JOURNAL: Slow Money

Within a successful transition to a resilient community, one of the earliest signs of progress will be a radical decrease in the community's monetary velocity. Essentially, this means that an ever increasing share of the money that flows into your community, stays within your community. Money, otherwise destined for big corporate retailers, the international banking system, and Asian exporters (the essence of global velocity), stays in the community. This in turn enables the investment flows require for the construction of community platforms (local systems that simplify and accelerate critical activities) that both guard against dislocation/failure in the short term and mint/drive wealth in the long term.

The short term shift to slow money won't be made due to the desire for a lifestyle change or because it is the trendy "eco" thing to do. Some improvements in food quality or a diffuse feeling of fuzzy warmth won't suffice to drive these changes. Instead, it will be driven by a hard edged need to enhance the long term economic and physical security of you and your family. Drivers include:

• Cost reduction. A substitution of time for money. Repair over new. Savings growth.
  
• Mutual support. The local sourcing of goods and services. Strong local relationships/networks vs. arms length/anonymous relationships with global retailers/service firms/banks. A strong hedge against dislocation or an inability to access global supplies/services. Increased flexibility though an ability to negotiate or a potential for barter.
  
• New sources of income. Local production of goods and services. Sales of excess food, energy, and services. A slow discarding of "global consumer" (a slur...) status in favor of "local producer."

For more on this read this excellent post by Robert Paterson.

Comments

[Grant Henninger]

John,

Americans have shown they are terrible at investing over the long term. Everything is done for the here and now. That's one of the big reasons we are in trouble now, we have constantly focused on short term investing. I know we will all say we have learned our lesson, and that we will be better and give up some short-term gain for long term stability and growth, but we won't stick to that.

The transition to local and possibly more sustainable economic practices is only going to result out of necessity. Not because it's the best thing to do over the long-term, but because it's the best thing to do over the short-term. In other words, it will only happen if it's needed to keep food on the table.

The velocity of money through a community probably is a good indication of how much a community is interacting with the global market. However, it doesn't necessarily mean there is a more robust local economy, it could also mean there is simply less economic activity within the community. If people consume less, there will be less monetary velocity. There is a probably a big gap between seeing a reduction in velocity to when people are forced to go local to survive. From where we are today, people can cut back a lot more before they need to start looking for other sources of food en mass.

[Duncan Kinder]

One way to achieve this slowing would be to re-establish the guild system.

One way guilds sustained themselves was through trade secrets rather than through patents, copyrights, or other more modern forms of intellectual property. Nobody knows, for example, how to make Damascus steel or how Brunelleschi built the Dome of Florence. Result, if you wanted fine woolens, you had to goto Florence. Fine swords? Goto Toledo. Mirrors? Goto Venice. And so forth.

[Stowe Boyd]

You and your readers might want to see the post that Robert Paterson linked to, where I define Slow Money as a form of locally socialized economic ethics: http://www.stoweboyd.com/ground/2008/11/small-is-the-ne.html

[gmoke]

Our next energy barnraising in Cambridge, MA will be an air sealing competition sponsored by a TV show, Energy Smackdown, and will include blower door and infrared camera documentation of the before and after.

I wonder whether Obama's email list of between ten and thirteen million will be used to replicate such activities in the coming months. If it did, such events could begin the process of training for green jobs on a wholesale and grassroots basis. Weatherization and energy conservation have immediate results in term of slowing down expenses. Doing them as barnraisings builds community as well.

PS: The people who live longest in this world, those who inhabit the "blue zones," garden throughout their lives and eat the local food they grow, have a purpose beyond a job, and retain strong friendships from birth to death. Sounds like the building blocks for resilience to me.

[Grahame]

so, one consequence of slow money is that the poor stay poor?

[Will]

I think you would find the community development process of the Rocky Mountain Institute interesting. Their approach to the economy is much as you have outlined.

Other work by the Institute on alternative energy also fit. See, for example, their book (available on-line) "The Oil End Game."

They're doing nice work and have the engineering expertise to back it up.

[Chris Albert]

John,
I recently had a conversation with a woman who has done considerable work over a generation with immigrant communities in the Central Valley of California ( where an important part of US Agriculture is produced).

She told me about the Hmong and Laotian communities that have settled in the area, and some of the patterns of establishment of these local communities, which made me think of the threads you have generated on that topic at this site.

What struck me in these conversations, was the pattern of entrenchment of these immigrant communities into a new area.

