Monnaie communautaire pour une économie locale: innovation populaire pour la prospérité par la démocratie ?

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L'économie locale au travers de la ruralisation semble être une alternative pour atteindre une nouvelle valorisation de la prospérité. Cependant, le système économique et monétaire classique induit une machine de croissance explosive qui apporte inégalités sociales et détériorations environnementales. Les monnaies communautaires sont des technologies sociales qui n'apportent pas seulement de la durabilité au système classique en le complétant, mais fournissent aussi un outil efficace d'incitation pour l'orientation démocratique de l'économie vers la prospérité en gérant les échanges au travers du contrôle de leurs circulations. De plus, cette économie d'abondance d'accès à l'intermédiaire d'échange construit une société de coopération. Ainsi, pour accompagner cette nécessaire transition entre le paradigme classique et celui alternatif et créatif, un financement externe au travers de la philanthropie est indispensable. Le secteur de la venture philanthropie et le microcosme des monnaies communautaires ont besoin de progresser afin de transformer cette utopie en un espoir envisageable pour notre civilisation.
Initialement ingénieur environnement et énergie, l'auteur possède un double diplôme Mastère Spécialisé Management du Développement Durable HEC Paris / MBA Gestão de Sustentabilidade FGV São Paulo. Il est le créateur du premier fond d'Investissement Socialement Responsable de partage au Brésil à la Société Générale Brasil, en partenariat avec Crédit Agricole Assest Management. Il s'intéresse particulièrement aux thématiques d'insertion sociale au travers de l'agriculture biologique et de la réhabilitation de la biodiversité, d'évaluation du quotient entrepreneurial, de venture philanthropie, de monnaie communautaire, et de développement rural.

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Alternative Management Observatory Observatoire du Management Alternatif ̶Essay Community currency for local economy : A grassroots innovation for prosperity through democracy? Christophe Place August 1, 2010 Specialized Master in Sustainable Development Management – HEC Paris Master of Business Administration in Sustainability Management – FGV São Paulo Class of 2009 Place Christophe. Community currency for local economy. Paris: Alternative Management Observatory, August 2010. 1

Community currency for local economy: a grassroots innovation for prosperity through democracy? This essay was made from a research oriented thesis within the framework of a double diploma Master / MBA in sustainable development between HEC Paris and Fundação Getulio Vargas São Paulo. The whole work is available on <http://ssrn.com/abstract=1582552> under the title: Place Christophe. Creative monetary valorization: what efficient incentive mechanisms of creative economy based on socio-environmental value exchange systems? HEC, FGV, Paris, 2009. It benefited advices from Eve Chiapello, co-responsible of the Alternative Management specialization of HEC Paris. Abstract: Local economy through ruralisation seems to be an alternative to reach a new valuation of prosperity. However, the classical economical and monetary system induces an explosive engine of growth which bring about social inequality and environmental deterioration. Community currencies are innovative social technologies which not only bring sustainability to the classical system by completing it, but also provide an efficient incentive tool for democratically orientating an economy towards prosperity by managing exchanges through the control of their circulation. Moreover, this economy of abundant access to exchange intermediaries builds a society of cooperation. To support this necessary transition from a classic paradigm to an alternative and creative one, external funding through philanthropy is essential. Both the venture philanthropy sector and community currency microcosms need to progress to transform this utopia in a conceivable hope for our civilization. Keywords: community currency, social technology, sustainability, prosperity, philanthropy Monnaie communautaire pour une économie locale: innovation populaire pour la prospérité par la démocratie ? Cet essai a été réalisé à partir d’une thèse professionnelle dans le cadre du double diplôme Mastère / MBA en développement durable entre HEC Paris et la Fundação Getulio Vargas São Paulo. La totalité du travail est disponible sur <http://ssrn.com/abstract=1582552> sous le titre : Place Christophe. Creative monetary valorization: what efficient incentive mechanisms of creative economy based on socio-environmental value exchange systems? HEC, FGV, Paris, 2009. Il a bénéficié des conseils d’Eve Chiapello, co-responsable de la majeure Alternative Management de HEC Paris. Résumé : L’économie locale au travers de la ruralisation semble être une alternative pour atteindre une nouvelle valorisation de la prospérité. Cependant, le système économique et monétaire classique induit une machine de croissance explosive qui apporte inégalités sociales et détériorations environnementales. Les monnaies communautaires sont des technologies sociales qui n’apportent pas seulement de la durabilité au système classique en le complétant, mais fournissent aussi un outil efficace d’incitation pour l’orientation démocratique de l’économie vers la prospérité en gérant les échanges au travers du contrôle de leurs circulations. De plus, cette économie d’abondance d’accès à l’intermédiaire d’échange construit une société de coopération. Ainsi, pour accompagner cette nécessaire transition entre le paradigme classique et celui alternatif et créatif, un financement externe au travers de la philanthropie est indispensable. Le secteur de la venture philanthropie et le microcosme des monnaies communautaires ont besoin de progresser afin de transformer cette utopie en un espoir envisageable pour notre civilisation. Mots-clés : monnaie communautaire, technologie sociale, durabilité, prospérité, philanthropie Ethical Charter of the Alternative Management Observatory Documents of the Alternative Management Observatory are published under a Creative Commons Licence http://creativecommons.org/licenses/by/2.0/fr/ to promote the equality of intellectual resources sharing and knowledge free access. Accuracy, reliability, and validity of information or opinion distributed by the Alternative Management Observatory come under the exclusive responsibility of their authors. Place Christophe. Community currency for local economy. Paris: Alternative Management Observatory, August 2010. 2

