MONEY AND FINANCE
Section 14.11, pages 533-538,
«Permaculture: a Designer’s Manual»
In small and unified groups (tribes), what is achieved by financial systems elsewhere is achieved by a set of exchanges, gifts, obligations, and feasts; here social accounting replaces fiscal accounting and to a great extent, everybody «owes» the others. In many smaller villages, barter and exchange occurs as non-formal financial transactions, and a modest financial component is maintained only for travel and trade external to the region; symbolic wealth such as cowries are used in trade.
Only in very mobile societies does money start to replace fair dealing, objective value, and hospitality shared, and the abstract and intrinsically valueless «money» (usually cheap strips of paper or lumps of metal) replaces real goods and services. Even in fiscal societies however, barter and exchange are highly developed (even by multinational firms), and formal barter centres are now also evolving locally to distribute surplus goods for real or imagined needs. Faith in the fiscal system (an essential delusion if money is to maintain any barter value) is fading as nation stales and giant corporations fail lo meet their debts, and either repudiate debts or go into voluntary liquidation. In every case, the cost falls back on us. Large banks not only lose our money to start with, but make us pay for the loss. Large companies receive public subsidies (often direct cash subsidies, e.g. the sugar industry) thai would make millionaires of paupers.
Fiscal (moneybased) societies give a false impression of security, which quickly falls apart every 40 or so years when inflation—which is itself due to greed—makes currency valueless. The final «inflation» is caused by the misuse of money, and is now upon us. It is seen in the collapse of the environmental system. No amount of gold or diamonds can avert, reduce, or soften the blows lhat nature is raining upon us, and in the final accounting, a cabbage can be worth a king’s castle (or more) if n saves your life. For Ihe last 40 years or so, money has been made by destruction of real wealth (soils and forests) and the debts are now being called in by nature herself.
Money is in itself not a resource, it represents (or should represent) a resource which lies «somewhere else». Often, however, that resource is a useless object (a diamond) which people rarely find a need for in any lifethreatening crisis, and never in any global crisis such as now threatens us. Money, in a sane society, must therefore be lied or fixed in value relative to a useful real asset; this is the very basis of fair trade in large societies.
All money arises from the wealth of the natural world (plants, clean water, clear air, stored energy). The accumulation of unused wealth, or wealth that does not lead to the proliferation of life, is a pollution of the same nature as any unused resource. Manure and money have much in common.
Insecure people can never have enough material resources, or the appearances of security. They tend to spend this money on monuments and protection rather than in assisting nature to produce wealth. Hence, we can find them associated with addictive, ostentatious, and exploitive occupations. Some tend to erect monuments to contain acquisitions (loot) in such places as museums, art galleries, stately homes, castles, libraries, and churches. Curiously, such monuments often display natural things portrayed in paintings and objects, but in so doing use up nature (the cedar table becoming more revered than the cedar tree, the leopard-skin coat more valued than the leopard).
While natural resources fuel such «wealth», artisans and architects develop the monuments, artists decorate them, and bankers, miners, and oil people fund or value them. The erection of monuments itself becomes a reason for existence. The rich are conspicuously represented in societies devoted to monument repair, but not in the area of landscape rehabilitation.
It is but a short step from worshipping, inside monuments to worshipping monuments themselves (people often being more proud of their church than they are of the trees and stones which were destroyed to build it). It is an even easier step to confuse oneself with the creator, and all the easier if one adopts a belief svslem in which god is portrayed as a man! (Some would say this is an insult to god.)
Money, however, is not intrinsically evil; it is the accumulation of money and its use to exploit others that is evil. The evil (privilege, power, stupidity, willfulness) lies within people, not within money itself. Nor is the making of money necessanly evil, providing the uses of money are creative and assist the natural world to proliferate. Thus, we can have a clear conscience on money put to earth rehabilitation.
We should develop or create wealth just as we develop landscapes, by concentrating on conservation of energy and natural resources (reducing the need to earn), by developing procreative assets (proliferating forests, prairies, and life systems), by reducing the creation of degenerative assets (roads, monuments, cities), and by constantly divesting ourselves of any surplus wealth to these ends.
