I’m writing a book – published by Chelsea Green next January – about the possibility of building a new economy around a moneyless, mutual credit core, at a time when money is going to be scarce. I’m often told that the best way to get new ideas across is with a story. So I’m trying to think of stories that can help beginners to understand the concept of mutual credit, and to get the penny to drop that we can take control of money away from banks – we don’t have to have a money system that drains our communities, grows tax havens and prevents real democracy.
What do you think of this one? It’s about an eleven dollar bill (or an eleven pound note – I’m just blatantly trying to grab the attention of a larger audience here).
Here goes. One day, a baker was on his way to buy some flour from his local grocery store. As he walked along the street, he saw a piece of paper on the floor, picked it up and saw that it was an eleven dollar bill. He thought to himself ‘Wow – I didn’t know such a thing as an eleven dollar bill existed; you learn something new every day’. Inside the shop, the grocer put the bag of flour on the counter and said ‘That’s eleven dollars please’. ‘Aha’ thought the baker, ‘I can use the eleven dollar bill I just found. That’s handy’. He put the eleven dollar bill on the counter, and the grocer said ‘I think that might be a fake. I don’t think eleven dollar bills exist’. ‘Oh’, said the baker, ‘You might be right, but I’ll tell you what – if it turns out to be fake, I’ll bring you over eleven dollars’ worth of bread – or maybe I’ll bake you a big cake.’ ‘OK’ said the grocer, and put the eleven dollar bill in the till.
The grocer popped next door at lunchtime to buy some fish and chips (do they have fish and chip shops in the US? Never mind), which came to eleven dollars (obviously). She slapped the eleven dollar bill on the counter and the chip shop owner said ‘Hmmm. Not sure that’s legal tender.’ The grocer said ‘I think it is. But if not, you can get eleven dollars’ worth of stuff from my shop. OK?’ ‘OK’, said the chip shop owner.
The chip shop owner needed a sign painted for outside the shop, which cost (you’ve guessed it) eleven dollars. Again, the eleven dollar bill was handed over, and again, the recipient, the signwriter, said ‘I don’t like the look of that’ and the chip shop owner said ‘Look, if it turns out to be fake, you can have eleven dollars’ worth of fish and chips.’ ‘OK’ said the signwriter.
This went on for 100 transactions, when a shoe-mender came into the bakery and asked how much it would cost for the baker to bake a nice birthday cake. ‘Eleven dollars’ said the baker. The shoe-mender gave him the eleven dollar bill. ‘That’s the second one of those I’ve seen today’, said the baker. ‘I hope they’re real.’ ‘Well if not, you can get your shoes fixed any time, said the shoe-mender. ‘Sure’, said the baker.
The next day, the baker was walking past the bank, and decided to go in and deposit the eleven dollar bill into his account. ‘What’s this?’ the bank cashier asked. ‘It’s an eleven dollar bill. I think they’re printing them now.’ ‘Don’t be ridiculous’, said the cashier, and tore it up before his eyes. ‘You’re lucky I don’t call the police’, she said. ‘But you obviously thought it was real, or a bank would be the last place you’d bring it.’
‘Ah well’, thought the baker. ‘Easy come, easy go’. But that little note had enabled $1100 worth of trade to happen in the town. Everyone was better off, even though it wasn’t ‘real’ money.
Now, times were hard in that little town, and the next day, the baker didn’t have any money to buy the flour he needed to bake his bread. ‘Actually’, he thought to himself, ‘I bought some flour and sold a cake yesterday, for something that wasn’t really money. Maybe I can do the same again today.’ So he took a piece of paper and wrote on it ‘I owe the bearer eleven dollars.’ Then he went to the grocery store and told the grocer what had happened to the eleven dollars that he’d given her yesterday. ‘Oh dear, I gave it to the chip shop, and I guess they must have spent it too, and I don’t know how many other people used it before it got back to you. I hope we don’t get into trouble.’ ‘No’, said the baker. ‘The bank let me off. But it got me thinking. Could we do the same thing today, but with something that won’t get us into trouble? Can I give you this note – an IOU? You can always give it back to me when you want bread, or you can spend it with local businesses, and promise to give them goods from your shop. Or you can tell them they can get bread from me with it. You’d be doing me a great favour, as I don’t have any money at the moment.’
