Here I interview Tim Jenkin, Matthew Slater and Dil Green (and Keith the cat, briefly, until he got bored – see video) about the money system, the problems it causes and what could replace it. Fascinating insights from three people who have spent an enormous amount of time thinking about the money system.
Tim was a member of the ANC, escaped from a high-security prison and is the subject of a new film – Escape from Pretoria, starring Daniel Radcliffe. He founded the Credit Commons (more later) with Matthew; and Dil is a co-founder of the Open Credit Network, a new mutual credit network for the UK.
Here’s a summary of what we talked about.
So – what’s wrong with the current money system?
Tim: the money system is presented to us as if it’s a public utility. It is not. Who is the provider? Most people think it’s the government. A country’s notes have a picture of the head of state. But money is not a public utility – it’s a control system. It’s the means by which our ruling classes keep us in place. From the ancient Mesopotamians, those who control the means of exchange control society.
So why, looking at the archaeological record, have coins typically had the head of the king on them? Why do kings maintain monopoly control over the money system? Why could people not control their own means of exchange – it’s always been forbidden.
Matthew: Tim gave a political answer, but there are also an environmental and economic answers. Economically, we haven’t functioned properly since the 2008 crash. The economy has been booming and crashing for the last 200 years. Money has a big part to play in the crashes, and therefore economically, the money system is problematic.
Dil: money is currently issued as debt, so more has to be paid back than was issued – therefore ordinary people has to pay back more than they receive, due to interest. Ultimately, this is borne by the natural world. An ever-expanding money system requires ever-expanding extraction from the biosphere. Up to around 50 years ago, the biosphere seemed inexhaustible, and so not worth paying attention to, but we now realise (a bit too late, and with too little urgency), that we’re having a big impact on nature’s ability to support our civilisation.
Matthew: a lot of ecological economists are saying that we have to re-think the money system in order to stop growth at c. 2% per year.
Dil: GDP is dangerous, agreed. I’d add something else – a social angle. For private central banks and multinational banks, who create most money since the deregulation of the 80s, their business model is to charge you money for the money they create. If there was enough money, they wouldn’t be able to charge so much for it – so it’s in their interest to keep money scarce. The 99% experience scarcity of money. For most people, all aspects of their lives are deeply affected by scarcity of money. Even loving your children is affected, if people have to work too many hours to make the money to be sure of being able to feed them. So scarcity of money delivers power, and bakes in cruelty to the system, which does a lot of psychological damage to people, and makes it difficult for people to trust each other. There’s a lot of fear, which is very damaging.
So money causes problems in terms of causing poverty and damaging nature and democracy. I know that your preferred alternative is the Credit Commons. Tell us about that, and how you got into it.
Dil: just to focus on the core concept of mutual credit – human-scale societies can provide their own money supply, allowing the people in that society to regulate exchange and send messages to each other about what is and is not important. The Credit Commons is a global economic alternative, based on the idea of mutual credit, which is much more local. It suggests that in a sufficiently large economy (larger than an extended family), it’s possible for people to trust each other for a certain amount of credit, and to keep accounts of that credit in an agreed numeric unit. We don’t need any material tokens to pass around, and we don’t need a centralised guarantor – it’s all about society managing itself, democratically. There’s no need, under those circumstances, for a central authority – in fact central authorities are often the cause of failure of networks.
Matthew: when a community trades amongst themselves, they can create their own money to do so, but to trade outside the community, you need a money that’s valuable outside the community. All communities in Britain are using money from outside the community. That means they have to get the money before they can spend it – usually by borrowing. This act of borrowing is a source of extraction of wealth, through interest, from the community.
Tim: the main concept here is exchange, not money itself. We all depend on each other, and we need to exchange things. It’s the same in nature – plants and animals are constantly exchanging with each other. With humans it’s slightly different, as we seem to want ever-increasing complexity and speed. First we walked, then rode animals, then built trains, cars, then jet planes, and then rockets. it’s the same with exchange – traditional, natural forms of exchange were very simple and slow – and the money system is complicated, and has allowed fast transactions worldwide; but it’s not the only way to exchange – there have been lots of successful ways to trade throughout history.