Money is to the social fabric as water is to land-scape. It is the agent of transport, the shaper and mover of trade. Like water, it is not the total amount of money entering a community which counts; it is the number of uses or duties to which we can divert money, and the number of cycles of use, that measures the availability of that money. Leakage from the community must therefore be prevented and recycling made the rule.
Money itself is not a resource, and has no intrinsic value or use, but it can create categories of resources or assets, which we can identify as follows (after Turnbull, 1975):
- DEGENERATIVE: Those assets that decay, rust, or wear out: the buildings, roads, cars, furnishings, and appliances of society. Too many of these «assets» in any a region will impoverish the region in the long term.
- GENERATIVE: The tools of society; those things which manufacture or process raw materials into useful products (buskers, grinders, blenders, lathes, furnaces, and so on). These do wear out, but can be used to repair each other in workshops. All groups need some of the tools of processing and repair; a wise farmer hires out or shares such tools.
- PROCREATIVE: The trees, wildlife, fish, invertebrates, mammals, and domestic livestock of a region. People who maximise a procreative asset base can support the use of some tools, and modest degenerative assets. People who maximise the possession of degenerative assets eventually fail in their attempts to organise upkeep and repair—hence so many ruined castles and stately homes.
I would also add to the above categories:
- INFORMATIONAL: Information (education and data), plus applied intelligence makes the best use of all assets, decides balances in the asset base, assesses future trends, and foresees needs and changes. Seeds have a high information content, as do books or data bases.
- CONSERVATIVE: Insulation, dams, money recycling systems, good storage areas, and strategic forests to guard against erosion or desertification are all categories of conserver society assets. All these guard resources for future use, and are essential to a sustainable system.
It follows that expenditure on categories 3 to 5 conserve and create wealth in any society. If a great many wealth producing assets are available, then some degenerative assets can be supported, but any society which spends only on categories 1 and 2 will first pollute, and then eventually extinguish, its resource base.
Apart from the asset categories given above, careful consideration must be given by any bioregion to what is locally conserved and used (the basis of regional wealth, such as soil) and what can be exported as a trade item (surplus waler or surplus manufacture). It then follows that financial institutions should themselves pay close attention to their function in that region, preventing leakages of essential resources, and expediting the export of local surplus in order to bring scarce resources into the region Such surplus should not, however, be based on the loss of any irreplaceable resource such as soil or humus.
Above all, any financial institution should pay attention to two necessitous «foundation stones»:
- AN ETHIC, expressed as a published, legally binding, and publicly known charter; and
- RESTRICTION TO APPROPRIATE RESOURCE DEVELOPMENT AND TRADE, in its operations (for not all financial institutions suit every objective of community).
Without ethics or restrictions, any financial institution is a danger and a weakness in a community. With sound ethics and resource usage restrictions, any financial institution can prevent leakage of wealth and the erosion of basic resources, so that it is itself an asset to community, and builds wealth for re-investment.
Financial institutions (those which deal in public funds) are of the following nature:
- Credit unions
- Credit cooperatives
- Trusts and foundations
- Savings and loan banks, or associations
- Insurance agencies
- Finance companies and lending organisations
- Commercial or merchant banks
- Investment brokers and stock exchanges
- Limited liability companies (risk capital)
- Trading or public companies
There are other and minor systems in use, but each of the above are now worldwide, have specific appropriate uses, and can be fairly easily understood or created by any community. The essentials of an ethical banking system is not only thai it has an ethical charter and is used for appropriate assets, but that it belongs to and is governed by the community it serves, and therefore is not open to distant or centralised control. One of the more extraordinary features of many of the strategies outlined in this chapter is that they have arisen in (and been developed and applied by) poor, depressed, minority, often unskilled, and frequently «powerless» groups. Good people everywhere can take financial and developmental control of their regions, give equal service to all people, and rise from an ethical but outcast sum of minorities to be a driving force in world stability. So go to it, as the sum of minorities is always the majority!
In this section, we are apparently talking about money, but keep it clear in your mind that we are actually talking about a philosophy of true democracy, peace, and «lifetime». Lifetime is that little space we are given to experience this world, which shapes up to what we can imagine to be heaven, but where the achievement of paradise is constantly set back by the «serpents» of greed, power, stupid exploitation, and war.