‘Sure’ said the grocer, who asked the chip shop owner if she could do the same thing, promising goods from her shop, or bread from the baker. The chip shop owner agreed, then decided they needed another sign. The signwriter agreed to take it, having been promised eleven dollars’ worth of fish and chips for it, or goods from the grocer, or bread from the baker. And so on – until, you’ve guessed it, the note came back to the baker, who accepted it from the shoe-mender for bread. Now, what do you do when someone returns an IOU to you and you’ve paid up / cleared the debt? Well, you can tear up the IOU. But in this case, the baker had an idea. In fact he had several ideas.
- What if I don’t tear up the IOU? What if I spend it again tomorrow? All the local businesses seem to accept it. They know I’ll provide bread for it.
- The grocer could write her own IOU too. Everyone knows she’s good for produce from her shop.
- Actually, I could write different IOUs for anything I buy from local businesses. They all could. Wow – we could all trade with each other without needing any money. Then if there’s a recession, and there’s not much money around, it really doesn’t matter. We can all keep producing stuff and trading with each other.
- Those big chains won’t accept our IOUs, because they need to send money out of the community to pay their shareholders, and they certainly don’t want little IOUs from people they don’t know. But I guess that’s a good thing, because then we’ll trade with each other more, and not so much with those big chains whose business model is sucking money out of our town.
And then, the big one:
- But those notes aren’t ideal. They can be so easily forged, or stolen, or lost. This is the 21st century. Surely someone can build a little software package so that we can keep track of who’s in credit and who’s in debit? We can all have an account with how much we owe, or how much we’re owed, exactly like little IOU notes, but not requiring any money, or bits of paper – just numbers in an account. Wouldn’t it be great if we could all access this on our phones, so that we can pay anyone in our little network, any time?
So, to get to the main point: this, of course, is possible, and it’s what my book is about – building a new kind of community-based economy around a ‘mutual credit’ core, that helps prevent money from being siphoned out of our communities. There are many, many excellent people building such schemes all over the world. There’s one on the island of Sardinia for example, that’s doing 50 million euros’ worth of trade annually – but without money.
There are schemes on every continent, and the really exciting thing is that all these schemes, even if they operate slightly differently, can be joined together in a new, global trading system. It’s happening, and the point of my book is to describe these schemes and the kinds of sustainable, local businesses they can spawn, and persuade you to join in.
About the author: Dave Darby lived at Redfield community from 1996 to 2009. Working on development projects in Romania, he realised they saw Western countries as role models, so decided to try to bring about change in the UK instead. He founded Lowimpact.org in 2001, spent 3 years on the board of the Ecological Land Co-op and was a founder of NonCorporate.org. and the Open Credit Network.
The views expressed in our blog are those of the author and not necessarily lowimpact.org's
1Anthony Hay March 21st, 2021
Dave, I enjoyed the story and look forward to reading the book. In case it’s of use, these are the sort of dumb questions that pop into my head when I read your story.
After a while, the baker realised something: for every loaf of bread he used to sell for a dollar he’d put a couple of cents in his ‘retirement jar.’ But since the, now celebrated, eleven dollar bill day, he hadn’t been saving anything for the day he could no longer face getting up at 3am to start work. In short, he was going to have to keep working until the day he died. He wasn’t sure if this was a good thing or not. He did enjoy making bread, and he’d read that, generally, the earlier people retire the earlier they die. But he always wanted to have more time for his other interests. So he needed to think of some way to support himself that didn’t involve baking or accumulating money.
Meanwhile, the grocer was feeling on top of the world. She’d been very unwell for many years, but after taking part in a medical trial for a new treatment she felt so much better she could kiss the scientists who had, through their pure science research, made the discoveries that had made the treatment possible. Her friend, the fish and chip shop owner, felt the same way. He’d been very unhappy about the climate crisis. But his fryers now ran on green hydrogen, so produced no CO2, which made him feel a little easier. He knew the electricity to electrolyse water came from the new nuclear fusion reactors. Neither of them really understood where the state got the money from to fund pure and applied science research. Did their eleven dollar IOUs somehow make a contribution, they didn’t know. Similarly the cobbler, who had no children of his own, was glad the state somehow funded education for all children.