Mutual credit is one way. It behaves similarly to money, but doesn’t require any tokens. In fact the money system today is very similar to mutual credit – most exchange doesn’t involve tokens, just numbers going up and down in accounts. So we could ask what is the need for tokens today. But no bank is going to tell you that, because their business depends on the need for people to borrow these (largely imaginary) tokens. They’ve hijacked a natural exchange system, that we could control. They’ve taken the exchange system away from us, and charge us to use theirs. They’ve managed to enslave humanity in this way, so we’re all spending most of our lives chasing after the exchange medium. It shapes our society. We’re on a juggernaut heading for a cliff, and there’s nothing we can do about it with this money system. The Credit Commons provides an alternative that bypasses the bank’s money system. It’s a very simple system, and our objective is to get people to use it.
There are successful examples of mutual credit out there aren’t there – it’s not just pie in the sky?
Dil: there’s a whole range of viable alternatives out there. There are thousands in fact, some networks of individuals and some of businesses.
Matthew: it’s about community too, as well as money. A lot of the groups Tim and I have built software for are most interested in building community and relationships, and building trust through exchange than they are in becoming wealthy in a monetary or material sense.
So tell me about the Credit Commons, and how it came about.
Matthew: well the trouble with money is that it doesn’t care if exchange takes place or not. It can help exchange, but in the whole of society, people can hoard it or spend it outside the community, and it can concentrate. Money doesn’t care about that at all. But with mutual credit, it matters very much that it means exchange, because whoever issues it in the first place, and spends it is also the the one who earns it back and ‘evaporates’ it. So credit is issued, it circulates, and when it comes back to you, it disappears. During circulation, it acts as money, but it ensures ‘completion’ by coming back to the issuer. Everyone gets their balance back to zero in the end – so everyone’s account always hovers around zero, with exchange happening, but not accumulation.
I call it ‘accounting for exchange’ – everyone in the network is up or down at any one time, and the amount that everyone is up is equal to the amount that everyone is down – so that all the balances in the accounting system add up to zero.
Dil: an easy way to think about it is that this happens all the time when a group of people buy rounds of drinks, or take it in turns to pay for anything. Everyone roughly knows who’s up and who’s down. The accounting system is drinks, and because the accounts are just in people’s memories, no-one would trust it over long time periods or for larger transactions. But just by keeping records of drinks bought, people could go away and come back a year later, and you’d still know how many drinks they owe or are owed. It just enables trade between a larger group of people over a longer time period.
But you asked about the Credit Commons – so mutual credit operates on the basis of trust. So if a mutual credit network gets too large, trust is harder to develop. So there’s a natural scale for mutual credit networks. The problem with that is that most communities only produce a fraction of what they consume. So how can you have a local economy and still buy, say, light bulbs or laptops. The Credit Commons is a wonderful invention by these two, that allows money creation to remain local and on the basis of trust, but that exchange can happen across networks.
How did it start?
Tim: it started as a LETS group in 2002 – LETS is what we’ve been describing, but traditionally among a community of individuals, based on the value of the national currency, but without any need for the actual money. It developed in the 1980s, before the internet era, and so was done in books – in paper ledgers. I think the Community Exchange System was the first to develop an internet version of this, that didn’t need an administrator to write everything down. Members could enter their own transactions. This made it much more viable. Administrator burnout often caused the collapse of LETS groups.
But the next step was working out how these groups could trade with each other, or would they just be separate forever, and not be able to trade in a bigger scheme. We started to develop protocols that allowed businesses in different groups to trade. The idea then expanded to a global network, in which entirely separate networks could collaborate and trade with each other. There’s the SWIFT system, where banks all over the world can trade, so we’ve created a mini version of that.
What’s been built so far?
Matthew: we’ve got a prototype of the Credit Commons software. The Credit Commons is a protocol, which means that it’s a language that allows different softwares to talk to each other. We’ve built a prototype that implements the protocol, so now we’ve proved that it’s possible to send a transaction across several ledgers. When the Credit Commons grows, it becomes a sort of tree structure, so if you want transact with someone far away, it will go from the twig to a branch, down to the trunk, up a different branch, to a twig, and so on. Each one of these is a ledger – so one transaction might appear on several ledgers.