Time and money are often interchangeable. To control the cash flow of our society is to control our lives. No price is too high to pay for the right to work at «right livelihood», to consume what we can help produce, to feel secure, and not only to avoid harming, but to actively assist, other people and life forms. People who steal our independence steal our lifetimes; our personal independence relies on a cooperative human society.
By changing ourselves, and living in closer harmony with life processes, we reduce the conflicts brought into our lives by the opposing demands of a truly sound economy and that of «unlimited growth» in the capitalistic sense; between a false assertion of human dominance over nature, and the certainty that we depend on all of nature; between the injunction to treat all people as equal, and the status given to those who consume and prosper at the expense of others; between the tyranny of need created by gadgets and luxury, and the satisfaction of working with Others to achieve our basic needs; between our natural drive to accumulate possessions, and the realisation that it is only what we share that gives us access to all necessary possessions.
THE INFORMAL ECONOMY
Barter is a common economy practiced particularly in rural or neighbourhood areas where people are more likely to know one another. At the household level, people exchange garden products and plants, share labour, and exchange goods and services. Occasionally people may form 35 person work groups to build houses, create gardens, or clean up housework; these work groups may be episodic, forming the pattern of a round robin until all present needs are met.
On a community level, or with more than 6-8 people involved, labour exchange may need to be coordinated or regulated. The Bendigo Home Builder’s Club in Victoria, Australia, is a group of 35 people building individual homes. They pay $5 a year per family, mainly to cover the printing and distribution costs of the Club’s newsletter. Each member can either be a recipient or donor of labour. The units of exchange are hours of labour, and all labour is considered equal. Using a standard labour exchange form (which is legally binding), the recipient is debited and the donor credited for every hour’s work he or she performs. There is a Labour Organiser in the group to sort out the balance of payments, and to dispatch labourers to a recipient (who must have at least 60 hours in credit).
A Community Barter Club also works on a system of debits and credits, where residents offer goods, services, and skills, from landscaping to massage, from mowing to printing. Even the Club secretary or organiser is paid in credits. A credit is calculated at one hour, and the donor and recipient agree among themselves what they consider the job is worth. People are not limited to a one-to-one exchange; as the Club organiser keeps records of the debits and credits of each individual, transactions occur as long as services are desired. The Community Barter Club can be an asset for people in the community who are unemployed or underemployed, and for those who need services but cannot afford to pay cash for them
Internal economics are greatly aided by exchange newsletters, computer services, and advertisement. These represent a good medium to swap goods in particular, with the Barter Centre charging only on a proportion of successful swaps. Several newsletters, like «Exchange and Mart» in the U.K. cope with this service. Brokerage houses now deal in large surplus barter systems for industry, using a Trade Unit (T.U.) valued at about $ 1, for pricing and exchange value. These can then be placed in smaller blocks for a variety of exchanges in goods and services, and are a good way to turn a large surplus of one commodity into a range of services and goods needed.
Conventional money derives from many agencies external to a community, and circulates throughout all communities, tending to be accumulated in cities, multinational coffers, and banks supporting large investors. Community money (or credit), however, is not usable or necessarily wanted outside that community, hence circulates indefinitely in the community, providing a constantly available resource.
The LET System (Local Employment Trading System) centres in a community: every joining member must be willing to consider trading in local «green» dollars. The LET dollars carry no interest, and administration costs are charged on a «cost of service» basis. Any taxes applicable are the responsibility of members, and any member can know the turnover or balance of any other member. Every member gets periodic statements of accounts. The currency, although equivalent to legal tender, is not issued and cannot be cashed in. Green dollars are «earned» by goods or services lo others, and «lost» by using services or goods. All trade, or credit standing, is a public act, and refers to the community as a whole. However, unlike simple barter, a member in credit can spend over the whole range of services or goods offered.
