Longtime readers know that in my analysis the economy has three interacting parts: the state (government) and the market economy (dominated by banks and global corporations) which together comprise the state-corporate debtocracy, and the largely forgotten third part, the community-based economy.

This part of the economy has been hollowed out, undermined and replaced by the state and corporate-banking sectors to the point that most of us have no understanding of what a community-based economy could be.

Correspondent Simon H. explains how the infrastructure for a community-based economy could work, using existing digital technologies. This is a revolutionary understanding of how ubiquitous digital technologies could serve as the foundation of a revitalized, full-employment economy.

A Community Credit Based Trading Infrastructure

During the financial crisis there was a very real chance that without intervention the whole financial system could have collapsed. If this had actually happened then how would we have coped? Without being able to draw money out of cashpoints or make electronic card payments how would we carry on making exchanges with one and other which is the fundamental mechanism that enables an economy to function as such? Employees would receive no wages but would they carry on working regardless? In terms of a thought experiment - what would our social landscapes have looked like.

In the absence of any backup infrastructures, it is possible that communities and societies could have completely broken down and householders would have found themselves trying to defend their homes and precious resources against a tidal wave of crime. Reading comments on the web, particularly from US citizens, it is clear that those who believe the system will inevitably collapse are preparing by buying weapons and ammunition and stock piling tinned foods etc.

This is a sad indictment of the isolationist characteristics of the functioning of the post-industrial world which has effectively deconstructed communities and their ability to understand, define, develop and protect their collective interests.

This bleak outcome can only materialize because there is no adequate sense of who and what constitutes the community and that consequently there are no community based backup and disaster recovery infrastructures.

It is possible given a systemic collapse, that communities would have joined together in an ad hoc fashion and pooled their resources to collectively manage their survival and security in order to make a transition to some new financial system and community stability.

In such a situation, tightly knit communities with a strong sense of solidarity and good organizational skills and communications would be best able to distribute their resources and effectively manage their collective security.

Given such a systemic collapse, communities would clearly need some kind of infrastructure for managing these requirements. Communities would essentially have to know who they are and what they can do. It would not simply be a case a pooling resources such as food and fuel to ensure that they are used and managed in the most efficient way, but also pooling and organizing community time, labour, skills and talents most effectively.

In such circumstances every member has the opportunity to make some kind of contribution to the collective effort. One does not need to be interviewed or compete for positions one simply volunteers whatever you have to offer. No-one but the most elderly of infirm would be unemployed as such - as everyone is invited to pitch in and to contribute their time, resources and efforts in order to keep the community economy functioning as such.

One could leave this sort of backup infrastructure to chance and its being implemented to various degrees of success across all of our communities, or one could design the basic organizational and communication infrastructures now while there is still time. Such a technological infrastructure would only need to be developed once, but in principle if designed correctly and effectively - could be deployed and used by all communities across the world.

Before I go on to outlining how such a community based system of exchange could function I would like to look at the phenomenon of PayPal and eBay as they have functioned within the internet revolution and consider what aspects might be useful for a community based economy.

As an internet programmer, the first e-commerce application I wrote back in 1999, was integrated with the WorldPay on-line payment system owned and run by the Royal Bank of Scotland. In order to be able to set up an account and start trading on-line meant that one had to already have an existing business account and stump up a large sign-up fee along with yearly service charges and individual payment fees. The system was infrastructural restrictive in these terms and effectively this allows for the system’s control and regulation of participants.

For any budding e-commerce entrepreneurs, it placed far too many bureaucratic and financial hurdles in the way to begin trading on-line. This was essentially a limitation imposed by the infrastructures of the ruling financial institutions at that time and the limited range of options available to produce, buy and sell stuff.

When eBay and PayPal materialized on the internet they bought new infrastructures, interfaces and rules as to what was required to become an entrepreneur. Originally conceived as a simple auction site, EBay quickly evolved into the infrastructure of a free market place that enabled individuals to easily establish themselves as entrepreneurial traders.

The great thing about this business model is that the eBay system allowed for the blurring of the distinction between being a private citizen and a businessman. One could easily start trading in a small and unofficial way and slowly transform oneself into a fully-fledged trading entity. In order to trade stuff, all you needed was a supplier and buyers. You didn’t need retail premises and providing your supplier could deliver to you in a reasonable time frame you did not to even hold any stock. You could sell on EBay, have the supplier deliver the products you had sold within a day or two and then repost them on to the buyer within an acceptable time period.