We’ve got member networks, but migrating them to the Credit Commons is quite a big job.
Dil: I’m sure you’ll put a link to this, but the Credit Commons white paper is quite a short read, and it sets out in more technical detail how it all works. It’s worth having a look at. You could link to the software repository too, and more technical people might want to have a look at that. We’re still talking amongst ourselves to work out the best niche for people to collaborate across groups. Community groups, as Matthew said, are as much about strengthening the bonds of local communities as they are about value production. They’re often about people doing things in their spare time, sharing things etc. These things are community-based and don’t travel well. Business-to-business networks will probably be the early adopters of long-distance trade.
For example, there’s a network in Sardinia called Sardex, and Dave, you and I are members of a UK initiative called the Open Credit Network. It’s easy to imagine that a food wholesaler in the UK might want to access good quality olive oil from Sardinia, and that people in Sardinia might want some UK craft ale. So there’s potential for trade there.
What happens next?
Matthew: we’re going to raise money, hire software developers, run a huge advertising campaign, bring all existing community and business networks into the system – we’ll publish the protocol and they’ll add it to their software, and then they’ll be able to pay each other for free or for a tiny fee, to pay anyone in the UK, and for a slightly larger fee, to pay anyone anywhere in the world. We’ll start to see ‘an economy outside of the economy’ – a parallel, a real alternative, where you can draw a line between one economy and the other, because they’re using very different kinds of money.
Tim: yes, we’re not fighting the existing economy – we’re just trying to quietly build an alternative. It’s not based on coercion like the conventional money system. We can begin to feel that this is our exchange system, not someone else’s. It’s a way of building community, and brings back monetary power that controls the trajectory that our society is following.
Matthew: it’s also a form of activism that doesn’t involve petitioning or begging the government to do something. It’s about changing behaviour so that we’re producing goods and services for the people that you’re consuming from.
Dil: a really key aspect of mutual credit is that it provides a sufficient money supply – not too much and not too little. When there’s a sufficient money supply, and people get used to the idea that it’s not something that’s perpetually scarce, they don’t feel the need to hoard, and they don’t feel as frightened, or feel the need for retail therapy. That’s not just a pious hope – that was the experience in the hundreds of communities that LETS schemes formed. People are more interested in community sufficiency and less in being avid consumers. It’s a move against the consumerism that’s at the heart of environmental damage.
Matthew: it also feels different to use. Experiments have been done with money and psychology, and that green stuff does something bad to us. Mutual credit makes people to feel good.
Just to clarify, it’s not possible to hoard in a mutual credit system is it?
Tim: the entire system has to add up to zero, because all the positive balances match all the negative balances. So the point is not to accumulate the exchange medium, as it makes no sense – it’s just a record of your exchanges. It makes sense to keep your personal balance around zero. There’s a limit to how far you can go into credit or debit. In the money system there are no limits. When you reach your upper limit, you don’t want to accumulate more numbers – because what does that mean? It means that you’re not giving others the opportunity to provide things to earn those credits. It’s about keeping the balance between giving and receiving.
Matthew: and more than that – there’s no interest in this system, so there’s no incentive to hoard, because you can’t make money from money, and you can’t make money from speculation either, because exchange rates are stable.
Dil: because every member of a network in effect creates their own money when they spend, on the basis of their membership of the network, and the trust of other members that they’re good for that credit. There’s no point hoarding the exchange medium, as you do in a scarcity system. If you accumulate a billion dollars in this system, you know that will allow you to boss around a lot of people, who haven’t got enough money, because it’s inherently scarce in this system. But if you try to do that in a mutual credit scheme, people can just do some work and create some ‘money’ – they can say ‘what have you got that I haven’t?’ So there’s no inbuilt incentive to create large piles of cash. People quickly realise that the safest place to be in a mutual credit system is at or around zero, because that means that if anything happens to the economy, you haven’t lost anything. No-one owes you anything and you don’t owe anyone anything.
So it’s only possible to earn credits by doing something useful?