Production, as time spent by members in service to others, is thus never limited by the lack of money. Businesses can charge federal currency for spare parts, and green dollars for labour. Price is agreed upon by the individuals, and reported in to the LET centre by the consumer. «Foreign» goods are thus more expensive, and local components increase; local businesses thrive. Charities and local farms benefit greatly, as charity donors can see their funds as likely to return to them. Anyone who wants work can offer services; they need not wait for «jobs». As only members can trade with each other, the community account is at all times balanced. In effect, any member (by working or selling) issues their own currency, and could return any community to full employment. An ideal member has many transactions, but accumulates modest debits and credits. (See under Resources at the end of this chapter for addresses).
Finally, the informal economy includes purely volunteer labour, exchanges of gifts, and taking responsibility for a certain community project or area. For example, convivial tree-planting on community common areas should be a part of every household’s responsibilities. This may well be achieved by the «adoption» of a few acres of community forest by a household. Other community projects can be helped along by volunteer efforts, gifts of materials, and gifts of time as advisors or entertainers.
THE FORMAL ECONOMY
«Formal» means that goods or services are conducted under a legal umbrella, and are regulated by accounting procedures. Exchange can still take place, but it is accounted for in terms of stocks or services. Such formal economics are necessary where people (managers) act for a group of members or investors, and not just for themselves or their households. Legal procedures must also be followed by self-employed people or family businesses, where cash is received for goods or services rendered or offered publicly.
A community may have at least these formal structures:
- Community savings and loans
- Small businesses service office
- Investment funds for special projects
- Leasing company or system
A cooperative is a group of people acting together for the benefit of members. It is a legal entity with limited liability, and perpetual succession (no dissolution for individual gain). It has several principles:
- Open membership (open to all who can make use of the services and will accept the responsibilities of membership).
- Democratic organisation (members participate in decisions affecting the cooperative, with affairs to be administered by people elected by the members).
- Strictly limited interest on share capital (fair but limited award for capital and restricted influence of people holding share capital).
- Surplus or savings out of the operation of the cooperative belong to members (with members to decide on the use of the surplus, whether to develop the business, to provide common services for members, and/or to distribute among members according to the degree of involvement in the cooperative).
- Education (cooperatives should provide education for members, officers, employees, and the public on principles and techniques of cooperation).
- Cooperation between cooperatives (encourages the development of more cooperatives).
The worker-cooperatives centred around Mondragon, in the Basque region of Spain, are worthy of note. In less than 30 years, 96 worker cooperatives, employing 17,000 worker-members have emerged. Each person is required to invest about $5,000 when joining. This can be borrowed from the bank or obtained by installments deducted from wages over a two-year period. Of this investment, 20% is a contribution to collectively owned funds, and 80% is for the purchase of an individual shareholding or capital account (which is normally not drawn upon by the worker except on retirement, death, or in cases of extreme hardship). In this way, a co-op can partially fund itself, with generous help from the cooperative bank.
The Mondragon cooperatives have several features:
- 10% of the profits must be returned to the community for public services. 20% of the profits are held as capital reserves, and 70% are distributed to workers, although not all of this is available for withdrawal until a worker leaves the cooperative, at which point all of their financial interest in the business must be withdrawn The worker is, in effect, «loaning» the cooperative the money, and so receives interest.
- A cooperatively run bank oversees the functioning of all new cooperatives in the group, finances new cooperatives (up to 90%), and offers expert management skills.
- No redundancies in the cooperatives—workers are retrained and new jobs found in other expanding co-operative groups.
- The ratio of the lowest to the highest paid person is never greater than 1:5.
- An annual meeting of all workers in a particular enterprise elects both directors (managers) to run the business and a social council (union) to negotiate with directors on work conditions, pay, education, etc. The meeting observes the principle of one worker, one vote.
- Each cooperative averages about 200-300 worker-owners; large numbers become too impersonal, and large cooperatives are divided into smaller independent units.
- The community has cooperative schools, hospitals, a university, housing, health and welfare services, a technical research laboratory, super-markets, banks, and computer centres; all of these are cooperatives, and schools earn part of their costs by contract to manufacturing cooperatives.
Unlike the Mondragon cooperatives, which are usually appliance manufacturing factories, a small community cooperative might have three categories of membership, as below:
- Worker-owners: These manage the cooperative, and are split into «management» and «union» groups. They contribute a set amount of capital into the capital fund, of which a percentage can be withdrawn should the worker depart. Only the worker-owners have a vote. Managers are elected, and are responsible to the rest of the group, they can also be sacked!
