresh out here in the GCC,” says Shymaa Binbrek, Co-Founder of the Time Dirham and an Emirati living in Dubai. “People from all walks of life have the opportunity to become part of a valuable force and allow them to convert their free time into time dirhams by serving other members of the community.”
The traditional monetary system allows members of society to earn money in dirhams which can be traded for goods and services which satisfy both basic needs and luxuries. One issue that arises, however, is that from the moment that barter went out of fashion and gave way to more efficient systems of trade like cash, emphasis has been placed more and more on the mechanical nature of the interaction and less so on the social value of the exchange.
“The time dirham balances the scales, so to speak;” says Amir-Esmaeil Bozorgzadeh, another Founder of the Time Dirham. “It allows members of the community to exchange skills and services without the necessity of direct cost or barter, so every hour is valuable independent of who the hour is from. Any one hour of service to the time bank community earns them a time dirham which they can then use to receive an hour of service in return. It is what is referred to as a complementary currency.”
In a survey conducted by YouGov Siraj between January 19th and 25th 2010, 88% of respondents stated that it was the responsibility of the people of a city to bring their community together. A further 82% agreed that they possess special skills, talents or monetary support which they could use to give back to the community in the form of personal contributions.
“These findings support the need for organizations such as the time bank, to empower residents to take more active roles in strengthening their communities, and to enhance the ties within them (between UAE Nationals and expatriates alike) by providing a platform for communities to come together” says Bozorgzadeh.
To learn more about the Time Dirham or join the community, visit their website www.timedirham.ae or see below for direct contact details.
Tuesday, March 16, 2010
From Main Street Cash
For the Eye of Dubai news
Timedirham.ae, the first time bank in the region, has officially launched in the United Arab Emirates. The organization introduces a new medium of exchange known as the ‘time dirham’, a currency which is equivalent to hours of time spent in service to other members of the time bank community.
“The idea is really fresh out here in the GCC,” says Shymaa Binbrek, Co-Founder of the Time Dirham and an Emirati living in Dubai. “People from all walks of life have the opportunity to become part of a valuable force and allow them to convert their free time into time dirhams by serving other members of the community.”
The traditional monetary system allows members of society to earn money in dirhams which can be traded for goods and services which satisfy both basic needs and luxuries. One issue that arises, however, is that from the moment that barter went out of fashion and gave way to more efficient systems of trade like cash, emphasis has been placed more and more on the mechanical nature of the interaction and less so on the social value of the exchange.
“The time dirham balances the scales, so to speak;” says Amir-Esmaeil Bozorgzadeh, another Founder of the Time Dirham. “It allows members of the community to exchange skills and services without the necessity of direct cost or barter, so every hour is valuable independent of who the hour is from. Any one hour of service to the time bank community earns them a time dirham which they can then use to receive an hour of service in return. It is what is referred to as a complementary currency.”
In a survey conducted by YouGov Siraj between January 19th and 25th 2010, 88% of respondents stated that it was the responsibility of the people of a city to bring their community together. A further 82% agreed that they possess special skills, talents or monetary support which they could use to give back to the community in the form of personal contributions.
“These findings support the need for organizations such as the time bank, to empower residents to take more active roles in strengthening their communities, and to enhance the ties within them (between UAE Nationals and expatriates alike) by providing a platform for communities to come together” says Bozorgzadeh.
To learn more about the Time Dirham or join the community, visit their website www.timedirham.ae or see below for direct contact details.
Public Policy Trends and Instruments supporting the Social Economy: International Experiences
A recently published paper on how public policy can aid in the development of alternative economies. Introduction below. To read the full text see http://www.socialeconomyhub.ca/sites/default/files/Crystal%27sPaper2_0.pdf
By Crystal Tremblay
1.0 Introduction: Building an alternative economy
The purpose of this paper is to highlight public policy trends and instruments from around the world that are meeting the socio-economic and environmental outcomes fostered in the Social Economy (SE). This paper (the second in a three part series) is intended to compliment the literature review titled “Advancing the Social Economy for socio-economic development: International perspectives”, by presenting specific policy instruments that are being applied by governments to support the Social Economy in producing public policy outcomes that respond to the social, economic and environmental challenges they and their citizens face. The literature review suggests that explicit and far-reaching public policy frameworks and instruments to enable the Social Economy to take action on a broad range of social, economic and environmental issues have had the greatest public policy outcomes. Where governments have fragmented or non-explicit approaches to the Social Economy as a means to achieving socio-economic policy objectives, there has been greater difficulty for actors in the Social Economy to maximise their outcomes for the public good and organize their activities across a range of sub sectors with shared goals. In highlighting successful innovative policy instruments therefore, this paper provides a foundation for discussion and analysis of policy and practice that can advance the Social Economy in Canada.
The Social Economy as a public policy focus has historically been driven by social movement action to create solutions and influence government policy (Poirier, 2008). It is in this context that trends in public policy are conceptualized as part of efforts to reconstitute the social construction of economic activities. The concept of policy instruments comes from recent literature on public policy and can be defined as “strategies and resources employed by governments to facilitate designated ends and goals vis-à-vis target populations” (Harman, 2004; p.1). The central idea behind theory on policy instruments is that governments can act through different instruments to achieve particular goals, and that the instruments chosen are important because they usually involve significantly different policy-making processes and produce different effects (Peters & Van Nispen, 2001). Public policy seeks to achieve goals that are considered to be in the best interest of the whole society, often by targeting specific groups within society (Torjman, 2005).
Because Social Economy organizations are by most definitions actors in the Social Economy, their efforts at the co-production and co-construction of policy is important to any analysis of trends and development in public policy. Vaillancourt (2008) defines co-production as the “participation by stakeholders from civil society and the market in the implementation of public policy”, while co-construction refers to “participation by those very stakeholders in the design of public policy” (p.12). Guy and Henneberry (2009) also embrace the public–private partnership or ‘collaboration’ between government and civil society “in building an inclusive and effective Social Economy network because it utilizes assets from a number of different economic sectors and therefore has the potential to be more efficient for each partner” (p.4). On addressing this evolving partnership, Kwan (2002) points to a “new and dynamic balance in which government and the third sector can work more closely together to find innovative, cost-efficient ways of delivering public services that are essential to Canadian communities” (p. 164).
The literature reveals numerous examples of Social Economy organizations successfully delivering public services. In Germany for example, although the government manages policy analysis and funding, social services are often run by non-profit organizations (Bode & Evers, 2004). Other EU countries are exploring new ways of co-management, where responsibilities are shared among governments, for-profit providers and third-sector organizations (Defourny, 2001). Neamtan (2004) suggests that public administration places insufficient attention on the integration of social, economic, cultural and environmental goals and that the needs of people might be improved through services based on partnerships.
Vaillancourt (2008) also points excellent examples of co-construction and co-production of public policy for social housing in Quebec. One example begins in the 1960’s “when the federal state altered its social housing cost-sharing programs so as to permit the provinces taking advantage of them to develop new social housing units that could come under not only the public sector (i.e., the low-income housing formula) but also housing co-operatives and non-profit organizations (NPO)” (p.31). During this time low-income housing expanded, and the development of housing co-operatives and NPO’s were favored. This trend in Quebec was accentuated with the AccesLogis program in 1997, giving priority to projects from local areas and favoring participation by the Social Economy in the application of public policy on housing. Through this program 20,000 new social housing units were developed from 1997 to 2007, with the vast majority as housing co-operatives and NPO’s.
