Designer Currencies and the Preferenced Domain
In Short Circuit, published in 1996, Feasta’s co-founder Richard Douthwaite described the challenge for local economies seeking self-reliance: “If people living in an area cannot trade among themselves without using money issued by outsiders, their local economy will always be at the mercy of events elsewhere. The first step for any community aiming to become more self-reliant is therefore to establish its own currency system.”
Douthwaite’s analysis was primarily concerned with localities within nations where the ‘money issued by outsiders’ was the national fiat currency. His Preferenced Domain (though Feasta hadn’t coined the term in 1996) was that locality.
This article attempts to explore the nature of a Preferenced Domain – what exactly we might want to preference and why – and to apply the concept to smaller and larger economies and to non-geographic domains.
Preferenced Domain Basics
The definition of a Preferenced Domain (PD) generally implies the existence (borrowing terminology from the software development sphere) of a Deprecated Domain – a domain that is ‘earnestly disapproved of’ but cannot be done away with or ignored. It may be deprecated because of its perceived embodied values, priorities or actions; or just because one feels a closer identification with the PD – for negative or positive reasons, or a combination thereof.
In a primary scenario the PD is a locality seeking greater economic self-reliance, local distinctiveness , a sense of place and local identity, and contrasting this vision with the deprecated behaviour of the national/ globalised economy within which it must operate. Apparent commitments to subsidiarity by politicians do not seem to have assuaged public feelings of disconnectedness. These feelings manifest themselves positively via the Transition Movement for example and are expressed negatively via distrust of national politics and institutions. In economic terms the deprecation is based somewhat on the baseless and unearned right for outsiders to create money (as loans with interest)- a right ceded to commercial banks by complicit governments; and on the subsequent allocation of capital into first-use guided by the values of the casino. All things being equal, those identifying with the PD (including enlightened local government) might prefer to exert a degree of strategic guidance over capital use and value exchange that reflects the importance of the real economy, the sustainability of the planet and local economic priorities; and in that context to explore the prospect of users controlling their own currency rather than being in hock to deaf-to-need and hard-to-influence absentee capital renters.
The Nation State
The most familiar geography-based economy is the nation state. The boundaries of many nation states are arbitrary – dictated by geography or by avuncular politicians and colonels divvying up territory in times of turmoil guided largely by a straight edge. Creation of national identity can be problematic, and is usually assisted by differentiating from an external oppressor. A national currency is part of that national identity (pace the Euro). The need to settle certain transactions (e.g. oil) in dollars may be deprecated. Within the national economy the public and private sectors work together in mysterious ways, with a sort of ‘top up and spill’ arrangement with the Rest of the World (import/ export), mapped out ad nauseam by orthodox economic models (and re-remapped now by MMT and others). To paraphrase the World War I lyric – they’re here because they’re here (sing to the tune of Auld Lang Syne).
The Designer Currency model emphasises the inescapable association of values, behaviours and outcomes with a currency , and suggests the validity of explicitly associating desired behaviours with currency design.
Monetary reformers [7,8] hope that it is not too late for nation states to recognise the importance of money design, recover the control they have ceded to the commercial banks and exert strategic guidance over currency issue and first-use, rescuing tattered democratic credentials in the process. There is some evidence that the chattering elite are re-examining the role of state intervention in partnership with the market but, to date, there is little change on the sea-bed where a ‘return to business as normal’ is, depressingly, the highest apparent ambition, and kicking the can down the road has developed into an art form.
Money diversifiers think this is too much to ask. Governments, entranced by the idea that the ‘market’ is a perfect proxy for people’s needs, see the banks and corporates as trustworthy interpreters of market gobbledegook. Either that or the thought of taking democratic responsibility scares them s**tless. Diversifiers believe that multiple currencies can be man-made from the ground up, can compete and prosper and eventually relegate fiat currencies to a more acceptable role. Even if taxes continue to be demanded solely in fiat.
Self-sufficiency and the Local/ Regional PD
Much of the richness of local economies – the diversity and skill sets – has been strip-mined out by progressive centralisation/ globalisation. Not many of us want to take the self-sufficiency agenda to the ultimate level – to retire to the hills with agricultural skills and an AK47. But many have a gut feeling that it is unwise and unsafe to continue to outsource our life-fundamentals to outsiders. And that we would feel better, happier, more fulfilled through exerting more direction over our own futures, in the company of those we want to trust – in a Preferenced Domain.
One of the major challenges of local currencies, like the UK proxy-Pounds of Totnes, Brixton, Stroud, Bristol and Lewes, is the lack of diverse local supply. It’s all very well alerting people to local suppliers but if sources of supply for given goods and services simply do not exist within the PD, you have to earn and use outside-currency (in this case pounds sterling) to access them. The development of a thriving local currency must go hand-in-hand with proactive local economic development.
But does it matter that supply is from outside the PD – and to what extent does the PD compete with its neighbours? The competitive paradigm is deeply embedded. It’s definitely part of the local authority (and national) zeitgeist, exemplified by the scramble for multinational FDI . Multinationals disrupt locally-rooted businesses on the way in (sweetheart deals, predatory pricing); and they certainly do likewise on the way out by which time local suppliers may have disappeared from the market. It may be time that preferencing was redirected towards real local-grounded businesses via patient long-term support.
Is increasing energy cost changing the equation? The received green wisdom is that it does, and that as transport costs increase local supply becomes more economic. Aggressive carbon pricing may accelerate this trend.
But is all supply equal? To a mainstream economist it may be. To real people it isn’t. Personally I am entirely happy to trust the free market to price the stuff I don’t really need; it’s the important things in life I have least confidence in the market delivering without screwing me over – water, food, energy, shelter. So there is one possible discriminator for a PD – the preferenced set of transactions.
All sub-economies – geographically local economies, and shared-interest economies – have to deal with Outsiders. Typically they will need Outsider currency to do so, and these currencies carry specific value-sets and encourage specific behaviours and outcomes that the sub-economy may deprecate. A Designer Currency, designed to operate within a defined Preferenced Domain and embodying the explicit, transparent, agreed (and indeed evolving) value-sets of the currency users can build the sub-economy. More than enhancing the local identity and spreading awareness of local supply, as is typical for established local currencies like the proxy-Pounds, it can help identify important gaps in local supply and be an integral part of proactive local economic development.
Featured image: Iroquois wampum belt. Source: National Museum of the American Indian Newservice.
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