- Corporate members: These are the primary producer, manufacturing, or public service associations. They are the users of the store cooperative in that their products are sold there, and/or they receive bulk supplies through the store for their business. They also pay a joining fee to capital funds. They may cooperate together for group insurance purposes. Voting powers can be allotted on the basis of involvement.
- Households: Basically consumers, each household pays a nominal joining fee, goods are bought at a discount, and an annual dividend is received for the bulk purchases over the year There is no vote.
Cooperatives also involve sharing, achieved by spreading the skills needed for any one job over more than one person (rotating jobs); by having near equality in shareholding; and by being able therefore to assess how others are coping with a job. Cooperatives have a greater demand on the energy and time of their workers – there are often planning or assessment sessions after working hours. However, productivity in such cooperatives is very high, and incomes or profits correspondingly high.
Even in cooperatives, the functions of management (supervision, administration, accounting, and assessing) and worker representation (unions) are necessary, but unlike privately owned businesses, the whole workforce are shareholders, and all vote for people to fill these positions. Thus, the work force has total control over the composition of representatives, rather like a bioregion.
In fact, a bioregion is a sort of multi-cooperative, where smaller groups take on specific services, thus specific responsibilities. Nobody «represents» a bioregion or cooperative in the ungovernable sense that elected politicians «represent» their electorate (i.e. every «representation» or policy decision of a cooperative comes from the ground up; whereas almost every politician makes purely personal decisions over a vast range of policy and expenditure – and that is «management out of control» ). In fact, today’s governments are not only in themselves irresponsible, but they often fund secret and far more irresponsible agencies, responsible to nobody!
A worthwhile goal of any community would be to keep the money saved and earned in the community cycling within itself. The only way to do this is to establish financial and economic systems on-site, such as a credit union, revolving loan fund, or local currency.
. Credit Union
Anyone who belongs to an identifiable group of 30 or more people can start a credit union. The purpose or charter of this credit union can be to fund local or neighbourhood self-reliance. A community credit union can pay all routine accounts of a household: some credit unions even have a cheque account service. Credit unions or friendly societies can set aside 10% of income to satisfy instant requests for money from depositors; larger sums can be withdrawn at short notice – often within a week. Friendly societies handle health and insurance.
The credit union can carefully assess loan applications. Money borrowed in order to save money is soon repaid, and so is safe to lend. Thus, money advanced for gardens, fuel conservation, energy generation, or for appropriate vehicles and appliances is soon returned. The savings (in time) exceeds the cash borrowed; from then on, the borrower has some spare capital. Usually, money borrowed to save energy is amortised over periods of from 2-7 years.
The Revolving Loan Fund
The basic principle of a revolving loans fund is that people put in $500-5,000 capital at a nominated interest (from 010%) into an established financial institution, and this is then loaned out to new businesses within the community. The group in charge of administering the loan checks references, offers advice, and acts on the recommendation of people who will service the loan (usually a skills or research group of volunteers, some of whom may take part in, or service, the business).
This can be called a loans trust, credit union, finance cooperative or enterprise fund pool; it can include barter, a labour exchange, a regular fair or market, and it needs an open register of local skills and resources, well displayed. Such a modest fund can operate out of a house or old shop front, or from a counter in an established food co-op or cooperative business.
On average, informed and concerned people will initially contribute a few hundred dollars, just «just to see a good thing go». This is enough; others will have good ideas about small essential services and businesses, and the research group can be very busy researching and publicising «leaks» of money from ihe area, so that under or unemployed people can start up services and supplies to stop these leaks, e.g. Does the area make its own bread, yogurt, sausages, shoes, clothes, pots and paper? Does it reuse its waste wood, glass, metal, paper, or organic wastes? Does it provide a wide range of services from haircutting to legal advice? If not, jobs are open and funds to start them are available! Loans, at low local interest (6-11% is fair) are made, and every borrower must be a contributor (active investment). The skills group help to select equipment, lest markets (presale of products is ideal), train young entrepreneurs in bookkeeping, and find resources and materials. Very few of such publicly needed, publicly funded and publicly open businesses fail. Everybody is self-interested in their success!
