Throwing Rocks at the Google Bus: How Growth Became the Enemy of Prosperity

by Douglas Rushkoff

  Even with all their advantages, there is a certain brittleness to most of these blockchain projects. Those who get in early tend to earn the most of whatever coin is being distributed. Moreover, the rules that get into a system in the beginning become pretty intractable. Unforeseen changes to the particular sector in which the blockchain is operating, or even to the whole world, are hard to account for on the fly. Finally, if everyone is supposed to keep a copy of the public ledger, that in itself can get pretty unwieldy once enough transactions have occurred; the Bitcoin blockchain alone is bigger than many people’s hard drives. In short, as these real-time economy projects scale, their legacies become liabilities.

  After all, no matter how promising the blockchain’s applications may be, decentralized technologies don’t guarantee equitable distribution; they merely allow for value to be exchanged and verified in ways that our current extractive, centralized systems do not. As we’ve seen, the Bitcoin project was intended only to address the issue of providing security through a decentralized ledger. It was solving for peer-to-peer verification with anonymity—not economic justice or even the healthier circulation of currency.44

  Bitcoin does prove that there are distributed solutions to problems formerly considered the exclusive province of central authorities. We can do this ourselves. But its inherent anonymity does nothing to restore the human relationships decimated by corporate activity, and its functionality irrespective of distance does nothing to reassert the local realities in which human beings actually live.

  To do that, we may have to turn not to a collectively negotiated digital file but to one another.

  MONEY IS A VERB

  As creatures of a digital age, our first impulse is often to apply some algorithm, computer program, or other technological solution to a problem. Bitcoin is just such an approach, turning the massive processing power of distributed personal computers to verifying the exchange of value. In using such a technology, we learn to trust the cryptocurrency’s open-source algorithms over the bankers and authorities who may have abused that privilege in the past. In blockchain we trust.

  Of course, the underlying assumption is that people can’t trust one another enough to transact directly without the constant threat of double-dealing, fraud, or nondelivery of services. By implementing a money system that encourages us to put our faith in technology, we again usurp whatever social bonds our marketplaces may afford us. We tend toward an economic culture driven more by disconnection and brinksmanship than by bonding and mutual benefit. That’s because we are influenced by the tools we use.

  Behavioral economists know this all too well. Interestingly, as we saw earlier, it was only when debt-based currency’s limits began to surface in the twentieth century that those legions of psychologists were hired by banks and credit companies to come up with ways to get people to borrow more money, and at higher interest rates. The psychologists learned how to exploit people’s misconceptions about how money worked and gave names to each of our vulnerabilities, such as “irrationality bias,” “money illusion bias,” “loss aversion theory,” and “time discounting.”* Then, they created products and wrote advertising that took advantage of these failings in order to get people to act against their own best interests. In other words, if the money stops fulfilling the needs of human beings, you change human beings to fit the needs of the money.

  It’s yet another example of the industrial-age ethos that places human needs and values below those of the greater machines and systems in which we live. By contrast, the digital media environment invites us to look at the systems we use as changeable programs, and people as the end users for whom those systems are built. Computer programs like Bitcoin may be the most explicitly digital expression of this drive to hack economics as if it were an operating system. But the Bitcoin protocols are still more concerned with replicating the functions of money than they are with serving the needs of humans. Indeed, the most far-reaching modifications of our debt and currency systems may turn out to be a lot less technological in their expression and more focused on the specific human problems they are attempting to address. They are not solving for money but solving for people.

  For instance, one of the main issues that emerged in the wake of the Occupy Wall Street movement was the problem of debt. Student debt is estimated at about $1.2 trillion as of this writing, while medical debt currently burdens over fifty million adults in the United States45 and is the nation’s largest single cause of personal bankruptcy.46 All these troubled debtors pose a problem for the debt industry as well: people in age groups that used to be counted on for buying first homes and taking out mortgages are still too busy paying back student loans to consider purchasing real estate, while homeowners facing medical debt are the leading cause of foreclosure and credit nonpayment.47 Most banks and credit-card companies simply package and sell the bad debt to loan collectors and other bottom-feeders at pennies on the dollar, just to get it off their books. The debtors still owe the full amounts on their loans, but the new creditors know they will collect on only a portion of it, if any, before the debtors go bankrupt or run away. Everyone ends up worse off.

  During the Occupy Wall Street gatherings, activists considered the conundrum from every traditional approach. They looked at promoting resistance through collective debt refusal, forcing creditors to show the full chain of custody of loans on which they were trying to collect, or forming a PAC and lobbying Congress on banking and credit reform. But taking a cue instead from the hands-on, do-it-yourself bias of the digital age, the activists came up with a much simpler solution: buy the debt. They launched a project called the Rolling Jubilee,48 raising money from donors to buy back and then dissolve debt. With just $700,000 of initial donations, they have managed to dissolve over $17 million of student debt and $15 million of medical debt and are now targeting payday loans and private probation debts.49 And the more people they get out of debt, the more new donors they create.

