Creating Sustainable Societies
170 pages, CreateSpace Independent Publishing Platform, 2012
Chapter 1: Getting There From Here
Imagine for a moment that it is April 1994. David Filo and Jerry Yang have just released the Yahoo! directory, and as yet there is no Internet search engine as we know it today. The Yahoo! directory is not much more than a hand-compiled list of websites. In that same month, Brian Pinkerton releases WebCrawler, the first Internet bot that automatically travels the World Wide Web to index entire pages. AOL is only one year old, and most Americans still don’t understand e-mail.
Now imagine someone told you that within 17 years there would be three billion e-mail accounts worldwide, more than eight billion Web pages, and that $177 billion in e-commerce would be conducted annually in the United States alone. Suppose he also told you that you could retrieve driving directions and road maps, complete with satellite and street-view photographs, to any destination you desire—all with a click of a button. And what if he said you could watch TV and movies, and make international phone calls over the Internet. Would you be skeptical? Would you be intrigued?
Now suppose I told you that within the next 17 years local economies could be booming, with an expanding middle class, reduced inequities in income and wealth, less economic power for big corporations, and a growing number of new corporations set up as locally owned, socially responsible entities. Suppose I also said that many business loans would be interest-free, cooperation would be rewarded, and the apparent conflict between economic growth and environmental protection would be resolved. Would you be skeptical? Would you be intrigued?
And what if I said that these gains would stem largely from new monetary and financial systems implemented at the local level, and managed democratically by users?
The purpose of this book is to convince you that such a future is possible, without enacting a single piece of legislation. A blueprint is proposed to achieve this future.
1.1 The age of transformation
Unless you live under a rock, you are well aware that American society, indeed global society, faces serious challenges. This is the Age of Transformation, a period of struggle and change and the confluence of three profound historic trends: (1) loss of confidence in established institutions, be they economic, financial, or political; (2) high population growth, resource depletion, and global ecological damage; and (3) an exponential expansion of technology.
The public’s trust in Congress, corporations, banks, and other institutions is at a low point. The specter of a protracted economic recession and recovery looms. Individuals, cities, states, and nations are drowning in debt. And the drive for ever-increasing corporate profits undermines our humanity and goodwill. Too many of us live in poverty or make up the working poor. Wealth and political influence are hyper-concentrating in a small sliver of the population.
Earth now has seven billion inhabitants, double the population of 1968. Many scientists believe that as early as the 1970s we began to overshoot the planet’s capacity to maintain ecological services (e.g., a stable climate, clean air and water, fertile soil), as well as renewable and non-renewable resources.1 Today, for the first time since the dinosaurs disappeared, the extinction rate is faster than the rate that new species evolve.2 A recent scientific article suggests that the next great die-off of species could be on the horizon.3
As futurist author Ray Kurzweil notes in his best seller The Singularity Is Near, almost unbelievable technological changes will soon be upon us. Some of these changes will certainly be beneficial. For example, faster computers will lead to improved medical imaging technologies. But others may be terrifying. Genetically engineered plagues and armies of robotic fighters and spies, some as small as insects, are also possible.
The pressure of these trends is forcing human societies to evolve. Life prods us forward with carrots and sticks. If we don’t begin to solve the fundamental dysfunctions, inequities, and injustices in our societies, not only will our current problems compound, we won’t be able to deal effectively with new ones. On the other hand, if we do invite real change, and use wisdom, we can look forward to greater well-being, sound economies, and a renaissance of the human spirit.
Change that does not reach the core is, by definition, superficial. This book examines new approaches for three of society’s core systems: monetary, financial, and corporate. It describes nuts-and-bolts mechanics of how new systems might operate, as well as how they might be governed. The proposal contained herein is intended to bring these core systems into better alignment with our hopes for a better world, our concerns for one another, and the best of science.
The scope of this book is neither national nor individual; it’s not about Washington politics or about what you, the reader, can do alone at home to improve the world. Rather, its focus is in between. It offers a practical blueprint by which communities might successfully address the real problems that they face, such as underemployment, debt, poverty, inequities of income and wealth, wasteful consumerism, infrastructure decay, environmental degradation, and underfunding of social services. Here, communities refers to the people and organizations of an urban area, which includes residents, businesses, nonprofits, and local governments. The scale is city, county, or metropolitan statistical area. Think city, suburbs, and surrounding farming areas.
One might expect that a book proposing innovations to core societal systems would focus on the national level. Efforts to improve national systems are critical, but this book describes a complementary, bottom-up approach that does not require any new legislation. It proposes a design for local monetary and financial systems, community-centric corporate models, and their governance. For simplicity, these are referred to as local monetary/financial systems.
Many city and county governments will be excited by the proposal. After all, the new systems should boost local economies, reduce unemployment, and generate funds for schools, nonprofits, and public services. But implementation and management does not occur through local governments. Rather, users of the system are in charge. Residents, businesses, schools, nonprofits, local governments, and others who voluntarily choose to participate form a membership-based community benefit corporation, referred to as a Principled Society Corporation (PSC, or alternatively, Principled Society). The members of a PSC implement and democratically manage their local monetary/financial system.
In essence, a local monetary/financial system is a sophisticated type of local currency system. As will be discussed in Chapter 3, local currencies are springing up in cities around the globe; including many cities in the U.S. Many of these currencies act as “buy-local” programs, whereby residents are encouraged to keep money circulating in their local economy. The more money is spent locally, the more the local economy benefits. This book calls for an expanded version of the local currency concept. It describes a system that creates new money, free of debt, and channels it into a local economy in a way that maximizes public benefit.