While the literature points to the valuable role the Social Economy plays in the co-production of policy, Loxley & Simpson (2007) provide a valuable critique regarding the negative implications of off-loading public services to the community sector. They caution that were social service delivery is devolved to the Social Economy, it might be quite consistent with neo-liberalism. “It could, indeed, be a way of reducing public sector employment and public sector wages, with particularly adverse effects on women, who are strongly represented in the public sector” (p.39). Despite the lack of literature and consensus on this debate, the co-construction and production of public policy is an important context for understanding and analysing trends in public policy development for the Social Economy, and where possible references are made to these linkages in the analysis that follows.
This paper outlines several public policy instruments being used by governments around the world to better meet the needs of actors involved in the Social Economy. These instruments range from defining legislation and regulatory measures, to cross-departmental governmental policy frameworks, to specific enabling policies and programs designed to achieve public policy outcomes. In order to obtain improved insight into the characteristics and trends of policy instruments, a typology of five thematic categories are used. This typology is adapted from Neamtam & Downing’s (2005) “Social Economy and Community Economic Development in Canada: Next Steps for Public Policy”, applied as a guide to classify and understand the various policies and their intended outcomes for socio-economic development and environmental sustainability. This paper, commissioned by the Government of Canada, attempted to provide a framework for classifying public policy instruments of direct relevance to the Social Economy in the contemporary governmental environment of the Canadian federal system (2006) and so is used as a basis for analysis. Each typology within this framework is then categorized into policy ‘domains’, or sub components to further highlight the diversity and innovation of policies in this sector. From this typology, conclusions can be drawn concerning future direction for public policy development in Canada for governments at all levels and actors in the Social Economy. The final paper in this series titled “The Social Economy in Canada: Strengthening the Public Policy Environment” highlights policy recommendations based on these trends from around the world.
The framework includes the following policy areas:
• Cross-governmental;
• Territorial;
• Tools for development;
• Sectoral; and
• Supporting disadvantaged communities and populations.
Cross-governmental policies are defined as explicit government-defined policy frameworks to use the Social Economy and enable its actors to achieve socio-economic development goals that cross-governmental departments and mandates. They may include but go beyond any of the following specific policy typologies. Territorial policies can be defined as those public policies that enable “communities to initiate and implement their own solutions to economic problems to build long-term community capacity and foster the integration of economic, social and environmental objectives” (Neamtan & Downing, 2005, p.16). Territorial policies support local communities to create networks, strategic planning processes and collective projects, such as the tripartite support for Community Economic Development corporations in most urban centres in Québec and in some other major Canadian cities (Neamtan & Downing, 2005). These types of policies play an important role in social entrepreneurship by providing a geographic community with funds and support for networking, strategic planning, and collective projects. Social Economy ventures need to have access to suitable tools for development including financing (access to capital), market access, research and development supports, and training and management systems. Sectoral policies often respond to needs that neither the market nor government can satisfy. Polices that support the emergence of Social Economy actors in economic sectors (such the environment, housing, new technologies, communications, food services etc.) are important tools for strengthening the Social Economy. Policies in favour of supporting disadvantaged communities and populations contribute to addressing access, services and employment to marginalized groups. These policies use the Social Economy as a vehicle to integrate citizens with barriers to socio-economic participation.
By Crystal Tremblay
1.0 Introduction: Building an alternative economy
The purpose of this paper is to highlight public policy trends and instruments from around the world that are meeting the socio-economic and environmental outcomes fostered in the Social Economy (SE). This paper (the second in a three part series) is intended to compliment the literature review titled “Advancing the Social Economy for socio-economic development: International perspectives”, by presenting specific policy instruments that are being applied by governments to support the Social Economy in producing public policy outcomes that respond to the social, economic and environmental challenges they and their citizens face. The literature review suggests that explicit and far-reaching public policy frameworks and instruments to enable the Social Economy to take action on a broad range of social, economic and environmental issues have had the greatest public policy outcomes. Where governments have fragmented or non-explicit approaches to the Social Economy as a means to achieving socio-economic policy objectives, there has been greater difficulty for actors in the Social Economy to maximise their outcomes for the public good and organize their activities across a range of sub sectors with shared goals. In highlighting successful innovative policy instruments therefore, this paper provides a foundation for discussion and analysis of policy and practice that can advance the Social Economy in Canada.
The Social Economy as a public policy focus has historically been driven by social movement action to create solutions and influence government policy (Poirier, 2008). It is in this context that trends in public policy are conceptualized as part of efforts to reconstitute the social construction of economic activities. The concept of policy instruments comes from recent literature on public policy and can be defined as “strategies and resources employed by governments to facilitate designated ends and goals vis-à-vis target populations” (Harman, 2004; p.1). The central idea behind theory on policy instruments is that governments can act through different instruments to achieve particular goals, and that the instruments chosen are important because they usually involve significantly different policy-making processes and produce different effects (Peters & Van Nispen, 2001). Public policy seeks to achieve goals that are considered to be in the best interest of the whole society, often by targeting specific groups within society (Torjman, 2005).
Because Social Economy organizations are by most definitions actors in the Social Economy, their efforts at the co-production and co-construction of policy is important to any analysis of trends and development in public policy. Vaillancourt (2008) defines co-production as the “participation by stakeholders from civil society and the market in the implementation of public policy”, while co-construction refers to “participation by those very stakeholders in the design of public policy” (p.12). Guy and Henneberry (2009) also embrace the public–private partnership or ‘collaboration’ between government and civil society “in building an inclusive and effective Social Economy network because it utilizes assets from a number of different economic sectors and therefore has the potential to be more efficient for each partner” (p.4). On addressing this evolving partnership, Kwan (2002) points to a “new and dynamic balance in which government and the third sector can work more closely together to find innovative, cost-efficient ways of delivering public services that are essential to Canadian communities” (p. 164).
The literature reveals numerous examples of Social Economy organizations successfully delivering public services. In Germany for example, although the government manages policy analysis and funding, social services are often run by non-profit organizations (Bode & Evers, 2004). Other EU countries are exploring new ways of co-management, where responsibilities are shared among governments, for-profit providers and third-sector organizations (Defourny, 2001). Neamtan (2004) suggests that public administration places insufficient attention on the integration of social, economic, cultural and environmental goals and that the needs of people might be improved through services based on partnerships.
Vaillancourt (2008) also points excellent examples of co-construction and co-production of public policy for social housing in Quebec. One example begins in the 1960’s “when the federal state altered its social housing cost-sharing programs so as to permit the provinces taking advantage of them to develop new social housing units that could come under not only the public sector (i.e., the low-income housing formula) but also housing co-operatives and non-profit organizations (NPO)” (p.31). During this time low-income housing expanded, and the development of housing co-operatives and NPO’s were favored. This trend in Quebec was accentuated with the AccesLogis program in 1997, giving priority to projects from local areas and favoring participation by the Social Economy in the application of public policy on housing. Through this program 20,000 new social housing units were developed from 1997 to 2007, with the vast majority as housing co-operatives and NPO’s.