  Such solutions may not be highly technological, but they are digital in spirit, especially in the way they retrieve the peer-to-peer mechanisms of mutual aid and distribute personal risk and liability throughout a network. Finally, the solution itself is a hack of the existing, highly exploitative system; pennies-on-the-dollar leverage afforded to credit packagers is used instead to relieve debts twenty-five times greater than the donated amount. In the best cases, the benefactors can in turn donate that small amount required to bail them out, and the debt jubilee can keep rolling to absolve more debtors.

  The remaking of the money system and its many debt-based tentacles can certainly make use of the net, social media, and blockchains. We have in consumer technology all the security and administrative capabilities that used to be the exclusive province of banks and major corporations. But the reprogramming of money requires less digital technology than digital thinking and purpose. As we put our fingers—our digits—to the purpose of a better money system, we must focus less on what we can accomplish with a particular set of technologies than what we want to accomplish with them. With those goals clear in our minds, we can evaluate the solutions on offer or develop new ones of our own.

  So instead of asking how we can manipulate human financial behavior to serve existing forms of money, we ask: What sorts of money will encourage the human behaviors we admire and long to practice? What sorts of money systems will encourage trust, reenergize local commerce, favor peer-to-peer value exchange, and transcend the growth requirement? In short, how can money be less an extractor of value and more a utility for its exchange? Less prone to getting stuck in capital, and more likely to remain dynamic and flowing?

  1. Local Currency

  The simplest approach to limiting the delocalizing, extractive power of central currency is for communities to adopt their own local moneys, pegged or tied in some way to central currency. One of the first and most successful contemporary efforts is the Massachusetts BerkShare, which was developed to help keep
money from flowing out of the Berkshire region.

  One hundred BerkShares cost ninety-five dollars and are available at local banks throughout the region. Participating local merchants then accept them as if they were dollars—offering their customers what amounts to a 5 percent discount for using the local money.50 Although it amounts to selling goods at a perpetual discount, merchants can in turn spend their local currency at other local businesses and receive the same discounted rate. Nonlocals and tourists purchase goods with dollars at full price, and those who bother to purchase items with BerkShares presumably leave town with a bit of unspent local money in their pockets.

  The 5 percent local discount may seem like a huge disadvantage to take on—but only if businesses think of themselves as competing individuals. In the long term, the discount is more than compensated for by the fact that BerkShares can circulate only locally. They remain in the region and come back to the same stores again and again. Even if nonlocal stores, such as Walmart, agree to accept the local currency, they can’t deliver it up to their shareholders or trap it in static savings. The best Walmart can do is use it to pay their local workers or purchase supplies and services from local merchants—again, supporting the local economy instead of absorbing those externalities.

  Simple, dollar-pegged local currencies like BerkShares are depending on what is known as the local multiplier effect.51 Money of any kind, even regular old dollars, spent at local businesses tends to stay within the local economy. That’s because local, independent businesses tend to source their materials and services from nearby instead of from some distant corporate headquarters. According to a broad study conducted by the American Booksellers Association, 48 percent of each dollar spent at locally owned retailers recirculates through the community, compared with 14 percent at chain stores.52 With geographically limited local currencies, that number stays close to 100 percent, until they are exchanged back into dollars. Such currencies are biased against extraction and toward velocity.

  BerkShares can purchase all the quaint New England commodities one would expect: local produce, a cup of fair trade coffee, a stay at the bed and breakfast. But they are also exchangeable for more utilitarian goods and services: construction contracting, Web design, even a trip to the undertaker.53 That’s where it gets tricky. Local currencies work best for locally generated goods and services, or when a commodity’s markup is derived from a locally added value, such as atmosphere or labor. They don’t work as well for selling goods that are at the end of long supply chains or depend on commodities sourced from far away. A contractor can use BerkShares to buy locally produced shutters, but he can’t buy his tools or nails with them. A bookshop owner can offer her customers an effective 5 percent discount on their purchases, but she’s still paying full price for her inventory. It’s just not in a local business’s short-term interests to accept local currencies. And the multiplier effect really works only if there are a whole lot of businesses willing to play along.

  Local-currency advocates acknowledge this shortcoming but believe it is mitigated by a currency’s visibility. With geographically based currencies, the thinking goes, the “buy local” ethos becomes visible—still voluntary but validated by merchants and political leaders. Unless you’re spending BerkShares, how can you make it clear to merchants that you are thoughtfully supporting local business? Local currencies are their own best publicity, rendering “buy local” visible and thereby fostering the community spirit and soft peer pressure that lead to widespread buy-in and network effect. Then again, some customers might demonstrate their loyalty to local merchants by forgoing the local currency discount altogether and spending “real” money without the discount.