Tables of contents INTRODUCTION..................................................................................................................................................4 1. MONETARY AND ECONOMIC SYSTEM VERSUS SUSTAINABILITY AND PROSPERITY......5 1.1. UNSUSTAINABLE CLASSICAL SYSTEM....................................................................................................5 1.2. TOWARDS AN ALTERNATIVE TO THE MATERIALISTIC DEVELOPMENT PARADIGM.................................13 2. COMMUNITY CURRENCY: A SOCIO-TECHNICAL INNOVATION............................................19 2.1. AN EFFICIENT TOOL FOR INCENTIVE MECHANISM.................................................................................19 2.1.1. Some experiences around the world...............................................................................................19 2.1.2. Brazilian specific experiences........................................................................................................22 2.1.3. Analysis of the case studies.............................................................................................................25 2.2. TO REACH LOCAL SUSTAINABLE PROSPERITY AND COOPERATION........................................................29 CONCLUSION.....................................................................................................................................................36 REFERENCES.....................................................................................................................................................37 Place Christophe. Community currency for local economy. Paris: Alternative Management Observatory, August 2010. 3

Introduction The past crises show us some limits of our economic system. Yet, the trend of our society is to conserve the same system with some remedial tools, avoiding the necessary initiation of a genuine dynamic of change to break the unbearable inertia. Socio-economical development needs a real mutation and some innovations in applied research to achieve an alternative for the classical system, based on utopia as a positive hope for civilization. From centuries, our society and culture have been dependent on money initially as a mean, and now as a goal. Money exchange almost became the unique reference of wealth. This dependence on wealth creation through exchange growth instead of stock conservation has brought money value higher than social, environmental and cultural ones. To change this paradigm, we need to find some effective innovations supported by the grassroots which redefine the prosperity. However, to finance these innovations and researches, a funding based on private donation seems to be necessary for this essential progression, this important transition, this possible revolution. First and foremost, we will show how our current economic and monetary system is intrinsically unsustainable and why it needs to be transformed to achieve a society based on local and democratic economy orientation for prosperity no more based on materialistic consumption veneration for societal integration. Then, we will analyse, through case studies, why community currency is an efficient social technology to incite an economy based on cooperation and determined post-materialist exchange to bring sustainability. Finally, we will suggest a venture philanthropy intermediary structure to support this microcosm of creative community currency. Reinventing our monetary valuation through creative economy is essential to reach a pertinent vision of prosperity. Place Christophe. Community currency for local economy. Paris: Alternative Management Observatory, August 2010. 4