Typically a leader of some sort would establish a foothold in a new area. (For example in the Hmong/Laotian community it would have been a 'General' or senior military/political leader from the origin community.
This foothold would bootstrap a local presence for the community, who would exist perhaps initially via local solidarity and government support and then via market specialization in the local community, and then via the next generations integration into the professional / business class of the community.
Of course, this is an over simplification.
However, it does suggest a strategy of local community immigration / development / integration that could be studied to provide models for successful resilient communities of the future.

Thus what I would like to say, is that I think that the model you are advocating, has been an essential part of the human experience for as long as our species has been in existence -- it is what we have been selected for.
In addition, that the study of human immigration patterns (the search for a better life) can teach us much about how to successfully design local, resilient communities.

[andrew]

Mr. Albert beat me to the post. I was also going to suggest looking at immigrant communities for some of the same ideas on how a community moves from a more or less self-sustaining unit to one in which integration with broader economic system occurs.

The area in which I reside also has a large Hmong community that has shown some of the characteristics Mr. Albert shares. The local Somali community has some of the same characteristics, but I am not as familiar with them.

You may also want to look at the golden age of Harlem. I suspect you already have and my long absence from this site makes itself obvious.

[Duncan Kinder]

Check out the Stranded Wind Initiative

"Stranded Wind is a multi level enterprise that facilitates the development of stranded renewable energy resources to address the issues of fossil fuels, energy independence and global warming. Stranded Wind is committed to the sustainable production of ammonia as an alternative fuel and agricultural commodity, rail electrification, the development of biofuels without impacting food production and local renewable power generation. Stranded Wind provides organizational development resources to encourage new, renewable energy projects using emerging technologies to enhance local energy independence.

http://strandedwind.org/

http://snipurl.com/6worm"

[gmoke]

One of the principals of the Stranded Wind Initiative is living in Western MA. He came into Cambridge for Bill McKibben's recent talk at Harvard.

McKibben's _Deep Economy_ is probably another resource for thinking about slow money and community economics.

To add to the mix, it may be that finances under Sharia law, without usury, will be ascendant in the next few years as the G20 economic structure goes through its transformations.

[g48]

John: the fundamental problem is that money does not obey the laws of thermodynamics.

It takes no more energy to tranfer a billion dollars across national borders, than to transfer a dollar. Money, unlike energy, can be created and destroyed. And the "law of increasing return" creates positive feedback systems that tend toward exponentials.

In effect, money is a form of information, which is to say, a form of thought. And the speed of thought is instantaneous: Blink! I'm halfway around the world in my mind's eye. Blink! I'm home again. Blink! A billion dollars. Blink! Seven point four trillion.

The only way to create slow money, aside from creating complex regulatory regimes that beg to be circumvented by various bad actors, is to decouple the international, national, and local levels of transaction.

Thus, a modest proposal: three currency systems:

International: denominated in ergs or BTUs, based on the energy that is available to do work.

National: denominated in the value of a nation's capital assets.

Local or bioregional: denominated in the value of a local or regional area's labor, for example "hours" (as in Ithaca Hours).

A three-level system produces a loose coupling between levels: by analogy similar to the suspension on a vehicle that evens out the impact of the bumps on the road. Problems that occur on one level don't readily propagate to the other levels. If a locality goes down, the trouble does not immediately take down a nation, and help can come in from outside. If a global entity breaks, local areas can still produce their basic necessities.

Further, a system of this type is not conducive to the global trade in "commodities" that creates artificial price crises and scarcities of essentials.

Lastly, a system of this type is inherently "slow" because it has an inherent bias toward transactions occurring within any given level rather than across levels. Thus, local tends to stay local, and national tends to stay national. Currencies circulate within their level, rather than being instantly convertible to a form that can be sucked out of a given area at the speed of thought.

Implementation of a system of this type will have to happen from the bottom up, and will no doubt encounter resistance from vested interests that presently benefit from the status quo.

I'll have more to say about all of this in subsequent postings.

One more thing:

I've been reading GG since forever-ago and recall many of your earlier postings about the "market state." Seems to me you've substantially changed your outlook, from one that appeared to believe in the inevitability (and perhaps the desirability) of globalism, to one that appears to believe in the necessity of localism as a core element of resilience. Excellent. We're on the same page.

More later.... -G48

[XON]

G48, I like this a lot. Of course it's not a new idea, but it is an idea with a lot of potential.

One thing I like about it is the possibility that such a system would underpin a move of political boundaries from arbitrary and/or militarily driven to economically/culturally driven. This would have a big potential to work out the current problems in the Middle East, as well as, perhaps, the water issues in the western U.S.

[gmoke]

Might be a good time to look at Upton Sinclair's End Poverty in California (EPIC) program as well.