  Many other communities are experimenting with variations on the BerkShare model. Proponents claim that by being removed from the greater economy, these currencies work against the scarcity bias of central currency and are more resistant to boom, bust, and bubble cycles.54 Detroit Dollars, Santa Barbara Missions, and, in the UK, the Bristol, Brixton, and Cumbrian Pounds each offer their particular variations. Detroit Dollars offer much the same arrangement as BerkShares, only at a 10 percent discounted exchange rate.55 The UK’s Bristol Pound is backed by a credit union, has a digital debit payment system, and can be used by businesses to pay certain taxes. A pilot program in Nantes, France, promises to allow citizens to pay municipal fees in local currency.56

  Most of these local currencies are still more fad than utility. In some cases, it’s because only economically conscious progressives are willing to employ them, and then only for goods and services that can’t command clear value on the regular open market, such as spiritual healing or career counseling. In others, it’s because the central monetary system is still strong enough to serve a majority of people—or dominant enough to minimize the apparent viability of alternatives. Moreover, by pegging themselves to central currency, these local discount currencies can isolate themselves only so much from the chronic monetary problems of inflation, deflation, bubbles, and debt.

  2. Free Money: Cash as Utility

  For a local currency to distinguish itself as more than fashion, it must be utterly independent of existing money systems—that is, pegged to nothing but itself. Maybe it’s only when an economy gets truly bad and money is nowhere to be found that more bootstrapped applications of alternative currency tend to surface.

  For example, after Germany’s defeat in World War I, much of the German-speaking world was in economic shambles. In the Austrian city of Wörgl, over 30 percent of workers were unemployed and a significant portion of the population was destitute.57 There was not enough currency—Austrian schillings—to go around, not with Austria paying off its war debt to the banks.

  Inspired by the “free money” theory of German economist Silvio Gesell, the mayor of Wörgl decided to create a local currency programmed to solve this particular crisis. According to Gesell, the core qualities of a money system—its biases, the way it extracts value or discourages circulation—are unknown to the people using it until they are shown an alternative. Gesell was no Marxist; he was a free-market advocate but particularly antipathetic toward charging interest for money, which he believed was the way that moneyed classes prevented others from participating fully in the economy.

  The town had plenty of workers and plenty of resources, plenty of needs and plenty of providers; it just didn’t have a means for all those people and businesses to exchange goods and services. Whatever money they were capable of generating went back to servicing debt. So the mayor took the town’s entire treasury of 40,000 Austrian schillings and put it in the local savings bank as a partial reserve against a new kind of currency: labor certificates that came to be known as Wörgl.58

  He got the town working again by paying people in Wörgl to attend to public works projects, such as roads and schools. Because he had read Gesell, he made sure to tilt the currency toward local prosperity. By design, the labor certificates functioned as “circulation only” currency. Citizens could use them for goods and services and even to pay their local taxes. But Wörgls were terrible for saving: the certificates lost value, “demurring” at a rate of 1 percent per month, much like a grain-based currency of the late Middle Ages. As an unexpected consequence, this demurrage incentivized citizens to pay their taxes early, which in turn gave local government the liquid assets it needed to manage infrastructure and create still more employment projects. Like the Rolling Jubilee, the new currency initiated a virtuous cycle. In the midst of global depression, the village built bridges, homes, a reservoir, even a ski jump.59

  By programming the Wörgl as an antigrowth currency that lost value over time, the mayor discouraged hoarding, freeing money to function in its needed role as a medium of exchange. The design privileged investment in local development ahead of servicing runaway debt. In the thirteen months of its existence, the Wörgl’s tremendous success drew a little too much attention from the wrong quarters. Viewing it as a
threat to its monopoly, the Austrian Central Bank declared the Wörgl illegal. All Wörgls were removed from circulation, scarcity returned, and unemployment rose back to its peak rate.

  There were many other successful local currency trials in Austria and Germany, and they were all met with a similar response from central lawmakers. Since they could not be used outside their respective regions, the local currencies had no value to the centers of political and economic power. They were stabilizing to real people in real places but destabilizing to those who sought to centralize control over Germany. If anything, the prolonged and unnecessary depression merely paved the way for the discontent that fueled Fascism.

  Free local currencies were also responsible for providing a means of transaction during the Great Depression in the United States. Some were successful enough to pose a threat to central powers; others were merely successful enough to get traditional banking running again. In a much more pragmatic set of writings than those of Gesell, Yale University economist Irving Fisher argued that the sole focus of an alternative currency in such circumstances should be to increase the velocity of money.60 He advocated the use of “stamp scrip” as a weapon against deflation.61 Stamp scrip would come with the requirement that it be spent and stamped at regular intervals in order to maintain its value. Only after it had been fully stamped—meaning it had been spent thirty-six or fifty-two times, depending on the particular note—could it be redeemed at the bank. The money therefore had a built-in incentive to be spent. And it worked, at least within the local communities that used it.

  Another depression-era currency, “tax anticipation scrip,” was issued by a few dozen American cities from Ann Arbor, Michigan, to Tulsa, Oklahoma,62 whose municipal funds had been lost in the banking crisis. Without any money, these city governments began to pay their workers and suppliers in small-denomination IOUs against future tax revenue. The scrip usually circulated at a discount of its face value, but that was better than nothing for workers and citizens of these otherwise bankrupt economies.