2Tony Haslam March 21st, 2021
I like your story, Dave Darby, and have used mutual credit clearing systems for my own business (e.g.Bartercard). The difficulty I found was spending the currency I earned. As a website designer and marketer I could find lots of businesses who wanted to purchase my services rather than pay me cash and I managed to eventually spend the money I made by renting holiday cottages and finding an accountant who would also accept being paid in this currency. I stopped using the service when I could no longer find holiday cottages to rent because they had all found difficulty in spending their currency and left. I also tried to start a local currency system in Lancaster through the Transition City Lancaster community group which was based on mutual credit clearing. It never really got off the ground because members of the community who don’t have businesses and would like to take part can’t. I even tried linking the currency to gold so that people could purchase the currency with gold. I didn’t want to link it to the £ because that has been tried with the Bristol and Totnes Pounds and they just become something that tourists take away as souvenirs! I am now convinced that we need to come up with something more radical and am working on developing a mobile app system called CLIME that was devised by Charles Hugh Smith in his book “A Radically Beneficial World: Automation, Technology and Creating Jobs for All”. One of the radical aspects of the CLIME system is that the currency used must be created through Labour by the individual who did the work. So rather than mutual debt we actually create the currency that we then spend. Since members of the community recognize the value of someone else’s work, as long as it has been validated by an unrelated member of the community, then the currency becomes of value and other members of the community are prepared to accept it, since they also do work of benefit to the community and seek to be rewarded for that. Nobody can buy the currency with fiat currencies but all members must be prepared to accept payment in full for goods and services they produce in this Workers Currency. I am looking for others to help build this system so I can send more details to anyone who is interested.
3Dave Darby March 21st, 2021
1. What I’m suggesting with the book is that we start at the ‘edges’ of the economy (in communities) and work towards the centre. So there’s no blueprint and nothing’s prescriptive. Even if it works as well as I can imagine, it will be a while before any states accept taxes in mutual credit. Local authorities – I can see that happening quite soon. We do what we can now, and build from there.
2. There are lots of people working on storing value separately from the exchange medium. See Chris Cook interview – and especially my comments 7 and 8, where I try to summarise – https://www.lowimpact.org/storing-value-in-a-mutual-credit-world-chris-cook/
3. Trade / mutual credit will be a small proportion of participating businesses’ income at first. The legal tender world will still be around, and the state will still tax us and pay for things. Hopefully at some point, states will accept taxes in other ways than just bank-issued money.
4Dave Darby March 21st, 2021
Sounds interesting. The credit in a mutual credit system is also created by people providing goods and services. People get credit in their account for providing something for someone else, and the ‘someone else’ gets debits.
Who do people do work for in your scheme? Surely if they do something useful, the member they do it for gets debits? Or is it about doing things for the community, not about the economy? Or does it start with community work, generating the units to be spent with other businesses?
If so, sounds a little bit like Michael Linton’s Open Money idea – I’ll be interviewing him soon.
NB Bartercard, BBX etc. just think of themselves as businesses providing a service for money. They’re not interested in federation or wider social / economic change. Plus we’re starting with groups of businesses that already trade together, and growing and federating them.
We’d like to see all similar global schemes federate – including yours, if it’s compatible.
5Steve Gwynne March 31st, 2021
Worth a read if you haven’t already. Includes a reference to a new book called Mutualism.
6Dave Darby April 1st, 2021
Steve – good article. And great what happened with Riverford. Even better – every town with it’s own local CSA / farm shops / veg box schemes / farmers’ market, rather than giant companies importing food from further away.
Yes, I came across the mutualism book recently. I think it will become a buzzword soon.
7Steve Gwynne April 6th, 2021
? At present I am reinforcing the need to take interspecific interactions into consideration when dealing with human Nature or human Culture.
Highlighting our human biological/ecological condition means understanding interspecific interactions and understanding the agency of choosing which one to utilise for the mutual good.