Amana’s Self-sufficiency And IOUs

“Amana’s Self-sufficiency And IOUs” is the fifth in CreaSakti’s sovereign digital money (SDM) series. CreaSakti’s SDM effort has many objectives. Understanding the structure, purpose and role of money is fundamental to these objectives.

It is my view that such understanding will have an impact on these. First, we will begin to appreciate money as an enabler and not as a generator. Money is a capacitor that holds energy. It is not a generator that produces energy. Money is a flywheel that holds energy. It is not an engine that produces energy. I plan to write a full article on this soon.

Second, money emerges spontaneously to absorb human energy and then to transmit it. Money emerges spontaneously to act as a link between people and their pursuit of livelihoods, leisure and well-being.

Third, we will begin to appreciate money as a link between assets but not as an asset by itself. Money is not an asset. I know this will be unsettling. I plan to write a full article on this soon. We will settle this as we go along. I will explain why cryptocurrencies are not assets. I will also explain why cryptocurrencies are not links between assets.

Fourth, money is an “I owe you”. Money is an IOU. This IOU is amenable to spontaneous digitisation in a manner that serves its role as a capacitor, flywheel and link.

The Amana Colonies

Germany had a history of persecuting practitioners of certain beliefs. Pietists were persecuted by the Lutheran Church and the German state government.

The Pietists left Germany. They then travelled west through Europe. They then boarded the vessels that sailed west across the Atlantic Ocean. They set up their first habitat in New York State in the United States of America (USA) near Buffalo in 1843. They lived there for 12 years. They grew in numbers. They needed more space. They needed more privacy. They needed more freedom. So, they upped stakes. They moved further west.

They reached the vicinity of Iowa City along the Iowa River in Iowa State. That is where I studied: the University of Iowa, Iowa City, IA, USA. They reached the neighbourhood of Iowa City in 1855, 128 years before my touchdown. My professors in the College of Business at the University of Iowa were among the best then. They are among the best now. They teach accounting, economics, finance, mathematics and markets with an unbeatable flair. They teach in the Tippie College of Business.

The Pietists set up Amana over 26,000 acres. Amana means to “remain true”. Amana was a closed, gated community. It did not transact with industrialising America in those 50 years until 1900. It did not transact with industrialised America until 1932. Thereafter, it chose to bring down the walls and open its gates.

Successful pioneers that preceded unsuccessful communism

Amana flourished for about 80 years. Members gave up their personal property to a common fund. They did not give up their professions. They worked as specialists and for the collective good of all. In return, they were promised economic security through life.

The Pietists of Amana were the pioneers. They did what the communists of Russia and China chose to do 70 years and 95 years later.

Unlike the Russians and the Chinese, the residents of Amana did not live on a political ideology that enforced commonness. The residents of Amana had escaped from persecution. They did not wish to use brutality and the thought police to suppress individual freedoms and individuality. They worshiped and practiced private enterprise.  

Individual fulfilment

The Pietists were skilled farmers – tillers and livestock keepers. They were talented woodsmen, builders, masons, carpenters, blacksmiths and wagon makers. They knew how to weave cloth. They could stitch garments. They knew enough about diet, good health and a bit of surgery!

Read that list again. They had diversity in talent. If all of them had been farmers, they would have had to look outside the Amana colonies to get cloth, clothes, building materials, wagons and medical care. If all of them had been craftspeople, they would have had to look outside Amana for food and other things.

So, they chose to build a community based on diversity, multiple talents, focus, specialisation and, above all, the exchange of goods and services through IOUs. They built and they then orchestrated their economy by making it possible for households to do what they were most talented to do.

Informal IOUs

Amana flourished because of private enterprise. Amana flourished because private entrepreneurs exchanged value and utility created through physical and intellectual effort.

Farmers grew maize, corn, vegetables and fruits. They gave these – the farm produce – to the craftspeople in return for IOUs. They – the farmers – then used the IOUs to buy building materials. They paid for these in these IOUs.

Families paid in IOUs to receive prenatal care for expectant mothers. Families paid in IOUs to receive babysitting services.

Carpenters, blacksmiths and masons were paid in IOUs. Amana had horse-drawn wagons. There were specialists that made wagons. This economy and society revolved around IOUs. But they did not know about the gold standard. They did not see the necessity for it. Smart! 

Everyone paid in IOUs to the informal leaders to take care of the vast acres spread along the Iowa River. The informal government paid the workers tasked with the upkeep of the Amana colonies in IOUs.

An IOU to enable exchange  

Money is fundamentally an “I owe you” or an “IOU”. First, money enables people to exchange valuable physical competence and effort. Let us regard the outcome of such competence and effort as physical work. That is why we use the services of Postmates and Swiggy.

Second, money enables people to exchange valuable intellectual competence and effort. There is work here too as the outcome of competence and effort. Let us regard the outcome of such competence and effort as mental and intellectual work. That is why we use the services of doctors, nurses and designers of robots.

Third, money enables people to exchange valuable time utility. Money enables people to exchange valuable place utility. Money transfers utility across time and place. In a modern society, money enables people to choose when they would use their competence and effort to produce an outcome. In such a modern society, money enables people to choose where they would use their competence and effort to produce an outcome.

Consider a ride in a cab in Worli. The paying passenger may own a car. The paying passenger may know how to drive. But in the here and in the now, the paying passenger depends on the services of the cab and its driver. The passenger is better off leaving the car at home. The passenger is better off leaving the wheel to the cab driver.

Consider eating a bowl of fresh salad for lunch while at work in an office in Bandra-Kurla Complex (BKC) in Mumbai. The customer knows how to make fresh salad. But BKC is not the place to make that fine salad. There is someone in BKC who will make the salad while the customer does “something more appropriate” and “something more valuable”.

Capability, possibility and choice

Money enables us to get the benefits of effort that we will never be able to expend. Money enables us to get the benefits of competence that we will never be able to acquire.

Would I be able to perform the role of a nurse? No. Would I be able to perform the role of a doctor? No way!

Money enables us to get the benefits of the efforts of others when we are unwilling to expend such effort. We have something more valuable to pursue.

Money enables us to get the benefits of the competence of others when we are unwilling to use that competence. We have something more valuable to pursue.

Experts and our own focus

Many of us know how to drive a bus, a truck or an ambulance. Would it be possible for us to drive that truck carrying liquid medical oxygen from Hindon to Gwalior? I would choose to leave that to the expert. Would it be possible for me to drive the ambulance from BKC to Cooper Hospital in Juhu? I would choose to leave that to the expert.

It is not necessary for us to perform all the tasks that we know how to perform. Leaving many tasks to an expert will make us better off. Often, it may be unwise to perform all the tasks that we know how to perform. Leaving the tasks of caring for a new mother and her newborn baby to an expert would make the baby and its mother better off. Choice, utility and collective well-being matter together. IOUs make that possible.