Tim: that’s the idea. You can’t accumulate points by doing nothing useful – as you can in the current system, with interest or speculation, or the other schemes that have been devised to enrich a whole class of people who don’t really produce anything. Those people manipulate and control the rest of us, who do produce useful things. In mutual credit, if you don’t do anything, you don’t get any points / credits. If you just take from the community, you’ll eventually reach a point where no-one trusts you – you’re just a free-rider, a taker. The idea of keeping the basic groups as small as possible is that people get to know each other. It’s friendly – we’ve experienced this, it’s not just theoretical. It creates a completely different spirit. We’re not just chasing this exchange medium, which is scarce, and fighting and competing with each other for small amounts of it. There’s no way of stealing the exchange medium, because it’s just numbers in an account, and there’s no need to fight, because it isn’t scarce.
If the wider economy crashes, I guess it would be very beneficial to be part of a mutual credit network.
Dil: sure, because of that trust that members will do productive work in the future. The thing that had people scratching their heads in 2009 was that, for example: well, this car factory is still here, there are plenty of skilled people who want to work, plenty of resources, and people still want cars, but suddenly it’s stopped producing cars. What’s happened? [maybe cars is a bad example from an environmental perspective, but you know what I mean]. What’s happened is that money has dried up – credit from the banks has dried up because the banks don’t trust each other or anyone else. So people who need work, and the workplaces are there to give them work, are told that their productivity is not needed any more, so the economy grinds to a halt. But in mutual credit networks, people still trust each other, and know that the skills and resources are still there, and that the demand is there, so they can just carry on trading.
So what are the main barriers to the growth of this kind of economy?
Tim: we’ve all grown up with an idea of money that’s deeply embedded in our psyches – this idea that if you don’t have money or a source of money, you can’t access the resources of this society, including food and accommodation, ultimately. Mutual credit is a way around this, although it’s small at the moment – you can’t buy houses or petrol or air tickets – but everything is born and has to grow, so we’re hoping that more and more people will understand that you don’t need money to exchange. Getting more people to use it and to experience the friendliness inherent in it, and to see that this builds community, unlike the current money system that destroys community, will show them that it’s a better system. Ultimately we’re hoping that one day, mutual credit will be able to provide everything we need.
It’s not going to be an easy ride – if it grows, one day the powers that be will realise that this undermines their profitability, and their ability to lend money, and their monopoly over the money supply, backed by government legal tender laws. Suddenly there’s a new system that provides what people need without the additional nonsense. We don’t know what will happen then, but presumably they’ll get their mates in government to legislate against us, but it’s something that might not be stoppable, because how do you stop people exchanging things outside of their system, that isn’t dependent on any of their mechanisms? People have been doing it for thousands of years. They’re now trying to monetise absolutely everything, including things that we’ve always done amongst ourselves, naturally – because they’re always seeking new ways to invest money.
Mutual credit does what money does, but it doesn’t control us – it’s our money not their money.
Matthew: it’s the social network effect. Lots of people are trying to build an alternative to Facebook, but you can’t get people to move out of Facebook because all their connections are there. The same thing is happening with money. It’s easier and more convenient to use your national currency because everyone accepts it. It’s easier than switching to another small marketplace to see if you can get your needs met there. There are a lot of mental barriers around the changing of habits. But the best things that have happened are when some people make it the aim of their life to try to live as much as possible within that system, and one person in a community can really animate it if they’re determined. So that’s what I’m trying to do with my life now – to live as much as possible from the local economy, by exchanging with people around me.
Dil: I think for some people, the laws of money feel more real than the laws of physics – that gravity could change a bit, but if the money system stopped working, what would we do? The fact is that the rules around money have been changed under our feet every 30 or so years since the current money system has been around. The rules of money now would be unrecognisable to an 18th century business person. They’d be shocked by lots of things that are common practice now. For me, the way to conquer that relates to what Matthew said about social networks – to step away from the idea that we’ve invented something clever, but to have a social network in which trade / exchange is a tool of that social network. But – to have a more beneficial type of trade than the current scarce money model. The idea a social network of groups that federate together rather than an economy of groups that federate together is something that I’m actively pursuing, and I’m hopeful that that will be a way to get people to use this means of trading. If they can swap numbers on a screen in a social network where they can find people to trade with, and it works, then I think people will just vote with their feet.