While the literature points to the valuable role the Social Economy plays in the co-production of policy, Loxley & Simpson (2007) provide a valuable critique regarding the negative implications of off-loading public services to the community sector. They caution that were social service delivery is devolved to the Social Economy, it might be quite consistent with neo-liberalism. “It could, indeed, be a way of reducing public sector employment and public sector wages, with particularly adverse effects on women, who are strongly represented in the public sector” (p.39). Despite the lack of literature and consensus on this debate, the co-construction and production of public policy is an important context for understanding and analysing trends in public policy development for the Social Economy, and where possible references are made to these linkages in the analysis that follows.
This paper outlines several public policy instruments being used by governments around the world to better meet the needs of actors involved in the Social Economy. These instruments range from defining legislation and regulatory measures, to cross-departmental governmental policy frameworks, to specific enabling policies and programs designed to achieve public policy outcomes. In order to obtain improved insight into the characteristics and trends of policy instruments, a typology of five thematic categories are used. This typology is adapted from Neamtam & Downing’s (2005) “Social Economy and Community Economic Development in Canada: Next Steps for Public Policy”, applied as a guide to classify and understand the various policies and their intended outcomes for socio-economic development and environmental sustainability. This paper, commissioned by the Government of Canada, attempted to provide a framework for classifying public policy instruments of direct relevance to the Social Economy in the contemporary governmental environment of the Canadian federal system (2006) and so is used as a basis for analysis. Each typology within this framework is then categorized into policy ‘domains’, or sub components to further highlight the diversity and innovation of policies in this sector. From this typology, conclusions can be drawn concerning future direction for public policy development in Canada for governments at all levels and actors in the Social Economy. The final paper in this series titled “The Social Economy in Canada: Strengthening the Public Policy Environment” highlights policy recommendations based on these trends from around the world.
The framework includes the following policy areas:
• Cross-governmental;
• Territorial;
• Tools for development;
• Sectoral; and
• Supporting disadvantaged communities and populations.
Cross-governmental policies are defined as explicit government-defined policy frameworks to use the Social Economy and enable its actors to achieve socio-economic development goals that cross-governmental departments and mandates. They may include but go beyond any of the following specific policy typologies. Territorial policies can be defined as those public policies that enable “communities to initiate and implement their own solutions to economic problems to build long-term community capacity and foster the integration of economic, social and environmental objectives” (Neamtan & Downing, 2005, p.16). Territorial policies support local communities to create networks, strategic planning processes and collective projects, such as the tripartite support for Community Economic Development corporations in most urban centres in Québec and in some other major Canadian cities (Neamtan & Downing, 2005). These types of policies play an important role in social entrepreneurship by providing a geographic community with funds and support for networking, strategic planning, and collective projects. Social Economy ventures need to have access to suitable tools for development including financing (access to capital), market access, research and development supports, and training and management systems. Sectoral policies often respond to needs that neither the market nor government can satisfy. Polices that support the emergence of Social Economy actors in economic sectors (such the environment, housing, new technologies, communications, food services etc.) are important tools for strengthening the Social Economy. Policies in favour of supporting disadvantaged communities and populations contribute to addressing access, services and employment to marginalized groups. These policies use the Social Economy as a vehicle to integrate citizens with barriers to socio-economic participation.
Friday, March 19, 2010
A Tale of Two Ecovillages: Damanhur and Findhorn
Jonathan Dawson
32 Resurgence No. 227 November/December 2004
There are signs of a growing awareness of the multiple dangers entailed in the loss of small-scale, locally based production systems. This is reflected in the growth in popularity of farmers’ markets, community-supported agriculture schemes, credit unions, buy-local campaigns, Fairtrade link-ups, and other initiatives to win back some community control over the processes of production and consumption. For the most part, these remain isolated initiatives: subscribers to organic box schemes, to give but one example, may have gone some way towards localising their food supply, but more than likely, in most other areas of their lives, they remain as dependent as ever on the global corporate economy. For the individual, for the household, even for groups of households the system is very hard to short-circuit. For a community of several hundred or more, however, especially if that community has a shared vision of creating an alternative to the global economy, the chance of success is significantly increased. And this is where the ecovillage model comes into its own as a seedbed for experimentation and innovation. Damanhur in Italy and the Findhorn Community in Scotland have consciously set out to reduce their dependence on the global corporate economy and to re-weave the web of a more complex, locally based, social economy. In an era where local shops, post offices, schools and other facilities are closing down in unprecedented numbers across Europe, these two communities are experiencing substantial growth and diversification, opening new enterprises and generating new employment. Findhorn and Damanhur have much in common. Both started as small initiatives in the 1960s and early 1970s. Both had, and continue to have, a strong spiritual focus to their activities. Both located themselves in economically marginalized areas: Damanhur in the alpine foothills of Piedmont, Findhorn in northern Scotland. Finally, both have experienced substantial growth in size over the decades: today, Damanhur is a federation of communities of more than 900 people, with many more supporters in the surrounding areas and indeed throughout Europe and the world; the Findhorn Community is home to around 450 people, with an extended international family of friends and partners. What is immediately striking on entering both ecovillages is the tangible feeling of activity and vitality. New buildings are being constructed, generally by companies owned by and employing community members. There are bakeries, theatres, shops and cafés that draw in visitors from far and wide. Local, organic cheeses, fruit and vegetables combine great quality with very low food miles. Crafts studios turn out beautiful ceramics, textiles, carvings and candles. Schools and training centres for both children and adults are flourishing. Publishing houses, printing presses, solar-panel manufacturers, waste-water system designers and consulting companies abound. Everywhere there is evidence of economic vitality and diversification. AT THE HEART of these success stories lies an astute understanding of the true nature of money and of how the rules that govern its movement can be managed so as to benefit the local economy. Damanhur and Findhorn have found a dual response to money management: to set up their own banks to retain their members’ savings within the community; and to create their own currencies to keep money circulating locally. Within Damanhur, the role of banker is taken on by the community’s real estate co-operative. This body was created as a vehicle for investing the savings of community members in the purchase of land and the building of accommodation, workshop and office space for community members and businesses. More recently, it has also come to play a role more akin to that of a mainstream bank, helping to identify business opportunities and providing loans and advice to community members who take them on. At the end of every year, the real-estate cooperative undertakes a study of the community economy, identifying which goods and services still need to be bought in from the outside, and seeking to promote new community enterprises to fill these gaps.The Findhorn Community has created Ekopia, a body with the status of an industrial provident society, to recycle locally the savings of its members. Here, projects in need of investment are identified, and share issues are raised against them. Each investor has one voting share only, irrespective of how much he or she invests, thus promoting a strongly communitarian ethic. This has enabled the community to draw on the financial resources of both current members and the wider Findhorn family, many of whom were previously members and all of whom share the community’s vision to create a more self-reliant and low impact human settlement. Both communities have also created their own currencies: the Credito in Damanhur and the Eko in Findhorn, each of which trades at parity with the national currency. While all transactions within Damanhur are undertaken using Creditos, residents and visitors to Findhorn have a choice and most use both national and community currencies. In both communities, all goods and services — for instance educational courses, building services, books, food, theatre tickets and printing — can be bought with the community currency. The beauty of these currencies from the point of view of the community economy is that they can only be spent locally and thus remain available to community members wishing to trade with each other. They are, in this sense, identical to Ithaca