Social cryptocurrency, or the convergence of monetary disputes

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Introductory courses in money economics often present money as a simple instrument. It would be basically a technology that came to take over the barter become unsuited to the needs of increasingly complex companies. This instrumental conception of money reduces it to the rank of mere "veil" placed on exchanges. By this formula, Jean-Baptiste Say, and after him a whole tradition of economic thought, mean to mean that nothing essential is played around the currency. Currency is so called "neutral". According to this doctrine, central banks must be independent. Irresponsible experts before the people and their representatives will manage them. Monetary instrumentalism therefore leads to the power of technocrats in monetary policy.

Yet, because it is linked to sovereignty and social values, money remains an issue of permanent struggles. History does not lack theories or experiences challenging the monetary orthodoxy of their time. Local and social currencies, which are nearly 4,000 worldwide, are nowadays joined by bitcoin and the 270 or so other cryptocurrencies currently referenced.

A priori, however, everything opposes these two forms of monetary dispute. The "solidarism" of social currencies appears at the antipodes of the libertarian accents of cryptos. A convergence movement has nevertheless begun via social cryptocurrencies, which arise from the alliance of Crédit Mutuel and blockchain.

Do without banks

Cryptocurrencies and social currencies face a similar problem, scaling up – but in specific ways. The "altcoins" (all non-bitcoin cryptocurrency) have, for many, only allowed the continuation of the maximization of individual profit by other means, to the detriment of any other form of consideration. Conversely, social coiners find it difficult to reach the critical mass needed to realize their full potential.

Crypto-credit could help to protect cryptocurrencies from speculative drift, the worst of the current monetary and financial system by putting the technology that bases their specificity, the blockchain, at the service of projects carried by social currencies. It is an opportunity for the latter to get out of their historical marginality, so that the modesty of the achievements does not cut any more with the radicality of the intentions.

It is that the financing of the economy is structured today mainly around the banking sector, headed by the central bank, which performs a function of validation of transactions taking place, to maintain confidence in the currency. Just like justice or education, money is a public good, necessary for the proper functioning of societies.

But the banking sector is primarily responsible to its shareholders, whose income it must maximize, secondarily before the state, which must respect the laws governing its activity, and not at all before the users. There is no popular control over money creation. However, this can be quite contradictory to the maintenance of a dynamic economy benefiting all, as shown by the 2008 financial crisis and the entry into the Great Recession.

The potential of crypto-credit is that of a radical overhaul of the financing modalities of the economy. The blockchain removes the need for a center to guarantee the integrity of individual accounts: thanks to this technology, it is now the network itself which, by its operating algorithm otherwise called consensus mechanism, validate transactions. The need for an intermediary, the banker, disappears.

The goal is to end the mis-granting of credit, a consequence of the private production of money, public good. The concentration of credit in the most economically-endowed sectors and regions, thus fueling speculative bubbles, has, however, become rarer where it is most needed.

Self-managing the system (s) of payment and financing of the economy is the prospect of crypto-credit, the fruit of the alliance between cryptocurrencies and social currencies. And these are new ways of considering the necessary democratization of economic life that become thinkable.

The promises of crypto-credit

The faircoin, which appeared in 2014, is a first example of this convergence between cryptocurrencies and social currencies. The failure of a first version of this currency, because of speculative malpractice on the part of its founder, led to the recovery in hand by Enric Duran, anti-capitalist Catalan militant atypical and promoter of the global cooperative platform Fair Coop.

The idea is to leverage the virtual and decentralized character of blockchain architecture to provide the self-managed productive units of the global cooperative platform with a dedicated financing and payment system. Exchanges between cooperatives members of the network could thus be strengthened: the self-management of the financing and payment system would thus complement and support the forms of "local" self-government, at the level of the production unit.

In Argentina, the Waba Network, in collaboration with the Observatory of Wealth Padre Arrupe and the National Movement of Recovered Enterprises (MNE) set up in May 2017 another of these social cryptocurrencies, the monedaPAR.