1. Monetary and economic system versus sustainability and prosperity When we speak about sustainability, we always have in mind some technological solutions for environmental and social management of energy, pollution, waste, biodiversity, water, forest, purchasing power poverty, health, food, education, resource access equality, liberty of transportation… All of those objectives should be reached thanks to the classical economical tools of the dominant wealth creation, exchange and redistribution system through respectively consumption with nature destruction; universal exchange intermediary; taxation and/or donation. Most of people believe that sustainability would be fulfilled by preserving the same economical system which led us to consistent human and nature crisis. Some are criticizing globalisation, only for profit goal, private property on production means, free market exchange and concurrency, unequal remuneration of working hours, capital accumulation and speculation and suggest more public control for more equality and local exchange through state intervention. But only few are really dealing with the deep problem of cultural values of our society induced by our intrinsically unsustainable economic system dominated by the unequal access of exchange intermediary as a universal medium of exchange on a global open market. A deep and fair restructuration of our monetary system would be a solution of our systemic economic crisis and thus civilization collapse by transforming an economy of scarcity in an economy of abundance, by transforming a society of global egoism and competition in a society of local altruism and cooperation. 1.1. Unsustainable classical system The growth of our economic and monetary system will exhaust because it is deeply based on the exploitation of exhaustible resources. On one side, we have the econosphere which is based on an infinite destruction of the nature through its paradigm of exploitation-production-consumption-recycling cycle growth, and on the other side we have the biosphere which is based on limited resources damage potential. Unfortunately, the growth of the econosphere is unavoidable because each economical entity needs to have more gain than loss to survive basically by making profit for the stockholders and by reimbursing the credit money with interest. The growth of this system can’t be infinite because of nature material and energy entropy. Indeed, because of natural resources entropy and its intrinsic loss of material and Place Christophe. Community currency for local economy. Paris: Alternative Management Observatory, August 2010. 5

energy, the exploitation-production-consumption-recycling cycle will always ingests energy and material exhaustible resources and reject pollution and waste (Georgescu-Roegen, 1971). Of course the econosphere needs the exploitation of exhaustible resources but only in a reasonable mean to fulfill human and nature prosperity and not as an unachievable aim of wealth accumulation for a minority. 1Figure 1: economy and monetary growth versus natural entropy Source: Place Christophe. Creative monetary valorization. Hautes Études Commerciales - Paris, Fundação Getulio Vargas - Escola de Administração de Empresas de São Paulo, January 2010. 1 This figure was created from a fusion of figures: Le Clézio Philippe. Les indicateurs du développement durable et l’empreinte écologique. Conseil économique, social et environnemental, Paris, 2009 and Jackson Tim. Prosperity without growth? The transition to a sustainable economy. Sustainable Development Commission, London, 2009. The econosphere represents the sphere of our economy, but it can also be called the societophere as the sphere of our society. This figure represents the money flow into the economic system and not the money stock, that’s why it doesn’t appear the capital, the treasury, and the debt. Furthermore, for clearness reasons, it doesn’t appear the government wealth redistribution through transfer or subvention. Nevertheless, the taxes are always higher than the expenditures in order to pay the internal cost of the governmental structure, except for the civil voluntary association which used to receive more subventions than taxes. It doesn’t appear also the saving interest rate and the credit interest rate. Nevertheless, the credit interest rate is higher than the saving interest rate in order to pay the internal cost of the commercial bank. It doesn’t appear the administrative fee and performance fee to pay the internal cost of the financial and commodity market. It doesn’t appear the effect of the interest rate of the central bank and its eventual effect on inflation, debt and growth. The private company and individual wealth is the unique source of wealth creation and can be redistributed through public taxation with a lost caused by the government money credit reimbursement and bureaucracy cost. Growth allows the government to pay back their central bank loan with interest through the taxation of private entity as individual and company. Place Christophe. Community currency for local economy. Paris: Alternative Management Observatory, August 2010. 6