Hours, the currency system created by the social activist Paul Glover in the New York State town of Ithaca, in that they represent, in Paul’s words, money “with a boundary around it, so it stays in our community. It doesn’t come to town, shake a few hands and then wander out across the globe. It reinforces trading locally…they are untravellers’ cheques because you have to use them here — you cannot take them away.” SO MUCH FOR the theory. To see how the system works in practice, let us look in a little more detail at the Findhorn Community economy. The first of the share issues raised by Ekopia involved 220 individuals investing a total of £225,000 in a community-led buy-out of the community store, the Phoenix shop, which had previously been owned by the Findhorn Foundation. Share issues have also been raised to provide finance to the Findhorn Foundation (£100,000 has been raised) and the community educational facility, Newbold House (£25,000). Further community-based projects to finance the purchase of new wind turbines and affordable, eco-friendly houses are in the pipeline. This system delivers several benefits to the community. Investors become co-owners of the businesses in which they buy shares, they gain a five per cent discount on all purchases in the Phoenix shop, and they receive a dividend reflecting the growth in the value of the business. Ekopia calculates that, together, these various benefits equal a return of £100 per annum on an investment of one £500 share, compared to around £10 interest payments on £500 deposited in the bank. Secondly, community businesses are able to draw on the monetary savings of community members without needing to pay commercial bank fees and interest rates to do so. With bank interest rates at historically low levels, this factor is less important today than it is likely to be in the future; however, community businesses still make a saving of around £2,000 per annum on bank charges. Meanwhile, the Eko was launched in 2001 with an initial issue of 18,500 Ekos and a second issue of 20,000 Ekos. It is estimated that the first issue of Ekos generated a turnover of £150,000 in the first year of the scheme: almost ten full spending cycles. This is money that has stuck around, shaken plenty of hands and provided much valuable lubrication to the community economy. For sure, many of the products for sale within the community shop and other businesses originate outside the community and so money will necessarily leave the system to pay for them. Nonetheless, the use of the Eko has prevented a substantial leakage of purchasing power, making it much easier for genuinely local enterprises to emerge. Ekos are purchased from Ekopia with pounds sterling, one Eko to one pound, thus creating a loan fund for community businesses. The first of these loans, to the Phoenix shop for the renovation of its crafts department, generated enough in interest payments to pay for the printing of the first issue of Eko notes and the purchase of a marquee for community gatherings. THE CREATION OF Ekopia and of the Eko in the Findhorn Community and of the real-estate co-operative and the Credito in Damanhur have gone some way towards setting up a virtuous circle in which everyone wins. Investors gain more in terms of both financial returns and ownership of community businesses. Businesses get access to credit at a cheaper rate than through the conventional banking system. Expanding local businesses generate extra employment and purchasing power. And more of that purchasing power remains within the community.
Last, but far from least, though less easy to measure in purely economic terms, is the strong social dividend inherent in the strong feelings of ownership and participation felt by members of the community towards their own economy. Decisions relating to consumption, investment and work cease to be made purely according to criteria of profit maximisation. The divorce between head and heart that the current global economy enforces (whereby people often make consumer choices that they know to be socially or ecologically exploitative because of financial implications) is, to some degree at least, overcome. This ecovillage model thereby enables people to bring their desire for justice and sustainability back into alignment with their aspiration to live well and happily.
For proof that the model works in practice, one need look no further than a 2002 study undertaken by the local enterprise company Moray, Badenoch and Strathspey Enterprise into the economic impact of the Findhorn community on that of the north of Scotland. This study calculated that the community generates 400 jobs and over £5 million of business annually and commented on the value to the Scottish economy of the community’s diversification into economic activities beyond its original educational heartland. Meanwhile, the Damanhurian economy goes from strength to strength, its latest expansion being the purchase of a former Olivetti factory located nearby, a metaphor, perhaps, for the evolution from a corporate to an ecovillage-based society. These experiments demonstrate that it is, in practice, possible for local communities to short-circuit the global economy and to take back a good measure of control over their own economic destinies. They also suggest that at least three complementary elements need to be in place to permit them to do so. First, there needs to be a strong, shared vision and community of interest within a defined population to engage with the task. A population of around 200 people suggests itself as the minimum necessary to create an economic unit with sufficient diversity of enterprises and adequate purchasing power to make this viable. Secondly, leakages of monetary wealth out of the local economy need to be carefully identified and, to the degree possible, staunched. And finally, following the observation of Michael Shuman, the success of the model appears to be dependent on the synergies that emerge when local investment is combined with local ownership, local production and local employment. Converting the vicious cycle of today’s global economy, which effects such a strong and divisive fracture within the human heart and mind, into a virtuous and nourishing cycle will be no easy task. Community-based action in an economics of solidarity is required. The ecovillage movement has begun to develop interesting and strikingly effective models. The next task is to transfer these out of the intentional community seedbed and into the wider society.
32 Resurgence No. 227 November/December 2004
There are signs of a growing awareness of the multiple dangers entailed in the loss of small-scale, locally based production systems. This is reflected in the growth in popularity of farmers’ markets, community-supported agriculture schemes, credit unions, buy-local campaigns, Fairtrade link-ups, and other initiatives to win back some community control over the processes of production and consumption. For the most part, these remain isolated initiatives: subscribers to organic box schemes, to give but one example, may have gone some way towards localising their food supply, but more than likely, in most other areas of their lives, they remain as dependent as ever on the global corporate economy. For the individual, for the household, even for groups of households the system is very hard to short-circuit. For a community of several hundred or more, however, especially if that community has a shared vision of creating an alternative to the global economy, the chance of success is significantly increased. And this is where the ecovillage model comes into its own as a seedbed for experimentation and innovation. Damanhur in Italy and the Findhorn Community in Scotland have consciously set out to reduce their dependence on the global corporate economy and to re-weave the web of a more complex, locally based, social economy. In an era where local shops, post offices, schools and other facilities are closing down in unprecedented numbers across Europe, these two communities are experiencing substantial growth and diversification, opening new enterprises and generating new employment. Findhorn and Damanhur have much in common. Both started as small initiatives in the 1960s and early 1970s. Both had, and continue to have, a strong spiritual focus to their activities. Both located themselves in economically marginalized areas: Damanhur in the alpine foothills of Piedmont, Findhorn in northern Scotland. Finally, both have experienced substantial growth in size over the decades: today, Damanhur is a federation of communities of more than 900 people, with many more supporters in the surrounding areas and indeed throughout Europe and the world; the Findhorn Community is home to around 450 people, with an extended international family of friends and partners. What is immediately striking on entering both ecovillages is the tangible feeling of activity and vitality. New buildings are being constructed, generally by companies owned by and employing community members. There are bakeries, theatres, shops and cafés that draw in visitors from far and wide. Local, organic cheeses, fruit and vegetables combine great quality with very low food miles. Crafts studios turn out beautiful ceramics, textiles, carvings and candles. Schools and training centres for both children and adults are flourishing. Publishing houses, printing presses, solar-panel manufacturers, waste-water system designers and consulting companies abound. Everywhere there is evidence of economic vitality and diversification. AT THE HEART of these success stories lies an astute understanding of the true nature of money and of how the rules that govern its movement can be managed so as to benefit the local economy. Damanhur and Findhorn have found a dual response to money management: to set up their own banks to retain their members’ savings within the community; and to create their own currencies to keep money circulating locally. Within Damanhur, the role of banker is taken on by the community’s real estate co-operative. This body was created as a vehicle for investing the savings of community members in the purchase of land and the building of accommodation, workshop and office space for community members and businesses. More recently, it has also come to play a role