For me, there’s an urgency to have a viable system that does that. Facebook are trying to do this with Libra, and it’s obvious that another social network that’s growing really fast – Telegram – has the same plan. There’s also Tencent in China – a social network with a payment system, already with over a billion users. Then we’d just have concentrated wealth and power with Facebook rather than the banks, which could be worse then the current system, because Facebook is regulated much more weakly. But this might be a reason that the Facebook plan doesn’t get to market – the powers that be might be resistant to such an unregulated giant. However, Telegram are coming up on the rails, and no-one is noticing. They’re blockchainy, and so can step outside a lot of regulation – and they’re smart and well-funded, so we’ll have to see what they come up with.
If people are up for helping build this alternative, how can they get involved?
Dil: if they’re a business in the UK, they can join the Open Credit Network, which will be rolling out local clubs in the coming year, as subsets of the UK-wide network. If anyone reading / watching / listening to this has technical capacities, they can also get in touch – they can help with the OCN and/or the Credit Commons. If you’re in neither of those situations, you can get a free software package and set up your own local group.
Matthew: but we’re less concerned with people setting up accounting systems than we are with changing the culture. Everyone who wants to participate should be thinking about the way they consume and produce, and who they do it for. It needs to be done on a much more local basis. Mutual credit and local currencies are there to support production and consumption on a local basis. The accounting system doesn’t come first – it’s there to make it better.
Tim: it’s important to understand that these groups are real people in real places, and if you get the free software, you can start a real group in your community. But the software is just a tool. It’s not the community, and the community won’t form itself out of the software and a database. It has to start with a real community of keen people who want this to work. They need to hold community meetings or advertise locally for people who want to do it – especially among people who already trade with each other. They can avail themselves of the tools we’re providing, and we want to draw together people doing similar things – i.e. alternatives to the current money system – all over the world, and to network and federate them – not to be competing amongst ourselves.
Thank you all very much. Tim – can’t wait to see the film. We’re going to be watching what you’re all up to very closely in the future.
Read and watch more about mutual credit in our earlier interview with Matthew Slater here.
The views expressed in our blog are those of the author and not necessarily lowimpact.org's
1annbeirneanimalwhisperert April 26th, 2020
I think this is wonderful, but what would happen as it might well do, if the internet went down for good? We rely far to much on the internet if it crashed we would be left fumbling about and running around like headless chickens, we always look on disasters as things like covid-19 or another economic crash or nature giving up on the human race, but if the sun has one of its turns and sends out another high radiation burst which according to scientist could be any minute now, this will wipe out all communications in one fell swoop, it has happened before. Is there a plan B?
2Jan April 26th, 2020
For me there are a couple of issues this doesn’t address:
Firstly advertising drives demand for more things. So I think we would need to stop advertising and then it will probably take a generation to get people out of the habit of buying stuff that they don’t really need.
Second how are mutual services to be paid for? Things that are commonly covered by taxes such as health care, police, pensions etc without any long term value where is the incentive to invest in infrastructure? Even if we move away from roads we will need to invest in things like internet
3Anthony Hay April 26th, 2020
ann – I believe the internet was designed to “route around failure” – it shouldn’t crash. But maybe that’s not right. Daniel Hillis said this in a TED talk about the internet:
“And the problem with it is, I think we are setting ourselves up for a kind of disaster like the disaster we had in the financial system, where we take a system that’s basically built on trust, was basically built for a smaller-scale system, and we’ve kind of expanded it way beyond the limits of how it was meant to operate. And so right now, I think it’s literally true that we don’t know what the consequences of an effective denial-of-service attack on the Internet would be, and whatever it would be is going to be worse next year, and worse next year, and so on.” – https://www.ted.com/talks/danny_hillis_the_internet_could_crash_we_need_a_plan_b/transcript?language=en
Also, if for some reason governments decided they wished to squash the credit commons protocol, would they be able to filter it out? E.g. I believe Google is not visible in China.
One of my own questions: if there is a ceiling on what credit you can accumulate, does that mean there is an upper limit to the value of what I could buy or sell? Could I buy a car or a combine harvester or a house?