This economic system is based on the wealth creation through the consumption growth of goods and services based on nature destruction production2. Consequently, wealth creation is nowadays made through not essential products through industry and services. Survival agricultural products are no more considered as a wealth. Indeed, the Gross Domestic Product per capita at Purchasing Power Parity in the sectors of services and industry are 15.5 higher than in the agricultural one, with an average Gross Domestic Product per capita at Purchasing Power Parity of $ 10,400. The economic system created and imposed a wealth creation based on material goods and immaterial services production where consumption is more important than indispensable food creation. It means that the rural agricultural value of survival food has less importance than the urban industrial and virtual value of respectively material goods and immaterial services. Thus, urban populations are indirectly dominating rural populations at national and international levels. Indeed, the intermediary exchange is the same for all sectors but with different level of access. The abundance of wealth through money access in urban sectors allows them to purchase the products of the rural ones which don’t have access to this resource of exchange intermediary. The universality and scarcity of exchange intermediary give the possibility of domination of some community on others. To reverse this tendency, we should not only initiate a ruralisation, a migration towards the rural zone, but also separate the exchange intermediaries by sectors with a regulated and strategic rate of exchange between them. Graphic 1: GDP per capita by sector in US $ in the world Source: CIA. The world factbook. Central Intelligence Agency (CIA), Washington, 2009. Moreover, the system of interest on lent money3 for consumption or production necessarily creates a wealth distribution inequality. The remuneration of money has a percentage of the amount lent / borrowed mechanically creates inequalities of gain between poor and rich. This 2 Indeed, wealth creation is determined by the cash flow, by the amount of money circulating, by the amount of exchange between producers and consumers, by the Gross Domestic Product. Nowadays, in our society, as money rules the world, wealth is resumed as money, accumulated or in circulation, used for goods and services exchange. Wealth grows when money grows, when the consumption-production cycle rises. When money in circulation grows, as a medium of exchange, exchange grows, the consumption-production cycle also. When money in accumulation grows, as a store of value, it is used as a capital for credit or investment with interest and incites the consumption-production cycle also. 3 Lent money would represent the scarce money you receive through a loan or an investment. The first case supposes to be less risky than the second case and it doesn’t deal with the notion of property of an organisation. Place Christophe. Community currency for local economy. Paris: Alternative Management Observatory, August 2010. 7

system, which has long been considered as a shameful, is today well accepted into our economic system but it is still an unfair and enriching / impoverishing mechanism. It tends to increase inequalities in such a strong way that it seems difficult to imagine any public action efficient enough to counterbalance it. This process is deeply based on a private self-interest and not a public cooperation and is present in all the step of economy, from saving-credit to investment. This process, by creating inequality, also participates in the growth paradigm, especially because our society is based on materialistic consumption veneration for societal integration (Jackson, 2009). Indeed, as resource access is unfair, poor wish to become richer to rise their amount of exchange intermediary, to increase their purchase power, to reach consumption standards and look for salary augmentation which reflects on price increase and thus on the need of more profit through more remuneration on money accumulation. Interest through economic growth should be higher than inflation to give credibility to money hoarding. The more the process of interest is functioning, the more inequality is creating, the more salary augmentation is needed, the more inflation is induced, and the more compensation through profit is researched through money remuneration and thus economic growth with investment and credit with interest. Graphic 2: interest rate mechanism and its intrinsic inequality4 Source: Place Christophe. Creative monetary valorization. Hautes Études Commerciales - Paris, Fundação Getulio Vargas - Escola de Administração de Empresas de São Paulo, January 2010. 4 Interest rate on a non shared wealth enriches the rich more than the poor. Indeed, a same interest rate applied to different non shared wealth will bring more benefit to the biggest wealth and the gap between the poor and the rich is growing. However, if a pooled wealth received an interest rate with a strictly equal redistribution of the benefit between the rich and the poor, the poor will receive more and the gap won’t grow. Nevertheless, to decrease the gap, it’s necessary to redistribute more benefit to the poor than the rich. Place Christophe. Community currency for local economy. Paris: Alternative Management Observatory, August 2010. 8

Finally, the increase of donation indirectly depends on profitability and on the fact that it’s impossible to give more than you have. Thus, the more we will need donation to compensate the socio-environmental impact of the economic system, the more we will need profit through this same economic system. To raise funds for better wealth redistribution, it is necessary to create this wealth through the economic growth of industrial and service sectors, and thus through environmental deterioration and social inequality. The more we need wealth to compensate the systemic unfair degradation, the more we push for the creation of this wealth through the economic growth engine. Indeed, we will always have intrinsically less wealth redistribution than creation because to redistribute wealth we must create it first. Tax and donation only exist through profit because loss can only be lower than gain in a self-interest market economy which avoids cooperative altruism where loss is higher than gain. Most politicians still follow old economics books. They want to decrease unemployment, inflation, deficit and interest rates, but they forget that global interactions are a woven fabric influencing each one of these rates. Once one goes down, the others go up (Henderson, 1999). Figure 2: wealth creation-redistribution and socio-environmental degradation: an Ouroboros Source: Place Christophe. Creative monetary valorization. Hautes Études Commerciales - Paris, Fundação Getulio Vargas - Escola de Administração de Empresas de São Paulo, January 2010. Place Christophe. Community currency for local economy. Paris: Alternative Management Observatory, August 2010. 9