more akin to that of a mainstream bank, helping to identify business opportunities and providing loans and advice to community members who take them on. At the end of every year, the real-estate cooperative undertakes a study of the community economy, identifying which goods and services still need to be bought in from the outside, and seeking to promote new community enterprises to fill these gaps.The Findhorn Community has created Ekopia, a body with the status of an industrial provident society, to recycle locally the savings of its members. Here, projects in need of investment are identified, and share issues are raised against them. Each investor has one voting share only, irrespective of how much he or she invests, thus promoting a strongly communitarian ethic. This has enabled the community to draw on the financial resources of both current members and the wider Findhorn family, many of whom were previously members and all of whom share the community’s vision to create a more self-reliant and low impact human settlement. Both communities have also created their own currencies: the Credito in Damanhur and the Eko in Findhorn, each of which trades at parity with the national currency. While all transactions within Damanhur are undertaken using Creditos, residents and visitors to Findhorn have a choice and most use both national and community currencies. In both communities, all goods and services — for instance educational courses, building services, books, food, theatre tickets and printing — can be bought with the community currency. The beauty of these currencies from the point of view of the community economy is that they can only be spent locally and thus remain available to community members wishing to trade with each other. They are, in this sense, identical to Ithaca Hours, the currency system created by the social activist Paul Glover in the New York State town of Ithaca, in that they represent, in Paul’s words, money “with a boundary around it, so it stays in our community. It doesn’t come to town, shake a few hands and then wander out across the globe. It reinforces trading locally…they are untravellers’ cheques because you have to use them here — you cannot take them away.” SO MUCH FOR the theory. To see how the system works in practice, let us look in a little more detail at the Findhorn Community economy. The first of the share issues raised by Ekopia involved 220 individuals investing a total of £225,000 in a community-led buy-out of the community store, the Phoenix shop, which had previously been owned by the Findhorn Foundation. Share issues have also been raised to provide finance to the Findhorn Foundation (£100,000 has been raised) and the community educational facility, Newbold House (£25,000). Further community-based projects to finance the purchase of new wind turbines and affordable, eco-friendly houses are in the pipeline. This system delivers several benefits to the community. Investors become co-owners of the businesses in which they buy shares, they gain a five per cent discount on all purchases in the Phoenix shop, and they receive a dividend reflecting the growth in the value of the business. Ekopia calculates that, together, these various benefits equal a return of £100 per annum on an investment of one £500 share, compared to around £10 interest payments on £500 deposited in the bank. Secondly, community businesses are able to draw on the monetary savings of community members without needing to pay commercial bank fees and interest rates to do so. With bank interest rates at historically low levels, this factor is less important today than it is likely to be in the future; however, community businesses still make a saving of around £2,000 per annum on bank charges. Meanwhile, the Eko was launched in 2001 with an initial issue of 18,500 Ekos and a second issue of 20,000 Ekos. It is estimated that the first issue of Ekos generated a turnover of £150,000 in the first year of the scheme: almost ten full spending cycles. This is money that has stuck around, shaken plenty of hands and provided much valuable lubrication to the community economy. For sure, many of the products for sale within the community shop and other businesses originate outside the community and so money will necessarily leave the system to pay for them. Nonetheless, the use of the Eko has prevented a substantial leakage of purchasing power, making it much easier for genuinely local enterprises to emerge. Ekos are purchased from Ekopia with pounds sterling, one Eko to one pound, thus creating a loan fund for community businesses. The first of these loans, to the Phoenix shop for the renovation of its crafts department, generated enough in interest payments to pay for the printing of the first issue of Eko notes and the purchase of a marquee for community gatherings. THE CREATION OF Ekopia and of the Eko in the Findhorn Community and of the real-estate co-operative and the Credito in Damanhur have gone some way towards setting up a virtuous circle in which everyone wins. Investors gain more in terms of both financial returns and ownership of community businesses. Businesses get access to credit at a cheaper rate than through the conventional banking system. Expanding local businesses generate extra employment and purchasing power. And more of that purchasing power remains within the community.
Last, but far from least, though less easy to measure in purely economic terms, is the strong social dividend inherent in the strong feelings of ownership and participation felt by members of the community towards their own economy. Decisions relating to consumption, investment and work cease to be made purely according to criteria of profit maximisation. The divorce between head and heart that the current global economy enforces (whereby people often make consumer choices that they know to be socially or ecologically exploitative because of financial implications) is, to some degree at least, overcome. This ecovillage model thereby enables people to bring their desire for justice and sustainability back into alignment with their aspiration to live well and happily.
For proof that the model works in practice, one need look no further than a 2002 study undertaken by the local enterprise company Moray, Badenoch and Strathspey Enterprise into the economic impact of the Findhorn community on that of the north of Scotland. This study calculated that the community generates 400 jobs and over £5 million of business annually and commented on the value to the Scottish economy of the community’s diversification into economic activities beyond its original educational heartland. Meanwhile, the Damanhurian economy goes from strength to strength, its latest expansion being the purchase of a former Olivetti factory located nearby, a metaphor, perhaps, for the evolution from a corporate to an ecovillage-based society. These experiments demonstrate that it is, in practice, possible for local communities to short-circuit the global economy and to take back a good measure of control over their own economic destinies. They also suggest that at least three complementary elements need to be in place to permit them to do so. First, there needs to be a strong, shared vision and community of interest within a defined population to engage with the task. A population of around 200 people suggests itself as the minimum necessary to create an economic unit with sufficient diversity of enterprises and adequate purchasing power to make this viable. Secondly, leakages of monetary wealth out of the local economy need to be carefully identified and, to the degree possible, staunched. And finally, following the observation of Michael Shuman, the success of the model appears to be dependent on the synergies that emerge when local investment is combined with local ownership, local production and local employment. Converting the vicious cycle of today’s global economy, which effects such a strong and divisive fracture within the human heart and mind, into a virtuous and nourishing cycle will be no easy task. Community-based action in an economics of solidarity is required. The ecovillage movement has begun to develop interesting and strikingly effective models. The next task is to transfer these out of the intentional community seedbed and into the wider society.
Monday, March 15, 2010
Coops and Currencies Unite at Conference
At the California Coop Conference in Santa Rosa, Friday April 9 from 1:20-3pm
For more info and registration: http://cccd.coop/announcements/posts/321
“Local Currencies – Reclaiming Our Economic Power”
A workshop led by 3 leading local currency experts and innovators. We will evaluate local currency best practices using real existing and historical programs as examples, explore the potential of the cooperative structure for developing community trade networks, and highlight exciting innovations happening in the field.
Presenters:
Derek Huntington
Derek Huntington graduated from San Diego State University in 2005 as a Bachelor of Science in corporate finance with a minor in international politics. Since 2006, Derek has been researching and developing community-friendly credit and financing structures, culminating in the development of the Sustaining Capital model and the formation of Sustaining Technologies, LLC. He was one of the main organizers of the Sonoma County relocalization effort, and now serves as President of the Sonoma County GoLocal Cooperative.
Sustaining Technologies has developed an integrated website, business directory, and rewards card system currently being piloted with the Sonoma County GoLocal Cooperative. The platform will evolve into a social media and trading platform designed to strengthen relationships between individuals, businesses, and non-profits in communities. Visit www.golocal.coop to check it out.
Thomas H. Greco, Jr.
Tom Greco is a community and monetary economist, educator and former college professor at Rochester Institute of Technology. He is a leading authority on cashless exchange systems, monetary history and theory, credit clearing systems, complementary currencies, statistical analysis, and community economic development. He is the author of several books, including Money and Debt: A Solution to the Global Crisis and The End of Money and the Future of Civilization.
