An Economy of Permanence

An Economy of Permanence
Excerpts from Robert Swann, “Putting Power in its Place�, 1992, and “A Place of Local Currency in the World Economy�, 1981, E.F. Schumacher Society

The opportunity now exists to develop a better money system than the one we use at present. We need a system that, by its nature, will promote and enhance small-scale institutions, including small businesses, cooperatives, small communities and local towns. We need a system that will support and encourage the local production and supply of local businesses, and that will allow farmers to make a living producing food for local consumption. In short, a regionally issued currency is a fundamental tool to creating a diversified, stable, regional economy made up of many interrelating small businesses.

Every region has its own distinct character that makes it different in very critical ways from other bioregions. It has its own resources, both natural and human, particular to the kind of land there and the people who live on it. Therefore each bioregion has its own unique productivity capacity. Since the creation of money, in order to avoid inflation and deflation, should increase or decrease with the amount of production at any time, it is essential that the supply of money be created at the local or regional level by institutions that are focused on their own regions.

Decentralization and diversity of money have the benefit of preventing large-scale failure. This is true in banking as it is in the natural world. For example, take seeds. If different farmers used many different strains of corn, some seeds will produce more than others; but if a disease hits the crop, some strains would resist and the total effect will not be disastrous. However, if all farmers have shifted to a new hybrid seed and a blight hits this type of seed, the result can be widespread disaster.

Many people assume that our centralized banking system goes back into very early history. In fact, in the U.S. at least, centralized banking is a relatively recent development. Throughout most of history money systems were small scale and decentralized consisting of either direct exchange of goods by barter or, later, exchange with metals of intrinsic value, such as gold or silver. Banking as a system grew slowly out of the medieval period when goldsmiths became, first, the caretakers of gold and, later, became bankers by using the gold as a reserve for redemption.

The banking system that grew out of the medieval period was, by and large, very diversified, with many banks issuing their own currencies. This condition existed right down to the early 19th century. Centralized banking had grown hand and hand with the industrialization of the country. As industrialization grew, the need for larger amounts of money to finance the large industries with their “economies of scale� grew also. Huge sums of money also meant the need for big banks.

Today a very large part of our lives is controlled or governed by a system over which we have little or no control of and do not understand. To a large extent we have accepted unconsciously a system of money and banking and we are asleep in our relationship to it. Perhaps no one fully understands this system – even many of the bankers who use it – but it is an important factor in determining what happens in our lives.

From a legal viewpoint, money is nothing more (or less) than a claim. But from a technological viewpoint, money is a tool. Like any other tool it can be shaped to perform in different ways. Just as both a scythe and a combine are tools for cutting wheat, so money may be designed to perform in different ways with different objectives. In the same way that we are presently designing and creating more appropriate hardware for small scale needs, so we must create an appropriate tool for exchange.

I do not mean to suggest that creating a better money or exchange mechanism will solve all the problems that confront our society. Not by a long shot. However, just as E. F. Schumacher pointed out, if we create inappropriately scaled tools we end up with many social problems such as unemployment, dissatisfaction with work, alienation, etc.

Economists are presently arguing about the possible “solutions� to these problems, but since economists, like most modern technologists, are looking for “macro� solutions, they have virtually overlooked the possibility of “micro� solutions.

It is, therefore, up to those of us who are the advocates of appropriate technology and small scale to become the inventors, creators, and producers of an appropriate technology for money and banking. We cannot expect the answer to come from outside of our own ranks. Moreover, it is vital to us, because all of the other appropriate technologies with which we are involved depend eventually upon a proper and decent exchange system. A new money system should have all of the attributes that we value (cooperation, self-reliance, community, etc.). Such would be the direction of the work on which we must concentrate in order to develop an “economy of permanence� in Schumacher¹s words.

If we are to begin to design a local money system that would work for the development of a local economy, what would be the elements or characteristics for such a system?

It would have to be simple to understand, but consistent with our experience of the present money system. Unlike our present money system, it would have to be redeemable (i.e. exchangeable) for something of real value, not necessarily gold or silver, but real needs of everyday use, such as energy. Without a redemption system it will be difficult to convince people of its value, after all isn¹t that exactly why the dollar so devalued, because it is not redeemable for real value from the primary issuer, the Federal Reserve. Most importantly, we would need to establish a measurement of value which would be as universal as possible and not subject to swings in value up or down as our present money system is. Such a method of measurement would be the most revolutionary element in the design and would be the key factor in making it possible for a universal system of money and banking without the need of central banks or central governments becoming involved in money issue.

And finally, it would have to be organized at the local level and controlled by the community as a whole (i.e. each community would elect members of the board of the issuing bank which would preferable be a non-profit institution

The most pressing need I can imagine for a local and regional self-reliant economy is the invention and establishment of an appropriate exchange system such as I have described. Yet such a system, because it is based on a universal measure of value like a kilowatt-hour of energy, could, at the same time, become the key to eventually establishing a worldwide system. For it is obvious that while on the one hand we are at an historical point where local and democratic participation in the economy is essential to our economic survival and to our humanity, it is also clear that we live in a world which is rapidly moving towards a one world economy. This new, appropriately scaled monetary system would consist of thousands of small, primarily self-reliant regions exchanging or trading directly with each other using a common unit of exchange. Thus the foundation for a cooperative world economy would emerge.

The E. F. Schumacher Society, named after the author of Small Is Beautiful: Economics As If People Mattered, is an educational non-profit organization founded in 1980. Our programs demonstrate that both social and environmental sustainability can be achieved by applying the values of human-scale communities and respect for the natural environment to economic issues.
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