THE LOGIC OF LIBERTY RESIDES IN DECENTRALIZED COMMUNITIES

" If society grows large, materializing as vast states or governments, the people therein lose their sense of common purpose, their desire to unify for mutual benefit and protection. Factions and classes arise, each contending for power. The people in whom the sovereignty of the central power supposedly resides may become disempowered and marginalized as the network of bureaucratic functionaries proliferates. The people are displaced by arms and agencies of the central power. Although progress cannot be achieved without constructive competition among and between rival groups, societies cannot flourish when their inhabitants do not share a fundamental sense of common purpose and identity." [Michael Polanyi, The Logic of Liberty ]

With the Portland Mayor tear gassed by Federal special forces , and similar clashes happening around the US these days from Seattle to Chicago and from Kansas City to Albuquerque, as I was revisiting my work on decentralized communities and organic governance , the invitation to speak on the topic could not have been more timely! (You can listen to it here https://www.youtube.com/watch?v=XJ_F4SonAFY&feature=youtu.be but start at min 8 to skip the boring bio and intro stuff… ??

Human society evolved in primitive times by self-organizing in groups driven by the survival need to coordinate and distribute work in tune with the natural environment . Tribes co-existed with their own economies, using as mediums of exchange shells, precious stones, metals, etc according to the realities and needs of the community.

The first city-states emerged in Sumer and Mesopotamia, followed by the Greek polis, and once social organization became too big these communities got assimilated into larger structures - the Megalopolises - ultimately ascending into centralized empires like in the times of Alexander, and of the Romans. … In these centrally ruled empires, the autocratic “winner takes all” led to “big/strong get stronger – small/weak get weaker”. Those marginalized at the fringes did not stand a chance, since governance and economics are intertwined…

DECENTRALIZED COMMUNITIES – A NATURAL WAY TO COPE WITH COMPLEXITY        

In modern times decentralized communities started to re-emerge from the centralized forms of organization mainly from the need to respond to economic crises, given that top-down autocracies were unable to address needs at the local level. We observe this in nature all the time, with e.g. bee or termite colonies which, when they reach a certain size a new queen emerges and creates another colony with the “extra” individuals, to be able to manage better.

In his work “Complexity Rising: From Human Beings to Human Civilizations ” Yaneer Bar-Yam scientifically proved that there is a limit to the complexity which?a centralized social organization can cope with and that decentralization helps respond to unexpected crises better by addressing local needs with greater ability to focus on the particular criticalities.

Experiments in decentralization driven by economic needs unfolded around the world, as for example in Europe where the Austrian town of W?rgl created its own micro-economy in 1932 releasing a form of “local currency” as vouchers that could be used to pay hundreds of unemployed residents to complete projects, such as road paving, for which the town didn’t have enough official currency. The workers in turn could spend their earnings at local businesses.

Even today, despite the dominance of national currencies controlled by central banks, most of us also use alternative currencies without even realizing it! Think frequent-flier miles. One of the longest-running examples is WIR Francs which hotels, retailers, and other companies in Switzerland have used for business-to-business transactions since the 1930s, helping insulate them from currency shortages and volatility. WIR (the abbreviation for The German word Wirtschaftsring, that is, "Economic Circle" and WIR also means "We") is a supplementary Swiss currency system that serves SMEs mainly in hospitality, construction, manufacturing, retail and professional services. The WIR provides a settlement mechanism in which companies can buy from each other without using Swiss Francs. However, The WIR is often used in combination with the Swiss Franc in transactions involving the two currencies.

Decentralized communities emerge around a need, be it economic or a “movement” that unites people for a common cause.        

For example, after the Chernobyl disaster in the German town of Schonau a small group of concerned citizens started organizing energy conservation competitions, reactivating small water hydroelectricity power plants, and installing solar power facilities. The local power grid operator, selling as much electricity as possible, including nuclear power, objected to their activities. So, the public interest group attempted to obtain the concession for the local power grid themselves. Two spectacular local referendums later, this band of determined citizens was finally granted the license to take over the power supply.

Today they sell clean electricity to over 170,000 German households.

No matter the drive, decentralized communities are departing from centralized governance inventing new forms of self-organization to enable more productive exchanges at the economic level. They all empower local people to decide how money is spent within the community.         

