Patchwork Design Lab

May 2, 2010

Centering the Community

Long supply chains have been the bane of generals and emperors throughout history. The globalized flat-earth market (flat, of course, only to the movement of fiat capital) with its tangled webs of transport, where a single product’s components may be manufactured in 3or 4 different countries on 2 or 3 different continents, while the product is assembled in another and sold in yet another, depends in its entirety upon cheaply available energy. And while investment fraud may have played a pivotal role in the most recent economic downturn, fraud, as John Updike’s character Rabbit Angstrom observes early in his career, makes the world go ‘round. And it is just possible that the steep ascent of oil prices during the summer of 2008 to just under 25% of GWP may have made some contribution to the precipitous skid in stock prices. Given the vulnerability of the market to the vicissitudes of oil pricing and supply and the notorious fragility of long supply chains (especially those that share the global financial markets’ crippling dependence upon the oil supply), it would seem only prudent, from a risk-management perspective, for local communities to develop a certain degree of self-sufficiency with respect to the production and exchange of critical goods and services.

Going back to the historical difficulties of supply chains, we find Sun Tzu writing, “we may take it then, that an army without its baggage-train is lost; without provisions it is lost; without bases of supply it is lost.” Local communities, with their current, near total dependence upon supply chains whose complexity would make Rube Goldberg dizzy, are little more than high-cost encampments plopped down any old place with no knowledge of local resources and no infrastructure to develop them. Ask Napoleon, next time you see him, how that worked out for him in his Russian Campaign.

Yuichiro Miura, the subject of the 1970 documentary, The Man Who Skied Down Everest, had, at least, a parachute which enabled him to stop, just barely, before he sailed over the edge of a deep crevasse. Very few communities today have even that much of a safety plan.

Nothing will Come of Nothing

The great depression delivered a nasty rabbit punch to the US economy and caused widespread deprivation in the midst (and in spite) of vast natural wealth. The fundamental problem was not that there wasn’t enough good land and agricultural know-how to feed everyone or that there wasn’t enough work that actually needed doing to achieve full employment or that there were any shortages of the energy or material resources needed to fuel the economy. The problem arose from a failure of the prevailing system of money and credit. Vesting the power to extend credit, and thereby create money, in the banking system in a monopolistic fashion interferes with money’s ability to function as a pure information medium in the same way that ownership of an influential newspaper by a large corporation with a vested interest in a specific ideological perspective tends to skew editorial policy.

Inability to accurately valorize natural capital, be it human labor and know-how or material resources, makes it difficult or impossible for individuals, businesses, or governments, either local or national, to access investment capital to match it. Monopolistic money can only represent the values of its creators. When the financial system views natural resources as externalities, it becomes blind to their true value – both as already functioning contributors to the general economy and as potential contributors to the development of essential products. Conventionally, we tend to think that it is the entrepreneur’s job to bring this value into light by inventing creative ways to develop and market it. But even the most creative of entrepreneurs is constrained by the in-built myopia of the market within which he must operate.

Nothing will come of nothing. In many cases poverty in fact arises from poverty in fancy. Where there is lack of vision, wrote Lao Tzu, the people perish.

Success to the Successful

All activity arises from nature’s abhorrence of a gradient. Electrical current flows because of a charge difference that sets up an electrical field between two battery terminals. This field is nothing other than a charge gradient. The flow of electrons functions to neutralize this gradient. All forces in nature arise in a similar fashion. Speculators in a market, on the other hand, love a financial gradient. Any gap in information or assignation of value creates an opportunity for arbitrage. But the flow of money across this gap constitutes an exchange of information that tends over time to eliminate this difference in valuation of the product or service in question. In order to stay in business, the gap-speculator must either find a way to conceal either his profitability or his source. Or, he can invest in a congressman or two in an attempt to create a law that works to preserve his value gradient. In other words, like any good business, he must invest some of his profits toward maintaining the resource that produced them.

If he is successful, his profitability should improve over time, giving him even more disposable income to put to work toward increasing his future profitability. In this case, the wider the gap, the greater will be the profit margin of its exploiter. If you can buy a commodity for dollars-a-ton and sell it for dollars-a-pound you can ride the gravy train all the way to seats on numerous influential boards-of-directors. You can dine with senators, drink with celebrities, and spend quality time with the young and the beautiful while your spouse goes shopping somewhere fashionably (and conveniently) far away.

All this success requires that you constantly mind the gap. And this gap is good, you think. This gap creates jobs on both sides. But increasingly, the lion’s share goes to the speculator, and to the others, the employees, the small, third-world-country farmers or suppliers, the factory workers, goes the trickle. Because your wealth depends on a gap, the gap must be maintained. To paraphrase, to him that hath it shall be given, and from him who hath not it shall be taken even that which he hath. Or words to that effect.

Democratizing the Money

Is there a natural or universal law that says only banks can create money? Clearly there is not. In fact, as we have seen, sequestering this right within the confines of one business, organization, or institution actually works to create wealth for a very few and poverty for very many. It functions to actually undermine the health of an economy and the well-being of the general populace.

If I have something that I value, whether it is an old guitar or a well-honed skill, all I have to do to profit from it is to find someone else who value’s it and has something else that I value. Generalize this idea to the notion that everyone has something of value to someone else and you have the makings of a small-scale, independent credit exchange system. The goal of such a system would be to provide its members with an alternative to monopolized bank money by empowering them to create their own exchange medium in the form of trade credit. Such a system can cast a much finer net over the distribution of resources within a local community. It can focus a community’s economic vision on developing these local resources and local talent rather than relying, in the fashion of the western Pacific cargo cults, on outside capital and investment whose lenders are guaranteed to take more of value away than they will bring in. They have to make a profit to stay in business, after all. Learn to see and value what’s all around you and create your own system of exchange and distribution, and you can begin to free your community from its dependence on the long and fragile supply chain that ties it to the interests of people who, let’s face it, apart from your value to them as cheap producers of what they want to buy and consumers of what they have to sell, have no reason to care whether you live or die.

In order to establish a truly local economy, you will need to put effort into developing the local infrastructure and resource basis, as well. You will need to establish farms using good soil management practices so that your yields continue to grow year after year because of soil improvement. There are ways to do this. It’s not rocket science. Likewise, other industries will have to be developed. Again, none of this is new or difficult to understand. The function of a localized trade, currency, or credit system is to facilitate investment on a scale that is small enough to succeed, rather than too big to fail.


Lets Systems: The Home Page

Interlinking Mutual Exchange Systems

Cooperative Principles and Complementary Currency

A successful Swiss Economic Circle Cooperative

Local Currencies:

E. F. Schumacher Society: List of local currencies…

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