4Dave Darby April 26th, 2020
annebeirne – the beauty of mutual credit is that, should there be societal collapse and no more internet / electricity, local nodes can run with a notebook and pen. It’s just an account, so you just need to know who’s traded with whom, and record it. LETS systems ran on pen/notebook technology for years.
Jan – tax is still payable. It’s not in any way a tax avoidance scheme – https://opencredit.network/2019/06/15/mutual-credit-accounting-and-tax/ (However, wouldn’t it be great if local authorities had a mutual credit account, to pay local contractors and receive local taxes? Who knows, in the current climate – local authorities are scared about what’s going to happen to their local economies).
Anthony – yes, there are limits to how far businesses can go into credit or debit – limits can be decided democratically by the ‘node’ or ‘club’ of which they are a member, based on turnover, the value of goods and services they can provide to their network, and levels of trust. It’s a business-to-business network (at least initially – after that works, employees can be paid partly in mutual credit – a way to start to include individuals), so it’s not about individuals buying houses yet. There are potential mechanisms for doing that – it’s just that the local economy / small business aspects have to be worked out – especially as so many small businesses are thereatened now. Also, it’s not a medium for accumulation – there’s no benefit in accumulating it. It’s a an exchange medium – it’s all about exchange, not wealth storage.
btw any specific questions on mutual credit, pop them in the comments on our topic page and we’ll get a specialist to answer them for you. https://www.lowimpact.org/lowimpact-topic/mutual-credit/
5scarlet Hamilton April 27th, 2020
Maybe this system attracts a certain kind of orientation.What about people who are not socially orientated. To some being embedded in a community is their worst nightmare. Not everybody likes people. would it work for a hermit?
6Dave Darby April 27th, 2020
scarlet – it’s just an exchange medium. There are loners who participate in the current economy, using conventional money, and there can be loners in a mutual credit system.
7homeminderuk April 27th, 2020
Ha! I’m with you on that one, Scarlet! Let’s hermitise together…I find people too scary, too complex, too downright nasty for my simple soul.
8Dave Darby April 28th, 2020
homeminderuk – ‘Hermits together’ is a great slogan. You could start a community of hermits!
9Adhinda Ikaputri May 1st, 2020
As a response to the advancing technological developments, all working aspects of Universitas Airlangga (UNAIR) are intensively developing new innovations to improve the existing service system. UNAIR Directorate of Finance was no exception, which sparked AICMS innovation some time ago. AICMS ( Airlangga Integrated Cash Management System ) is an integrated financial management system of Universitas Airlangga. That way, the fund disbursement process will be faster because it is processed from one screen, through UNAIR Financial Information System. “AICMS will shorten the process of disbursing funds from faculties and work units to bank transfers. We no longer need to send files to the bank or open internet banking because all transactions are carried out in UNAIR Financial System, “explained Anto Sujarwo, SE., one of the members of AICMS development team For the full article, please visit the following link
10petehallpeterpete hall May 14th, 2020
I used to belong to a LETS network from when it was paper-based through to its computerization. In its early days back in the 1990’s, its level of democracy and accountability felt quite high. I think this was because it was relatively easy for any member to understand and control not only their own account but also the overall operation of the system. So it was pretty easy to have de-centralized power. There was no need to be afraid of the responsibility to pick up the pieces after a bust-up.
Each stage of technological ‘progress’ concentrated power in the hands of the system operators. Partly because of their specialist knowledge needed to do the software, but also the need to guard the value of the computer itself. Theft risk, office security, etc, and hence access to the levers and authority of power all combined to restrict the ability of individual members to oversee the implementation of group decisions.
You can imagine where this is going; “Animal Farm” was played out right in front of us. The organization broke up just a few years later. Factionalism, distrust, cliques, people just drifted away.
What I make of this is that the issues of democratic accountability in a technological society need to be thrashed out and implemented before we can trust the operators of power. Have to say, I don’t see any signs of this happening. Bitcoin, for instance, once touted as the acme of accountability and fraud-resistance, seems to me to actually be the exact opposite. Who, actually, are the operators of any of these currencies? Can we actually pin them down to answer tough questions? I don’t think so!