Chris Lindstrom
Chris Lindstrom is a long time student of community economic development and community exchange systems. He worked for the E.F. Schumacher Society as staff and program developer from 2003 to 2008. He was a founding board member of the BerkShares, one of the most widely acclaimed local currencies located in the Southern Berkshire region of Massachusetts. In 2004, he organized a conference for the Schumacher Society titled Local Currencies in the Twenty-First Century: Understanding Money, Building Local Economies, Renewing Community.
Lindstrom is currently a student at Goddard College and is writing his senior thesis on the philosophy, theory, and spirituality of money. He serves as the advisor and consultant to a number of complementary currency projects through out North America including GETS Plus, an incubator for green business barter and exchange systems
For more info and registration: http://cccd.coop/announcements/posts/321
“Local Currencies – Reclaiming Our Economic Power”
A workshop led by 3 leading local currency experts and innovators. We will evaluate local currency best practices using real existing and historical programs as examples, explore the potential of the cooperative structure for developing community trade networks, and highlight exciting innovations happening in the field.
Presenters:
Derek Huntington
Derek Huntington graduated from San Diego State University in 2005 as a Bachelor of Science in corporate finance with a minor in international politics. Since 2006, Derek has been researching and developing community-friendly credit and financing structures, culminating in the development of the Sustaining Capital model and the formation of Sustaining Technologies, LLC. He was one of the main organizers of the Sonoma County relocalization effort, and now serves as President of the Sonoma County GoLocal Cooperative.
Sustaining Technologies has developed an integrated website, business directory, and rewards card system currently being piloted with the Sonoma County GoLocal Cooperative. The platform will evolve into a social media and trading platform designed to strengthen relationships between individuals, businesses, and non-profits in communities. Visit www.golocal.coop to check it out.
Thomas H. Greco, Jr.
Tom Greco is a community and monetary economist, educator and former college professor at Rochester Institute of Technology. He is a leading authority on cashless exchange systems, monetary history and theory, credit clearing systems, complementary currencies, statistical analysis, and community economic development. He is the author of several books, including Money and Debt: A Solution to the Global Crisis and The End of Money and the Future of Civilization.
Chris Lindstrom
Chris Lindstrom is a long time student of community economic development and community exchange systems. He worked for the E.F. Schumacher Society as staff and program developer from 2003 to 2008. He was a founding board member of the BerkShares, one of the most widely acclaimed local currencies located in the Southern Berkshire region of Massachusetts. In 2004, he organized a conference for the Schumacher Society titled Local Currencies in the Twenty-First Century: Understanding Money, Building Local Economies, Renewing Community.
Lindstrom is currently a student at Goddard College and is writing his senior thesis on the philosophy, theory, and spirituality of money. He serves as the advisor and consultant to a number of complementary currency projects through out North America including GETS Plus, an incubator for green business barter and exchange systems
Saturday, March 13, 2010
To jumpstart US job market, turn workers into owners
Reposted from Christian Science Monitor
Many Americans build wealth through their home. Why not through work?
By Melissa Hoover and Beadsie Woo / January 11, 2010
San Francisco and Baltimore
Seldom do the United Steelworkers, the United Nations, and film director Michael Moore express the same idea at the same time. But all have, in their own way, promoted the benefits of cooperative businesses in recent months.
The Steelworkers Union, North America’s largest industrial union, has signed an agreement with a 100,000-member European co-op to help workers here gain an ownership stake in their workplace.
Just last month, the UN declared 2012 the International Year of Cooperatives. It’s urging governments worldwide to collaborate with the co-op movement to reduce poverty and create more productive societies.
And Michael Moore sent a valentine to the co-op movement in his latest film, “Capitalism: A Love Story.” As a form of economic democracy, he said in an interview, co-ops are “the patriotic thing to do.”
In hard times like these, the co-op model makes sense. After all, public confidence in corporations, banks, and the larger financial system is at low ebb, while unemployment is at its highest level in 25 years. Homeownership, historically a reliable way to build equity, has been rocked by foreclosures. People are looking for other ways to do business and save money.
Turning workers into investors isn’t new. We’re all familiar with dot-com employees whose vested stock options turned them into overnight millionaires. And Employee Stock Ownership Plans have long allowed workers to invest in their companies. But worker-owned co-ops are unique because employees own 100 percent of the business, so they have a voice in how it’s run.
Many people think of co-ops as the hippie-dippy grocery store that sells organic goods. In fact, a 2009 study by the University of Wisconsin Center for Cooperatives found more than 29,000 cooperatives in the US, which make $500 billion in annual revenue, support 83,000 people, and pay $25 billion in wages and benefits. They include national firms such as credit unions, and local businesses such as the Alvarado Street Bakery in Petaluma, Calif., or the Evergreen Cooperative Laundry in Cleveland.
Cleaning ladies in the San Francisco area and home-care workers in New York have banded to pool resources as worker-owners of profitable enterprises. White-collar workers are getting involved, too: One of the most successful cooperatives is Isthmus Engineering, a Wisconsin firm where engineers bought the company from its owner.
For low-wage workers, owning a business cooperatively can play a particularly important role in helping them climb out of poverty and build savings. Cooperative Home Care Associates in New York’s South Bronx, for instance, lets its 1,600 members save money toward a $1,000 stake in the co-op, entitling them to annual dividends. The business offers them affordable health insurance, retirement plans, and other benefits.
In America, most families build wealth by buying homes, investing in businesses, or putting money into employer-sponsored retirement accounts. The federal government subsidizes this wealth-building to the tune of $367 billion a year. But most low-income families don’t have the money to buy a house or start a business. And they don’t have jobs that come with 401(k) plans. Many of those who stretched to buy a house this decade have lost their homes or their equity.
It was mass unemployment and widespread poverty in Spain’s Basque region that spurred the creation of the Mondragon co-op in the 1950s. Today it’s the region’s economic engine, with more than 100,000 workers. At Mondragon, workers make the investment and the decisions. They share the profits and the risk. The Steelworkers say the co-op structure empowers workers and makes business more accountable. It envisions converting an existing site or starting new ventures, a natural extension of the union’s role in giving workers a voice with owners. Except this time, the workers would also be the owners.
There is plenty America can do to help cooperative businesses flourish. The Small Business Administration could make clear that it guarantees loans to worker co-ops. Congress could set aside money for an urban co-op development initiative as it does now for rural cooperatives. State and local governments could provide tax breaks and loans to co-ops that create new jobs. They could also fund an employee-ownership bank to support these ventures. Charitable groups, too, could help develop and expand the co-op model as a strategic approach to creating jobs and building assets for working families.
A model based on human values rather than the unbridled pursuit of profit might be just what we need to create jobs, rebuild wealth, and support our communities. Keep your eye on co-ops.
Melissa Hoover is executive director of the US Federation of Worker Cooperatives. Lillian “Beadsie” Woo is a senior associate at the Annie E. Casey Foundation in Baltimore.
Many Americans build wealth through their home. Why not through work?
By Melissa Hoover and Beadsie Woo / January 11, 2010
San Francisco and Baltimore
Seldom do the United Steelworkers, the United Nations, and film director Michael Moore express the same idea at the same time. But all have, in their own way, promoted the benefits of cooperative businesses in recent months.