If you are unemployed, this is a virtually cost free business model to set up which only requires getting your profit margins right to ensure that you can cover the sales and transaction fees and still earn a productive living. All you need to do is find suppliers and buyers.

As much as eBay provided the critical and simplified infrastructure for a new more democratically accessible trading system to emerge, then it was also essential for a simplified and more democratic infrastructure to emerge to facilitate exchanges in terms of payments.

It was no surprise then that EBay acquired they PayPal payment system as it was the missing piece of the jigsaw within their business model.

Compared to the demands being made by the traditional banks who controlled e-commerce prior to PayPal coming on the scene, establishing a PayPal account in order to receive money on-line was a complete doddle. One didn’t need to have savings to make any large advance payments, there were no annual service costs and the only costs borne by any budding entrepreneur was a cost-effective payment by payment transaction fee.

This made payment processing costs far more manageable The more you sold the greater the fees, but if your business plan was a complete failure, then you would lose nothing in fees to the payment service provider.

One wonders how great a role the eBay and PayPal systems have played in keeping families solvent since the financial crisis and how many businesses have been started as a direct result of these new infrastructures?

What must be abundantly clear is that the creation of new infrastructures has led to revolutionary changes in ways that we can be productive and earn some kind of living when the traditional system has reached capacity and has no room for for a growing population who find themselves on its margins.

Whilst eBay, PayPal and social media sites such as Facebook, have enabled individuals to earn money towards making a living, or to provide some form of basic virtual communities based on personal and referred friendships and common interests, none of them have a community-centric element based upon strict geography.

They do not enable any community-based immediate forms of trading and exchange, nor do they facilitate communities discovering, organizing themselves, managing themselves, expressing their interests and ultimately, fully realizing themselves and their potentials. Part of what is missing then, is an infrastructure that fulfills the basic trading functions of eBay and PayPal, but which is individually owned, maintained and run by communities themselves.

In terms of a community based economy, the fundamental requirement is for the members of a community to be able to instantly and freely advertise, manage and exchange the goods and services they have to offer and also operate an entirely independent system of payments or community credits - controlled by the community itself to facilitate its exchanges in order for a community centric economy to function in its most efficient and independent infrastructural form.

It is important to note here that both eBay and PayPal are not independent infrastructures as they are directly tied to the banking and taxation systems of our existing infrastructures. As such, in the event of a collapse of the financial and governmental revenue systems, any savings each individual has with PayPal are liable to disappear or be confiscated. In terms of their globalization and centralization they are relatively easy for our existing infrastructures to monitor, tax or confiscate should the need arise.

The PayPal payment system has only designed itself with such a flaw because of its global and national reach and that it saw a necessity for users to be able to sell directly in their own nationally defined and controlled currencies or exchange goods via the mechanisms of foreign currency exchange infrastructures.

This is necessary within a national model of supply and demand, where a trader’s supplier would naturally request payment in their own nationally acceptable currency, but there is no necessary requirement whereby a community based economy/infrastructure would need to function in the same way with the same rules and requirements.

However, given a systemic financial breakdown and the confiscation or collapse in the credibility of its credit, it would be possible for PayPal to issue all its members substitute PayPal credits which it could electronically print and issue, just as central banks have printed their own credits via quantitative easing. In this case however, the credit created would go directly to the masses and not to the tiny minority who have benefitted from central bank interventions.

At the end of the day, currency systems are not based upon intrinsic values or precious metals, they are based upon relationships of trust. In the absence of any other reliable currency, a PayPal credit could function just as efficiently providing we all accept and share a belief in its ‘value’ which is nothing other than its ability for exchanges to efficiently take place. I could accept PayPal credits when I sell something and the system stores the credits I receive until I need to convert them into goods that I need in the future.

If we had a community based trading and payment system along the lines of the eBay and PayPal systems then this could also be based upon a system of community issued credits. All a ‘currency’ has to do is facilitate exchanges to take place and provide for the accumulation and storage of credits.

If we accept a community credit as a basis for exchange and have faith in its ability to service this simple function then that’s all we need.

There are many advantages to a community based system of credit. Firstly it cannot be taxed or monitored by national agencies. Governments cannot confiscate or tax community credits as they have no way of spending them. They can only be ‘spent’ as such, within the community that issues and uses them. They are also not subject to any speculative activity or market collapse.

Once a community can effectively issue its own credit as virtual currency, the community can exercise QE in its own right as it can electronically create credits and then allocate them where it believes they are needed. In doing this it is merely creating or enabling a claim on the future efforts of all its participants and is actually enabling its members to participate and for community trade, production and development to take place on its own terms.