As confidence in the local fund grows, loans can start to cover energy-saving house additions, insulation, or new well-designed housing, small vehicles, small fuel supply technology, and land purchase for approved projects. Even so, funds subscribed may always exceed demand (businesses are slow to develop), so the fund managers should always be ready to fund the start-up of more advanced money systems such as investment advisors in ethical trusts, local insurance and banking, and a local «mint» to print a district currency of non-inflatable money, which in the end is also non-interest bearing.
Every place where this has started (and since 1980, there are dozens or hundreds of funds, currencies, barter fairs, and investment trusts established to build a sustainable future) has benefited. Imports are greatly decreased, local employment rises rapidly, good products (and security) are available, and community morale is enhanced.
Thus, community savings and loans associations are appropriate for reducing community and household costs, and freeing more capital into the community, which leads us to the S.H.A.R.E. and CE.LT. systems of «wealth-producing» loans. These are revolving loan funds that provide capital to community-based groups, enriching the community and forming a strong support base for the businesses established.
S.H.A.R.E. stands for Self Help Association for a Regional Economy. It is a local nonprofit corporation formed to help encourage small businesses that are producing necessary goods and services for the community (in this case, the Berkshire area in Massachusetts, U.S.A.). It works in conjunction with a local bank in the area. Members of the community can become S.H.A.R.E. members, which means they open a S.H.A.R.E. joint account with the bank. They receive only 6% interest (but this means small loans can be given out at 10% interest). The person receiving the loan must first collect references from people who know them as responsible and conscientious. They must show that the proposed business will attract customers from the community or even from outside the community. By doing this preliminary work, the borrower gets to know many people, and the community has a keen interest in seeing that the business succeeds.
C.E.LT. stands for Community Enterprise Loans Trust, a New Zealand-wide charitable trust to promote and support small businesses and cooperatives. C.E.L.T. helps people form and run cooperatives and other enterprises by providing advice, running training sessions so that people can leam cooperative business skills, and by providing loans.
CELT services are funded by subscriptions from the public ($5). by donations, and by government special schemes. Education and other work is funded by the interest from deposits and loans. CELT accepts cash deposits, and lends out to enterprises working closely with them until they are on their feet.
Depositors receive from 0-12% interest per year depending on the amount of time the money is in the account, and whether the depositor wants interest paid. The borrowing criteria is that the entrepreneur must be willing to work closely and regularly with CELT during the loan, so that a business has the greatest chance to succeed. CELT has now achieved the status of a bank, and can offer services such as a bank offers.
Southern Cross Capital Exchange Ltd, operating out of Wentworth Falls, NSW Australia, is a non-profit organisation that brings together those who want to borrow from specific (socially conscious) projects, and those who have money to loan to such projects. The role of the S.C.C.E. is to review applications for loans and to recommend individuals and businesses to receive these loans. It is not a bank or finance company, and so loans through the S.C.C.E. are not secured. However, they are guaranteed by the Exchange (though only if loans are made through S.C.C.E., not directly to the project). The borrowers make personal guarantees, and «guarantee circles» are set up to spread the risk (e.g. parents who want to build a school will all guarantee to pay back the loan). This sort of capital exchange format may be one way in which community schools and other socially conscious projects can become financially viable.
As the community gains skills in financial management, there is no reason why an internal and district economy should not be bolstered by a non-inflating currency printed by the community. Already this is done by individuals and businesses who have a product or skill to sell (real value), and who print up vouchers or coupons to pay for setting up their business. For example, a publishing company sends out pre-publication order slips to people before a particular book is published. People buy or prepurchase the book at a slightly reduced price, which enables the publisher to print the book (this is how the book you are reading was printed).
In another example, a restaurant (Zoo Zoos) in Washington State, USA, in transferring from single ownership to a work cooperative, needed lo raise funds to buy out the owner. They printed meal vouchers, redeemable up to one year, and sold them to future customers and friends. Most people came in to eat their promised meal, but some vouchers were traded to other people for some other service in the community, and thus the «currency» starts circulating as vouchers relating to a real commodity…