Economic decentralization experiments abound around the world, such as in Japan?after the country's crash in 1990, or in Argentina when unemployment spiked at over 20 percent in 2002 and 7 percent of the population was trading in the homegrown mint créditos.

The Great Depression was the golden age for alternative currencies in the U.S., but the oldest one still in circulation is the Ithaca HOUR, created during the recession of the early 1990s. Its founder Paul Glover was frustrated that so many of his neighbors in Ithaca, N.Y., were underpaid and underemployed, and he hoped to stimulate neighborhood sales. But Glover also believed a local-money system would be fairer and greener . "We printed our own money because we watched Federal dollars come to town, shake a few hands, then leave to buy rainforest lumber and fight wars," Glover.

The driving forces for decentralization aim to create economic stability        

The recipe is quite simple: Due to economic instability, people often lack money with which to purchase from each other. Community currencies create a stable medium of exchange tied to local development. Using these local currencies thriving communities build their own prospering economies.

The main mechanism enabling these decentralized micro-economies work is to enable credit at the local level.        

In 2010 Will Ruddick, then a grad student in high energy physics at the University of Colorado created EcoPesa local currency in Mombasa, Kenya . Used in 3 villages in the slums of Kongowea Kenya, Eco-Pesa comes in the form of “Colored paper” redeemable for shillings and enabling exchanges of various types of items. Ruddick thought that “Communities should be afforded the same privileges as nations to develop their own prospering economies with the stability of their own currencies ” – echoing financial luminaries like the late Bernard Lietaer who, pointed to this reality in his lifetime work summed up in “The Future of Money ”.

By observing that money is simply an agreement that a particular thing is accepted as a medium of exchange Ruddick thought there was no reason that a community of families and businesses couldn’t agree on something other than the Kenyan shilling. They could get some nonprofit backing, generate a large amount of this new currency, give it to the community, and let its value multiply as members spent amongst each other. Businesses trade with the vouchers, and community members earn extra by taking part in monthly service projects. Every month, people give the vouchers back to the project’s donor,?the Green World Campaign , an anti-poverty, environmentalist group, in exchange for cold, hard, government-sanctioned cash. Productivity spiked, wealth climbed and hunger and hopelessness faded - all without setting foot in a bank.

The banks have little contact with the people with the goods and services. So, if we want to empower those at the fringes and “invert the pyramid” such community currencies are the way! [Will Ruddick]        

How these alternative currencies work is by empowering people to depart from the centralized banking behemoths which are keeping them in a gridlock of credit and exorbitant fees impossible to cope with by those at the fringes. This monopoly by private banks and credit companies is taken for granted by the entire world that they’re the only ones allowed to give credit. What if we enable credit to be made by non-profits and dispersed within communities to enable them to self-organize around exchanging and trading the goods and services which their labor provides at the local level. This will free them from the tutelage and constraints of having to rely on national centralized money.

BLOCKCHAIN PAVING THE WAY TO DECENTRALIZATION

More recently technological innovations such as Blockchain have enabled decentralized communities to streamline their micro-economies by facilitating peer-to-peer exchanges almost eliminating the cost of transactions by eliminating the rents which the “middle-man” financial institutions are charging.

The “Poster Child” and pioneer among the existing blockchain-enabled solutions is the Bancor Protocol spearheaded by luminary entrepreneur Galia Benartzi . Her mission is to enable community owned issuance, distribution and management of local currencies to fill credit gaps . Bancor’s founding team launched numerous community currency pilots serving diverse communities. A currency for a local community of mothers processed over 1,000 transactions per day at its peak, though activity eventually tapered off due to the currency not being transferrable outside the group -- a problem that the Bancor technology aims to solve in the following simple steps:

1.????Enable communities to create and distribute their own currencies as easy as
      sending a text message, all you need is a cellphone (not even a “smart” one)
2.????Enable the exchange of the local currency with national currencies
3.????Support and spark entrepreneurship and resilience among the community         

Bancor unleashed a series of community currencies in Kenya under the “Sarafu Network” (Sarafu means “currency” in Swahili), enabling easy exchange from one currency into the other as well as convertibility between the network of local currencies at algorithmically calculated prices and the national currency (the Kenyan Shilling).