Whilst the majority blindly accept QE on a national scale despite the fact that it only favours 1% of the population, then a community centric form of QE could not make credit allocations on such a basis. It would know and see precisely where investments needed to be made and distribute the benefits of its investments across the community as it needs everyone to be strong within it and realize that it is only when the community realizes that its strength, prosperity and security is wholly reliant upon the all-inclusive integration and well-being of all its actors.

This also has an effect that all wealth generated through community trade, will always be directly circulated and multiplied within the community itself.

Once we have the infrastructure for a community based trading and payment system that is not possible to tax or regulate by national entities, then we need have no distinction between being a private citizen and an entrepreneur, no distinction between being unemployed and employed. There are no bureaucratic barriers to becoming productive and useful.

If you wanted to roast chestnuts and sell them in a market place tomorrow you could just go out and do it with no worries about regulations as you are technically not selling as such - merely exchanging and building credits and personal and community credibility within a self-regulating system based upon community unity, trust and common interests.

The more localized the system of trust, the more reliable it must necessarily be - as to abuse such local trust is to abuse someone whom one is very likely to have embarrassing social and economic contact with on a regular basis.

How could such a system even begin to be established given the basis of what would be initially, a zero level of trust in its systemic practicability?

A community based trading system could be established whereby every member of the community which joined it would receive a certain amount of community credits free. This could be the equivalent of a week or a month’s wages.

Initially then, it would start by enabling its members to trade and exchange things that they don’t use or are going to throw away.

A broken laptop has no value to one person, but another person with the knowledge to repair laptops who accumulates broken laptops and takes functional parts from donor machines to repair more viable machines, can be productive and useful and spend and earn community credits. Providing you acquire the skills to do this, and you can download service manuals which give step by step instruction to take laptops apart and there are hundreds of instructional videos on YouTube showing you how to repair or maintain just about everything, then you can easily make a self-trained transition from being unemployed to a productive and useful community member.

Similarly you might want to dispose of furniture or white goods or pretty much anything. Most of our stuff can be recycled in that there is always someone who can find a way to make use of it and hence rationalize its production by ensuring that it is properly used and consumed and is not simply a dust-gathering waste of resources.

Essentially this not only enables a basic community trading infrastructure it also establishes a highly efficient recycling infrastructure.

Unlike basic bartering systems our community trading system enables us to buy and sell things directly and to accumulate and store our community credits for when we will need them. All we need to do is establish the technological infrastructure that enables community trading to take place in its simplest and easiest terms so that it will be ridiculously easy for me to advertise what I want to sell and for you to buy it if you need it.

In order to gain ‘currency’ as such, all a system has to do is show than it can function effectively. Once we have proved that a community credit based system can function effectively and we realize that we can profit from our exchanges, we will have built a systemic trust in that system and we can begin to build upon what is possible to exchange. In addition to buying and selling second hand items one could buy and sell new items and also trade services.

All one needs for this to take place is the community infrastructure and a collective faith in its ability to serve its purpose which is simply enabling trade and exchange of goods and services to take place. Such a system can function alongside our existing infrastructures but most notably would carry on functioning in the event of the systemic collapse of our traditional financial infrastructure. It needs to be designed so that it is entirely independent of external financial systems and entirely controlled and regulated by the community of members themselves.

This is just a small part of the infrastructure that needs to be put in place. Initially what communities really need is an infrastructure that enables them to establish and manage clubs based around their own common interests. These could be sports, drama, arts, cookery, wood working, political, literature, environmental, developmental etc., etc.

The point being that given the right infrastructure, the community could be an economy or grand club of its collective clubs and interests. One could find them all in the same place and take part in any.

It is only when such infrastructures have been put in place that communities can begin to discover, know and understand themselves and realize their potentiality. It is only when a community infrastructure is established that an effective community intelligence can emerge and be exercised.

This would enable communities to build a sense of unity and a real independent identity along with the communications and trading infrastructures required to successfully deal with and survive systemic crisis.

Build it and they will come to realize their own fields of dreams.

Thank you, Simon, for providing the intellectual and technical groundwork for a community-based economy.


Note: blog entries and email will be sporadic for the next few weeks. Your patience and understanding are greatly appreciated.


My new book The Nearly Free University and The Emerging Economy (Kindle eBook) is available at a 20% discount ($7.95, list $9.95) this week. Read the Foreword, first section and the Table of Contents.