[Duncan Kinder]

A Miami-based grassroots movement of squatters that "liberate" foreclosed housing:
"Take Back the Land"

http://www.takebacktheland.net/index.cfm

"Take Back the Land Mission

Mission
People of African descent have been systematically denied control of land in their communities- from slavery to sharecropping to segregation to the current gentrification and displacement of our communities.

Elected officials and high ranking bureaucrats have sold out the black community in favor of enriching already wealthy and politically connected developers.

We assert our right to the land in our community and to use public space for the public good- specifically, to house, feed and provide community space for the poor, particularly in low income black communities. As such, we are Taking Back the Land and empowering the black community, not the politicians, to determine how to use land for the benefit of the community.

Our struggle is fundamentally one of land, and control over that land. We take inspiration from and support our sisters and brothers across the globe engaged in similar struggles for control over land for the benefit of the people.

Objectives
Take Back the Land pursues three core political objectives:

First, feed and house people. Taking control of land to feed and house those impacted by the crisis of gentrification and low-income housing is the ultimate in public space for public good.

As such, the Umoja Village provides free food and modest housing for 50 people. While the housing is not "up to code," it is far better than conditions under local bridges and even some of the nearby slum housing. We strive to consistently improve conditions and the quality of life on the land, including regular delivery of food and other goods, as well as upgrading housing and amenities.

Second, assert our right to control the land in our community. This movement is not fundamentally about homelessness or even housing: it is about land. We contend that the land in the black community is not the domain of wealthy developers or the politicians who do their bidding. The land belongs to the people in the black community. As such, the people have the right to control the land and its uses.

Instead of giveaways to wealthy developers to build high cost, high profit condos which do not serve the needs of the community, the land on which the Umoja Village sits is used to benefit the community. Particularly during land related crisis, such as gentrification and housing, public land should not be used for the enrichment of wealthy, politically connected interests. Instead, the land must be used to solve problems to the benefit of the community. Our communities must determine its own priorities and the appropriate use of land in accordance with those priorities.

Third, build a new society. Instead of replicating the power and social relationships of the broader society in a smaller setting, we build a new society in which people relate to one another differently and the power to make decisions about the Village is centered on them, not the politicians.

While critics charge we are anti-development, nothing could be further from the truth. However, development is not about buildings, technology and the latest consumer products. Development is fundamentally about human beings. The building of structures without the development of human beings is nothing more than a profit making venture, something not worthy of the social status attached to "development" projects."

[Michael]

Grahme - "so, one consequence of slow money is that the poor stay poor?"

"Poor" for certain values of poor perhaps...

From a material point of view, if they're saving money / investing in household items that have longer periods of obsolescence (via fixing or buying sturdier items), and "getting more for their money" then it's hard to see the downside...

Of course they might not be able to buy all the flash new things immediately and get a huge new house (for a time), but then they're far less likely to go bankrupt as well... It's also worth noting that very few people (barring the homeless) in western societies are actually "poor" in any meaningful sense of the word.

Also, there are some that define "wealth" by the amount of leisure you have... In this case slow money WILL make you a little poorer, as there will be a trade off from spending time rather than spending money to achieve your aims... Still, some of this "spent time" is enjoyable - we grow a lot of vegetables, raise meat animals, and cook a lot from scratch at home - these are enjoyable as well as financially rewarding even though they "take time" that could otherwise be spent in idle leisure.

More to the point though, slow money allows the middle class to stay middle class, and not decline to poverty.

[Duncan Kinder]

A sketch of thoughts I have on how to slow money down while increasing wealth at the same time:

Central to much economic thought is the need to move inventory. I am in the business of manufacturing, wholesaling, or retailing widgets, which I must move to generate sufficient cash to stay in business. Economics is the study of the optimal situation in which I might move this inventory. ( Yes, the economy consists of services as well as goods, but I have yet to figure them out - so for present purposes I am ignoring them. )

In contrast to goods, such as widgets, however, there is also art. While art can be bought and sold, it is fundamentally priceless. If I have five Leonardos and sell you one, I am arguably the worse off no matter what the price. Art is that which is not inventory. I make or collect it for its own sake and am in no hurry to transfer it to you.

To the extent that an economy rests upon its production / collection of artifacts, its economy will be slow; yet it will thereby also be wealthy.

[Duncan Kinder]

A brief update to my prior post.

While, for reasons stated above, the production and collection of artifacts would encourage the emergence of resilient communities, the looting, theft, and forgery of such items is very much part of the stock-in-trade of global guerrillas.

[Kevin Parcell]

Create local money that's stronger than national currency so that communities are empowered to reclaim control of their destinies:

http://sunmoney.org