RESISTANCE FROM THE CENTRALIZED POWERS

But history revealed over and over that governments regard decentralized communities as a threat, e.g. with the W?rgl vouchers being shut down by the Austrian government, and with Ruddick ending up in Kenyan prison under the false accusation of setting up a terrorist plot to undermine the Kenyan Shilling.

So, the clashes we see these days in the US, with the White House sending federal special forces to shut down the protests which call for equality in cities around the country , echo that history of centralized powers unable to understand the realities of those at the fringes …Undermining the local governance by ignoring the requests of the Mayors in Portland, Chicago, Kansas City, etc, and exercising force against the local leaders (with the Portland Mayor tear-gassed along with protesters), is as shocking as it is revealing that centralized powers will not give up easily.

The current inter-dependent crises expose once again the even more fundamental crisis of legitimacy which governments around the world are facing for some time, as in several places authoritarianism is clashing with the democratic forces and freedom seems to be but an illusion… Moreover, the US and other western nations are accelerating the advent of the COVID-induced economic crisis by printing incomprehensible amounts of FIAT currencies to deal with the immediate impact . As Anthony Pompiliano recently noted, “In essence, the United States is basically a poorly run company. This would be like a business that spends WAY more than it makes every year and even though it continues to collect more revenue each year, it actually ends up losing more money year after year. Thankfully for the US government, they are not a business though. They don’t have a plan for reigning in the spending and I would even argue that they wouldn’t be able to without an entire generation of baby boomers rioting in the streets. They also don’t have to go to the capital markets because they have access to the one thing that companies don’t — the Federal Reserve’s money printer. You cannot print trillions of dollars and hope there is no negative impact on the currency or the poorest people in your society.”

And how will these people escape the cycle of financial arrogance for which they are supposed to take the burden, be it through more taxation, or through inability to fulfill credit conditions?         

THE TIME FOR CHANGE IS NOW

Well, history shows hope, as for example in Kenya, where after several months of postponed trials, thousands of dollars in lawyer's fees, a petition from the Hague and an intervention by Kenya’s attorney general, the charges against Will Ruddick were finally dropped, with the correct spelling of Ruddick’s actual crime: starting an alternative currency, issuing colorful vouchers to cash-poor businesses in Mombasa’s largest slum to help elevate them from poverty. And in November of the same year, Ruddick relaunched his currency, in partnership with the Kenyan government and is now productively working to elevate the marginalized communities with the support of the Red Cross .

A parallel story is that of helping a sovereign nation to preserve its identity and embed its values in its national currency, which Barak Ben Ezer and his team at is doing with The Sovereign , the new (and first!) FIAT currency issued as “programmable money” on Blockchain, which was adopted by the Marshall Islands in 2018 . Initially, this initiative got a lot of backlash from the US Treasury as well as from the international banking system, at the risk of losing the only corresponding banking relationship...

Things have radically changed since the currency was presented at the UN by the Minister of Finance of the RMI in the spring of 2019 . Meantime around the world, the movement to deploy CBDCs has intensified, with the digital Dollar and the digital Euro pushed by the speed with which China is accelerating the digital Yuan deployment. Even the large corporations want a piece of the pie, with Facebook Libra having undergone several metamorphoses on the path to deploying “a currency aimed at helping the unbanked”. These large government and corporate powers are poised to use the Blockchain technological innovations to oil their old mechanisms and make them more effective at what they already were doing – preserving and strengthening, even more, their powers at the expense of those they pretend helping... The regulatory barriers are set by these powers to make illegal most decentralization efforts, so while there is little impetus to do anything in the US and in the Western world in general, Africa is more open to such innovations, mainly due to necessity. There we see innovators like Galia Benartzi and Will Ruddick making strides in lifting the disenfranchised out of the poverty cycle. They are our heroes who undertake the biggest challenge ! That of enabling a more fair society by empowering those at the fringes , fulfilling Bernard Lietaer vision of sustainable abundance through an “ecosystem” of community and complementary currencies

… as I expressed it in my Organic Governance essay spelling out the Logic of Liberty through decentralized communities animated by the Logic of Holonic Systems        

“The biggest challenge mankind faces today is not the development of more breakthrough technology; it is to create a society whose institutions integrate the knowledge that must precede any such technology, including knowledge about these institutions themselves. The inherent problem stems from our limited capacity to comprehend the interplay of large crowds of people and to transcend our own individual psychology rooted in interactions with groups of tens to hundreds, not billions”.