Economy must look for a better life of Mankind on its Planet in a long term vision and not only the increase of a money flow based on a wealth of production-consumption. Economy is multiform, its criticism also. In spite of the diversity of their approaches, capitalism and communism detractors converge in some little groups interlinked through different angles: moral, social, anthropological and environmental. But both economic systems are based on the same wealth creation through consumption and wealth exchange through a scarce and universal exchange intermediary and may only diverge in some aspects of public or private wealth redistribution methods and production tools property. Even sustainable development is integrated in this economical and monetary paradigm whereas it supposes to achieve also economical sustainability. Indeed, sustainable development either through investment or donation totally depends on this unsustainable economic and monetary system. Indeed, social and environmental compensation, still considered as a loss, would never become higher than economical gain and thus social and environmental degradation. Apparently, sustainable development links well-being with standards of living and consumption and never speaks about consumption reduction because it is deeply integrated into the economic system of wealth creation. Consequently sustainable development oriented initiatives stay in the same imperfect classical economic and monetary system:  Explosive engine: money creation, inflation, debt, and interest rates imply unsustainable systemic crisis.  Unsustainable growth:�economic growth through wealth creation and redistribution can’t be decoupled from Nature destruction and Human injustice.  Consumption veneration: societal integration depends on profession and purchasing power in a constant quest for productivity gains. Moreover, solidarity and sustainability investing, as every kind of investment or saving profit, is based on the production-consumption cycle. Finally, sustainable development can be reached through donation or through base of the pyramid and green businesses5. In both cases, it participates to the economic growth which inevitably creates not only environmental deterioration through waste, pollution and resources exploitation, but also social inequality through the lack of wealth redistribution and the unfair interest rate process. Even microcredit, 5 Indeed, it seems that the new markets of green business, bottom of the pyramid and African market of resource exploitation, agriculture and industrialization will provide the necessary opportunities of our market economy. Place Christophe. Community currency for local economy. Paris: Alternative Management Observatory, August 2010. 10

which aims to increase the national currency resource access for the poor, has its own limit besides it also uses the interest mechanism. Firstly, microcredit avoids keeping the created wealth within the community because it’s an open market, thus it can’t limit the disappearance of money through importation of products. Secondly, it increases the local development through Gross Domestic Product growth as a wealth creation based on production-consumption exchange of goods and services system with its socio-environmental impact. Microcredit, which uses national currency to reach the last market of financial inclusion, must also be differentiated between consumer credit and productive credit. In the first case it promotes the consumption through money supply, and in the second case, the production and consumption through entrepreneurship. In both cases it has an impact on the economic growth. As we said before, each economic agents needs to have more gain than loss to survive. Indeed, all individuals and companies are directly forced under the worst penalties to seek profit and wealth by the circulation flow of money determined by the macroeconomics of our monetary and economic system. This pushes the companies to enter into competition in order to maximize their profits, for remuneration of saving and investment. In highly competitive markets, companies try to increase profit by increasing the volume or value of their sales6. To increase your sales in the market system, there are three choices7:  Market growth: it can be driven either by the growth of the number of consumers or by the growth in the purchasing power of those consumers. The first driver is fundamentally linked with demographic growth and immigration. The second driver depends on the economic wealth of the potential customers. Those drivers have always been playing in favour of companies, and thus Gross Domestic Product, as their growth has always been positive.  Market competition: it is the strategy of economic actors to increase their market share relatively to their competitors on a specific market. These strategies are mainly price competition and marketing investment. 6 Indeed, to increase the remuneration, you can either increase the sale quantity by increasing the consumption, or increase the difference between the product cost and price. That’s why all products are created to strategically increase its benefit, difference between its competitive price and its low cost, which directly or indirectly create a socio-environmental degradation. 7 Indeed, the capitalism based on investment, credit and inflation need profit through the client increase of the same market (population growth), the increase of the market size thanks to competition, the creation of new market (social business, green business, industry, resources and agriculture in Africa). Indeed the inflation and the accumulation imply the market growth by forcing the consumption of useless products. Unfortunately, the increase of competition on a same market with a stable population means the decreasing of profit. Place Christophe. Community currency for local economy. Paris: Alternative Management Observatory, August 2010. 11

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