It is not surprising that a new chapter in our monetary history is being written in the Río de la Plata region. The plurality of theories and monetary systems is ancient in Argentina. A coastal town, Villa Gesell, bears the name of the German social reformer Silvio Gesell. He was the author of a heterodox monetary theory with Proudhonian accents advocating the construction of "melting" currencies. They lose value over time, making them "perishable" like other goods. The desired effect is to discourage the hoarding and accumulation of wealth in the hands of a few.

In 2001, a year of brutal crisis for the Argentine economy, the provincial governments followed the example of the province of Tucumán, which for several years hit its own parallel provincial currency, the bocade, to overcome the scarcity of the peso, the federal currency. At the same time, clubes of trueque (barter clubs) knew their maximum extension, gathering up to 2.5 million people exchanging credits, because in any case largely excluded from the peso economy. It is to this day the experience of the most massive social currency known to date.

monedaPAR

Self-management experiences

The monedaPAR wants to be the heiress of these experiences. The use of blockchain would make it possible to deal with political conflicts internally (power struggle around the modalities of the monetary issue and the attacks coming from outside (federal state, federal monetary authorities) who ended up putting an end to clubes. The modalities of the monetary issue result from the deliberation of the collective. The algorithm comes to offer a greater resilience of the democratic choices made within these clubes of trueque 2.0. Finally, the decentralization of the network makes its control, even its repression, by external entities more difficult to achieve.

Another specificity of this Argentinian experience: the promoters of the currency aim to set up a system of payments and financing dedicated to the self-managed enterprises of MNER (National Movement of the recovered companies), of which more than 50% are concentrated in the 'industry. Also born during the 2001 crisis, these original experiences of self-management emerge following the financial and moral bankruptcy of part of the employers. There is the possibility of making a local currency work on the basis of an industrial production of goods and services. The model claimed is that of Swiss SMEs using the complementary currency wir, whose founders in 1934, Zimmermann and Enz, were already inspired by Silvio Gesell's designs.

The originality compared to the Swiss experience is twofold. On the one hand, the undertakings concerned are sin boss (without boss). On the other hand, the use of the blockchain allows the monedaPAR to be built without center emitting the means of payment and guaranteeing transactions, unlike the Swiss network, which remains structured around the bank Wir. The monedaPAR could thus be the emergence of a self-managed wir and not centralized.

Power of collective trust

A case of convergence between social currencies and cryptocurrencies, the monedaPAR proposes to realize a synthesis of the forms of self-management inscribed in the sphere of the production with others centered on the sphere of the exchange. In a country where real interest rates are kept at astronomical levels in the name of the fight against the flight of capital on which the neoliberal government of Mauricio Macri refuses to impose any control, the accumulated financial rent can represent up to 50% of the prices of final consumer goods. Despite the disappearance of the wage exploitation report within the self-managed enterprises, these remain in a relationship of subordination to the official system of financing in pesos, permanent threat to their sustainability.

If the viability of a currency ultimately depends on the strength of the bonds that together hold a community of payments on which it depends, then the crypto-credit issue is to put this trust power into the service of another economy. collective. The capture of the traditional banking and financial system for the purpose of harmful speculation could thus be avoided, while the virtual and decentralized architecture allowed by the blockchain would increase its resilience and allow a real scaling up.

Basically, the alliance of crypto-credit is not surprising: a deep desire for systematic change brought together social currencies and cryptocurrencies. It remains to be seen how far their hybridization can lead. In the meantime, and while the independence of central banks and banking and financial practices are always more in the line of fire of the critics, the experiments continue, and the grammar of the monetary challenge is enriched, in view of the building an economy more geared to workers.

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By Raphael Porcherot, PhD student in economics and sociology on the theories and practices of monetary plurality, Ecole Normale Supérieure Paris-Saclay – Paris-Saclay University

The original version of this article was originally published on More Bank