The Steelworkers Union, North America’s largest industrial union, has signed an agreement with a 100,000-member European co-op to help workers here gain an ownership stake in their workplace.
Just last month, the UN declared 2012 the International Year of Cooperatives. It’s urging governments worldwide to collaborate with the co-op movement to reduce poverty and create more productive societies.
And Michael Moore sent a valentine to the co-op movement in his latest film, “Capitalism: A Love Story.” As a form of economic democracy, he said in an interview, co-ops are “the patriotic thing to do.”
In hard times like these, the co-op model makes sense. After all, public confidence in corporations, banks, and the larger financial system is at low ebb, while unemployment is at its highest level in 25 years. Homeownership, historically a reliable way to build equity, has been rocked by foreclosures. People are looking for other ways to do business and save money.
Turning workers into investors isn’t new. We’re all familiar with dot-com employees whose vested stock options turned them into overnight millionaires. And Employee Stock Ownership Plans have long allowed workers to invest in their companies. But worker-owned co-ops are unique because employees own 100 percent of the business, so they have a voice in how it’s run.
Many people think of co-ops as the hippie-dippy grocery store that sells organic goods. In fact, a 2009 study by the University of Wisconsin Center for Cooperatives found more than 29,000 cooperatives in the US, which make $500 billion in annual revenue, support 83,000 people, and pay $25 billion in wages and benefits. They include national firms such as credit unions, and local businesses such as the Alvarado Street Bakery in Petaluma, Calif., or the Evergreen Cooperative Laundry in Cleveland.
Cleaning ladies in the San Francisco area and home-care workers in New York have banded to pool resources as worker-owners of profitable enterprises. White-collar workers are getting involved, too: One of the most successful cooperatives is Isthmus Engineering, a Wisconsin firm where engineers bought the company from its owner.
For low-wage workers, owning a business cooperatively can play a particularly important role in helping them climb out of poverty and build savings. Cooperative Home Care Associates in New York’s South Bronx, for instance, lets its 1,600 members save money toward a $1,000 stake in the co-op, entitling them to annual dividends. The business offers them affordable health insurance, retirement plans, and other benefits.
In America, most families build wealth by buying homes, investing in businesses, or putting money into employer-sponsored retirement accounts. The federal government subsidizes this wealth-building to the tune of $367 billion a year. But most low-income families don’t have the money to buy a house or start a business. And they don’t have jobs that come with 401(k) plans. Many of those who stretched to buy a house this decade have lost their homes or their equity.
It was mass unemployment and widespread poverty in Spain’s Basque region that spurred the creation of the Mondragon co-op in the 1950s. Today it’s the region’s economic engine, with more than 100,000 workers. At Mondragon, workers make the investment and the decisions. They share the profits and the risk. The Steelworkers say the co-op structure empowers workers and makes business more accountable. It envisions converting an existing site or starting new ventures, a natural extension of the union’s role in giving workers a voice with owners. Except this time, the workers would also be the owners.
There is plenty America can do to help cooperative businesses flourish. The Small Business Administration could make clear that it guarantees loans to worker co-ops. Congress could set aside money for an urban co-op development initiative as it does now for rural cooperatives. State and local governments could provide tax breaks and loans to co-ops that create new jobs. They could also fund an employee-ownership bank to support these ventures. Charitable groups, too, could help develop and expand the co-op model as a strategic approach to creating jobs and building assets for working families.
A model based on human values rather than the unbridled pursuit of profit might be just what we need to create jobs, rebuild wealth, and support our communities. Keep your eye on co-ops.
Melissa Hoover is executive director of the US Federation of Worker Cooperatives. Lillian “Beadsie” Woo is a senior associate at the Annie E. Casey Foundation in Baltimore.
Thursday, March 11, 2010
Reputation Currencies
Sunday, April 12, 2009
Posted by Alan Rosenblith on New Currency Frontiers
Reputations
I do not claim to be an expert on reputations systems. There are many who have gone way deeper on this subject than I. Instead, I hope to seed a conversation about the complex interplay between reputations currencies, exchange currencies, and the marketplace. While there are a whopping variety of reputations currencies in play today on the web, I see two basic categories.
Do I live up to my promises?
When two parties come together to make a transaction, both sides make a variety of promises. As a player in a given marketplace I get a reputation about whether or not I live up to my promises. Some of these promises are explicit and some are implicit. The seller explicitly promises things about their goods or services, such as “This mouse works with USB.” If I get home and the box has been incorrectly labeled, I am legally allowed to return it, since the seller’s explicit promise has been broken. If the seller frequently breaks their explicit promises, they earn a bad reputation and buyers avoid them (they may even be sued). Ebay makes excellent use of this principle with their “thumbs up / thumbs down” system that allows buyers to rate sellers.
On the buyer’s end, the story is a little more complicated. In some marketplaces, the promise might have to do with timely payment. When I receive an invoice, I have until a certain date to settle my account. If, as a buyer, I stop settling accounts on time, I develop a bad reputation.
However, if we look a little deeper we see there are explicit promises backing up the exchange medium itself. Money is an IOU, and, as such, someone had to make an explicit promise to a bank to pay back a loan (with interest) in the future for it to be issued in the first place. While that kind of explicit promise is at the foundation of exchange currency, we rarely perceive money that way. If I develop a bad history as a borrower of money, my credit rating (a reputation currency) is negatively affected, and I lose access to exchange currency.
Reputations outside the explicit promise
Let’s say I own a pizza place. I advertise that, because I care about the environment, I will only employ people who deliver pizzas with their bicycles. You care about the environment too. You order a pizza, but when you get it, the delivery person is driving a Hummer. You feel cheated. Part of what you were paying for was benefit to the environment. This is an example of the first kind of reputation. I as a seller broke my explicit promise.
But what happens if everything is the same, except I didn’t promise bicycles for delivery vehicles? You might still be outraged that a Hummer was the delivery vehicle, but I didn’t promise anything to the contrary. This situation is an example of the second kind of reputation. This kind of reputation may have been what Adam Smith was talking about with his prescription for successful markets: there must be symmetrical information between buyers and sellers. I didn’t know I was supporting a pizza place that used Hummers. I accidentally caused an environmental externality that could have been avoided if I had had access to better information. We could solve this problem by introducing a reputations currency that measured buyers’ perceptions of sellers’ ecological impact. Buyers who cared could go to only those sellers who also cared (or more precisely, imbued buyers with that perception).
Complications
This situation gets murky very quickly, however. What happens if, in the above scenario, I advertise that I, as a pizza seller, care about the environment, but don’t make a promise about delivery vehicles? Perhaps I compost all my waste, or recycle soda cans, or use environmentally friendly cleaners. Since, you as a buyer sitting at home don’t see those behaviors, you are not getting the whole picture. Again, we have asymmetric information.
I might incur an unfair reputation as an ecological monster, since the people who contribute to my reputation don’t see most of my environmentally friendly behavior. A buyer-issued reputations currency would therefore bias me towards enacting environmentally friendly practices that were visible to buyers. However, many of the most important environmental practices might not be things that buyers normally see.
Enter the third party rating service. I, as a seller, can choose to be environmentally audited by a disinterested third party. An auditor gets a thorough look at all my practices and issues credentials to me based on them (another reputations currency). However, there is a tricky balance in this transaction. Since I, as a seller, probably have to pay for this service, I want to make sure there is a good chance I will receive the credentials in question. Therefore, I am biased towards hiring less stringent auditors. However, buyers are not served by this arrangement, and if word gets out that the auditors aren’t stringent, the auditor loses its reputation as an auditor. This means that auditors are trying to appeal to sellers as likely to grant credentials, while simultaneously trying to appeal to buyers as stringent.