The local currency does not replace the dollar, and the local monetary/financial system does not replace banks or other financial institutions. Rather, they act as complements. In fact, the majority of sales and other transactions would continue normally through the dollar. Further, it is likely that only a minority of people in an urban area would choose to participate in the program, especially at its start. If it produced clear benefits for its participants, however, the number of users, and perhaps the fraction of commerce handled by the local currency, would grow over time.
While successful demonstration of new systems in a subset of the population in one city is not sufficient to produce large impacts on society as a whole, it is a crucial and dramatic first step. Thus, this book describes Phase I—developing the design, conducting computer simulations, creating the software to run new systems, and implementing the first scientific pilot trial. If all goes well, Phase I will naturally turn into Phase II—wider implementation of the new systems in new urban areas, further refinement, and a larger impact on society.
As mentioned, the aim of a local monetary/financial system is to introduce new currency into a region in a way that maximizes public benefit. This implies, naturally, a cooperative effort. There are various types of cooperation—collusion and racketeering being two of them. In this book, the word cooperation refers to fair, transparent, and widely beneficial engagement among individuals and groups. Cooperation is the defining aspect of any society. For example, the Great Seal of the United States contains the phrase e pluribus unum, which translates to “out of many, one.” It is through cooperation, not selfishness, that we achieve shared goals.
A design goal is to make cooperation so easy in a PSC that it becomes the default behavior. To this end, cooperation is hard-wired, as much as possible, into the mechanics of a local monetary/financial system. Simply using the system becomes an act of cooperation. For example, all members of a PSC participate in making interest-free loans in local currency to businesses that apply for them. If businesses receive the funding they need, jobs can be created and local economies can bloom.
Some readers might question whether people are too selfish to cooperate any more than they already do. In this line of thinking, our societal systems are already near optimal, given the limitations set by human nature.
It is not difficult to understand why some would view humans as inherently selfish. After all, news headlines regularly tell of executives, officials, and ordinary people who act out of greed. Even standard economic models developed at top universities incorporate narrow self-interest as a driving component. But new evidence from a variety of fields, including psychology, sociology, behavioral economics, evolutionary biology, and game theory suggests that people are, in fact, prone to cooperate. While roughly 25 percent of people tend to act out of narrow self-interest, a much larger percentage, about 50 percent, tend to act pro-socially depending on the circumstances.4 This leaves about 25 percent who tend to act pro-socially, regardless of circumstances.
Thus, given the right societal signals and conditions, about three quarters of the population will readily act pro-socially. And many who tend toward selfishness will also behave cooperatively, if signals are clear and strong enough. Given that the vast majority of people will act pro-socially under the right conditions, the task is to create them.
To this end, two guidelines will help. First, pro-social behavior will be easier to achieve in a society that ensures no individuals or groups receive undue advantages, and that any acts of cooperation are effective in making a positive difference in people’s lives. To accomplish this, societies should become fairer, more democratic, and more transparent. As an example, if taxes go into secret funds for hidden purposes, or for projects viewed as wasteful or unpopular, the willingness to pay them decreases.
Second, pro-social behavior will be easier to achieve if the core systems of a society reflect the full spectrum of factors that naturally motivate people to act. Our current financial and corporate systems are driven largely by the profit motive, or narrow self-interest. But as economist Robert Frank puts it, “repeated exposure to the self-interest model makes selfish behavior more likely.”5 Although our systems reward narrow self-interest, people are naturally motivated to act by a much wider spectrum of impulses and desires.
Given the opportunity, we want to earn the respect of peers and maintain our self-respect. Most of us abhor injustice and wish to help others. We are driven by creative impulses, curiosity, and the desire for community fellowship. We want to take pride in work that is meaningful. We do not like situations that compromise our reputation or integrity, waste our time, limit our freedoms, or cause harm to others or the environment.
We can build happier, wealthier, healthier, and more peaceful societies if we cooperate. The price for this is to become fairer, more democratic, more transparent, and more realistic about what drives human behavior. Principled Societies are a step in this direction.
1.4 Framework of a Principled Society Corporation
A PSC is a local entity, but its infrastructure is designed to address major weaknesses seen at the national level. In this way, Principled Societies build on the experience of existing systems. The proposed framework consists of three core elements:
- A local currency model, called a Token Exchange System (TES). The token is an electronic currency that circulates among members of PSC in conjunction with the dollar. Tokens are used by members to purchase goods and services, and are channeled by a TES to fund businesses and support local schools, nonprofits, and public services.
- A socially responsible corporate structure, called a Principled Business. The types of business models funded by a TES include the standard corporation, sole proprietorship, partnership, and cooperative, as well as a new community-centric corporate model called a Principled Business. A Principled Business is a for-profit corporation that retains the social mission, transparency, and accountability of a nonprofit.
- A corporate governance system, called the Collaborative Governance System. A PSC is governed by its members via an efficient online system of direct democracy. The system allows all members to take part in creating and amending rules and setting policy.
Although this book proposes a blueprint for local monetary/financial systems, the blueprint is only a rough draft. Many questions are left unanswered and details left unspecified. It will take time to develop the concepts further, and this effort will benefit from input from potential users, including interested citizens and business, academic, and community leaders. As a science-based project, academic experts from fields as diverse as computer science, political science, statistics, sociology, law, ecology, business, psychology, and linguistics are encouraged to play a role.