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RE: <nettime> Open Source and Open Money
Kermit Snelson on Thu, 17 Jan 2002 10:56:15 +0100 (CET)


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RE: <nettime> Open Source and Open Money


> The key intellectual and practical breakthrough consists in
> thinking of community currencies as plural rather than singular.

With this statement by Keith Hart, further elucidated by those of his
colleagues, I reached enlightenment.  We're certainly fortunate to have had
the world's leading experts on LETS join our discussion.  I now have some
new worries, however.

But first I want to make sure the problem's not on my end.  As I understand
it, LETS designs are completely agnostic with respect to issues of trust.
In fact, that's precisely the claimed breakthrough.  By design, LETS systems
make absolutely no assumptions about the economy, topology or culture of the
communities that use them.  By eliminating the concept of interest, LETS
leaves it up to the communities themselves to devise their own norms and
mechanisms for dealing with the risk of default.

In fact, a community may choose not to address the risk at all.  If it is
sufficiently small and saintly (or simply harmless) it may be perfectly safe
to allow any member to "create money" anonymously to her heart's content.
The key point is that any self-constituted community may enjoy the
market-making benefits of a currency without having to buy into a bundled
social norm that it may find inappropriate, unnecessary or even oppressive.

This LETS design feature leads directly to the concept of plurality of
currencies.  Because such systems don't assume any social norms in their
design, they may be used efficiently by any kind of community, from
commercial banks to autonomous worker collectives.  Instead of the
monolithic, one-size-fits-all design of national currencies, the LETS design
enables a flexible constellation of interacting payment systems that operate
for different purposes and on different levels of scale.  This improved
modularity of design allows the advantages of currency to penetrate those
hard-to-reach places in the economy, such as non-profits, the self-employed
and the NGO's, that are currently ill-served by the existing "central bank"
design.  (By the way, this modular design for flexibility reminds me a lot
of best practices in computer science, such as "separation of concerns" in
object-oriented analysis, normalization in database schemas and
orthogonality in microprocessor instruction sets.)

It was this plurality that was argued against Felix Stalder's main concern,
which was that the transfer of trust "from the token to the person" (to
invert Felix's elegant phrase) would inevitably harm personal privacy.  In
support of this, he pointed to the elaborate and invasive actuarial-forensic
methods of the existing credit card regimes.  The LETS experts answered by
appealing not only to the above-mentioned agnosticism of their design with
respect to enforcing social norms, but also to the plurality of payment
systems they envision.  In other words, the multitude of systems means that
there will always be a currency available that suits one's privacy needs.
Some will allow anonymous transactions, some won't.  The customer is free to
choose.

But at this point, I caught a whiff of Milton Friedman and started to worry.
I'll get right to the point.  Isn't what we're really talking about here the
eventual privatization of the monetary system?  Consider, as an analogy, the
present (yet fading) system of national currencies.  Every sovereign state
has the right to "create its own money," and usually does.  But in practice,
the dodgier the country, the dodgier its currency.  If we give the same
right to individuals or ad-hoc communities, what's to prevent the current
international situation from becoming universal?  So much for the old
democratic principle that "one man's dollar is as good as another's."  The
poor and marginal may indeed have more currency at their disposal once LETS
systems become widespread, but their currency is likely to be less
acceptable than a rich person's and may, in fact, be completely unable to
buy certain goods in any amount.  Today's wealthy, advanced OECD countries
may become like the Soviet Union once was, with a miserable ruble economy
for the masses and a luxurious "hard currency" economy (complete with
separate shops) for the well-connected.

I realize, of course, that this isn't what the inventors of the LETS design
intend.  But as they've just taught us, the technology is agnostic with
respect to social norms.  ("Once the rockets are up, who cares where they
come down?")  And, with my hat off to them, I believe its adoption is
inevitable.  I don't at all dispute the fact that LETS could greatly benefit
currently marginalized communities, but it also offers potential benefits to
global corporations, both in terms of profits and social control, that are
simply staggering.  Just as Internet-enabled "granular" advertising
bequeathed us today's privacy nightmare of CRM and "one-to-one marketing",
the potential for a DNS-enabled "granular" and privatized monetary system
opens up brave new worlds of opportunity for price discrimination.  (This is
economist-speak for the hugely profitable practice of charging based on
elasticity of demand, i.e., effectively higher prices for those who have
less market power.)  I think it's safe to say that once today's business
leaders have grasped the concept, if they haven't already, they'll co-opt
LETS as soon as it's legally and politically possible.  Long before the
"multitude" catches on.

Unless, of course, the "multitude" rediscovers effective political activism,
and soon.  Getting back to the Open Source movement, Lawrence Lessig is
completely relevant here.  Everybody in the movement seems to have latched
on to his slogan "Code Is Law", but that's probably his worst and most
misleading turn of phrase.  His main and best message has been completely
ignored:  that there is nothing inherently progressive about the Internet.
It certainly has much liberating potential, but it can also enable a
commercially-driven nightmare of "exquisitely oppressive control."  It all
depends on the political choices we make and the effectiveness of our
actions.  The LETS technology is one of the most potentially liberating
Internet-based technologies I've ever seen, but it's also perhaps the single
most dangerous.  Unfortunately, the commercial banks are currently the
best-positioned to understand and profit from it.  We need to educate
ourselves fast.

Kermit Snelson

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