One way to solve this dilemma might be to have the buyers rather than sellers pay for the auditing. However, sellers still need to grant access to the auditors. They might only want to grant access to auditors who are less stringent. And if auditors don’t get access to a broad enough swath of businesses, how can they charge buyers for their service?
Also, there are clearly situations where sellers make implicit rather than explicit promises. I might, as a seller, imply something about my practices or my product without making an explicit promise about them. Into which category should we put reputations around these promises? Due to the subtle nature of these reputations currencies, an open source development process that includes the communities that make use of them is the only way to ensure they can be sufficiently dynamic.
Domains of Trust
One final complication: Let’s say we are aggregating reputations about the first kind of reputation (do I live up to explicit promises?). Because (in a hypothetical near future) we have transitioned into a fully open data context, we can see the Ebay seller rating of someone as we buy something from them on Craigslist. But, does an Ebay rating have any meaning in a Craigslist marketplace? It does, IF AND ONLY IF, the rating can travel in the other direction as well, and I incur a consequence on Ebay as a result. If I transact with someone on Craigslist, and they decided to trust me on the basis of my Ebay rating, I could very easily abuse that trust unless they have the ability to post a rating about that transaction back to Ebay. Therefore the consequences of my actions must be applied across all relevant domains.
This gets even more complicated though, because how do we know that the person on Craigslist is rating me based on the same criteria? If they weren’t, we would be comparing apples and oranges, and my Ebay rating would cease to have any meaning at all. The only way to solve this problem is to have open standardized reputation currencies that could be imported and exported across domains. Meta-currency project, here we come!
Posted by Alan Rosenblith on New Currency Frontiers
Reputations
I do not claim to be an expert on reputations systems. There are many who have gone way deeper on this subject than I. Instead, I hope to seed a conversation about the complex interplay between reputations currencies, exchange currencies, and the marketplace. While there are a whopping variety of reputations currencies in play today on the web, I see two basic categories.
Do I live up to my promises?
When two parties come together to make a transaction, both sides make a variety of promises. As a player in a given marketplace I get a reputation about whether or not I live up to my promises. Some of these promises are explicit and some are implicit. The seller explicitly promises things about their goods or services, such as “This mouse works with USB.” If I get home and the box has been incorrectly labeled, I am legally allowed to return it, since the seller’s explicit promise has been broken. If the seller frequently breaks their explicit promises, they earn a bad reputation and buyers avoid them (they may even be sued). Ebay makes excellent use of this principle with their “thumbs up / thumbs down” system that allows buyers to rate sellers.
On the buyer’s end, the story is a little more complicated. In some marketplaces, the promise might have to do with timely payment. When I receive an invoice, I have until a certain date to settle my account. If, as a buyer, I stop settling accounts on time, I develop a bad reputation.
However, if we look a little deeper we see there are explicit promises backing up the exchange medium itself. Money is an IOU, and, as such, someone had to make an explicit promise to a bank to pay back a loan (with interest) in the future for it to be issued in the first place. While that kind of explicit promise is at the foundation of exchange currency, we rarely perceive money that way. If I develop a bad history as a borrower of money, my credit rating (a reputation currency) is negatively affected, and I lose access to exchange currency.
Reputations outside the explicit promise
Let’s say I own a pizza place. I advertise that, because I care about the environment, I will only employ people who deliver pizzas with their bicycles. You care about the environment too. You order a pizza, but when you get it, the delivery person is driving a Hummer. You feel cheated. Part of what you were paying for was benefit to the environment. This is an example of the first kind of reputation. I as a seller broke my explicit promise.
But what happens if everything is the same, except I didn’t promise bicycles for delivery vehicles? You might still be outraged that a Hummer was the delivery vehicle, but I didn’t promise anything to the contrary. This situation is an example of the second kind of reputation. This kind of reputation may have been what Adam Smith was talking about with his prescription for successful markets: there must be symmetrical information between buyers and sellers. I didn’t know I was supporting a pizza place that used Hummers. I accidentally caused an environmental externality that could have been avoided if I had had access to better information. We could solve this problem by introducing a reputations currency that measured buyers’ perceptions of sellers’ ecological impact. Buyers who cared could go to only those sellers who also cared (or more precisely, imbued buyers with that perception).
Complications
This situation gets murky very quickly, however. What happens if, in the above scenario, I advertise that I, as a pizza seller, care about the environment, but don’t make a promise about delivery vehicles? Perhaps I compost all my waste, or recycle soda cans, or use environmentally friendly cleaners. Since, you as a buyer sitting at home don’t see those behaviors, you are not getting the whole picture. Again, we have asymmetric information.
I might incur an unfair reputation as an ecological monster, since the people who contribute to my reputation don’t see most of my environmentally friendly behavior. A buyer-issued reputations currency would therefore bias me towards enacting environmentally friendly practices that were visible to buyers. However, many of the most important environmental practices might not be things that buyers normally see.
Enter the third party rating service. I, as a seller, can choose to be environmentally audited by a disinterested third party. An auditor gets a thorough look at all my practices and issues credentials to me based on them (another reputations currency). However, there is a tricky balance in this transaction. Since I, as a seller, probably have to pay for this service, I want to make sure there is a good chance I will receive the credentials in question. Therefore, I am biased towards hiring less stringent auditors. However, buyers are not served by this arrangement, and if word gets out that the auditors aren’t stringent, the auditor loses its reputation as an auditor. This means that auditors are trying to appeal to sellers as likely to grant credentials, while simultaneously trying to appeal to buyers as stringent.
One way to solve this dilemma might be to have the buyers rather than sellers pay for the auditing. However, sellers still need to grant access to the auditors. They might only want to grant access to auditors who are less stringent. And if auditors don’t get access to a broad enough swath of businesses, how can they charge buyers for their service?
Also, there are clearly situations where sellers make implicit rather than explicit promises. I might, as a seller, imply something about my practices or my product without making an explicit promise about them. Into which category should we put reputations around these promises? Due to the subtle nature of these reputations currencies, an open source development process that includes the communities that make use of them is the only way to ensure they can be sufficiently dynamic.
Domains of Trust
One final complication: Let’s say we are aggregating reputations about the first kind of reputation (do I live up to explicit promises?). Because (in a hypothetical near future) we have transitioned into a fully open data context, we can see the Ebay seller rating of someone as we buy something from them on Craigslist. But, does an Ebay rating have any meaning in a Craigslist marketplace? It does, IF AND ONLY IF, the rating can travel in the other direction as well, and I incur a consequence on Ebay as a result. If I transact with someone on Craigslist, and they decided to trust me on the basis of my Ebay rating, I could very easily abuse that trust unless they have the ability to post a rating about that transaction back to Ebay. Therefore the consequences of my actions must be applied across all relevant domains.
This gets even more complicated though, because how do we know that the person on Craigslist is rating me based on the same criteria? If they weren’t, we would be comparing apples and oranges, and my Ebay rating would cease to have any meaning at all. The only way to solve this problem is to have open standardized reputation currencies that could be imported and exported across domains. Meta-currency project, here we come!
Subscribe to:
Posts (Atom)