Compeerists can become independent of capital and the state with dynamic socio-technological strategies—modern examples are proof of concept

Hannes, Professor of Geography at the University of West Georgia. “Reinventing Money’s Role In the Economy.” From Capital to Commons: Exploring the Promise of a World Beyond Capitalism. University of Bristol. Pp 162-172. /LJS

There is no doubt that a move to sovereign money by the state would be a monumental shift with enormous implications for the capitalist mode of production, while at the same time opening up significant opportunities for commons expansion. Still, given the uncertainty of whether or when states would be prepared to trigger such serious monetary reforms, we must also consider efforts for finding a wholesale exit from, and replacement of, the monetary-banking apparatus that could be pursued via bottomup mobilizations. One of the things that has characterized past complementary currencies and alternative trading networks is their focus on a relatively limited economic space. This was partly due to an ideological focus on localism, but it was also the result of limited technological means to expand such efforts. Yet, in the previous chapter, we saw how cryptocurrencies have enabled much more expansive transactions, for instance to incentivize compeerist-aligned behaviours. Now a growing number of projects, albeit many still conceptual, are also using cryptographic and blockchain technology to pursue entirely new means-of-exchange money that can help facilitate and support a growing and more delinked commons economy (Fritsch et al, 2021). In other words, these currencies strive to become units of account used in actual transactions, as opposed to simply a store of value that is mostly held as a speculative investment, as most cryptocurrencies still are. The enticement of a non-state means-of-exchange tender from a compeerist perspective is that it could potentially endow the issuer with similar advantages to that of a state managing its own sovereign currency. This is, however, assuming the currency allows for some form of intentional control, which is difficult to achieve in blockchain based cryptocurrencies due to the intentional decentralization of their validation and issuance procedures, as with Bitcoin. Still, even if an alternative design could be developed along abstract hacktivist principles, hence allowing the currency to be used more intentionally, managing to successfully launch and then reap the benefits of such an alternative money is still fraught with sizable hurdles. Undoubtedly the greatest challenge is that of creating enough buy-in to make the currency viable. Cryptocurrencies are known to be particularly vulnerable to speculation and subsequent valuation swings based on herdlike movements within the volatile world of cryptocurrency exchanges. Such instabilities are particularly untenable for means-of-exchange tender as it makes it difficult to price goods and services, hence significantly damaging such currency’s appeal. While much of this instability could be remedied if the intended unit of account actually denoted a sizable economy of things to be bought and sold, the big question is how to get to that point when this money starts off as unstable, unwieldy, and impractical. We should add that if such a currency were, in fact, to ever achieve viability, the utmost care would then need to be taken to not over-issue it, as this could quickly lead to devaluation and abandonment, with very few means to remedy the problem. Currently there are still no instances where an expansive, non-state-based currency of account has effectively been implemented. Paradoxically, the closest example is Bitcoin. Although treated primarily as a speculative store of value today, Bitcoin was originally intended to be a means-of-exchange money that could compete with state-based tender, hence the much-told story of the first pizza bought with Bitcoin shortly after its launch (the amount paid for two pizzas at that time is worth about US$150 million as of this writing). Since then, Bitcoin has, in fact, steadily been making inroads as a legitimate unit of account, with a growing number of big vendors accepting Bitcoin payment and the prospect of more Majority World countries – following El Salvador’s example – adopting the cryptocurrency as legal tender (Bernstein, 2021). While Bitcoin is not a sovereign currency (due to its in-built decentralization), if a sovereign, means-of-exchange crypto token/coin were to actually reach Bitcoin’s overall valuation, the concomitant economic power bestowed on the issuer would be significant (Fama et al, 2019). Bitcoin may currently only be the equivalent of 0.1 per cent of the world’s overall accessible money supply (known as broad money), yet this still signifies a third of the money supply of Kenya (US$10 billion) and ten times that of the Seychelles. Indeed, a sovereign, alternative currency that denominated $10 billion worth of value within a commons-based subeconomy could be leveraged in various ways to boost the commons and commoning. There are currently several nascent efforts pursuing such a goal, usually adopting one of two main strategies. The first is an exit-centred effort in which crypto tokens are issued with the aim of achieving a viable commons based network of exchange that could support a guaranteed basic income. The second is a more radical project where an alternative money form is created to denominate what is to become an expanding commons-based economic realm that can compete with (and perhaps even replace) the dominant capitalist economy and its adopted state-based currency of account. We can start with the former. In basic-income type cryptocurrencies, such as SwiftDemand, Mannabase, and Circles, the aim is to establish a means-of-exchange money that is accepted by enough people to enable its incremental release as a form of free income. Focusing on just one example, Circles, which runs on Ethereum’s blockchain-based xDai sidechain, is pursuing a guaranteed income currency by creating relatively closed, trust-based networks comprised of individuals and businesses who agree to accept each other’s Circles tokens as tender to be used for any goods and services they bring to the network (Circles, 2020). A key challenge facing such basic-income cryptocurrencies, however, is that many may be interested in free money, but few will be thrilled about denominating their assets in such a currency if there is little expectation that doing so will be reciprocated. In Circles this issue is decentralized, leaving it up to the various trust networks to establish systems of accepted reciprocity; only if you are invited into the network can you receive your steady stream of Circles currency. While this may lead to a slow start, it also creates more confidence and security in the currency. With time, then, the aim is to have the trust-based networks begin to interlink, expanding them from very small complementary economies to ever more expansive and diversified ones. The expansion of Circles networks also means that the inflationary pressure of a continuous issuance of guaranteed income money can be partly offset. At the same time, inflation is also not fully shunned in the Circles project, which strives to maintain a set level of seven per cent yearly inflation to dissuade its use as a store of value. In the Circles whitepaper, the currency is clearly envisioned as a currency of account that is meant to be used for economic interactions. Thus, the pursued level of inflation serves as an intended demurrage, ensuring that the Circles money stays in circulation as a means of exchange (Circles, 2020). Yet, while inflation poses an ongoing challenge to be managed, the Circles currency also comes with the benefit of avoiding sudden and unpredictable fluctuations in its value. This is because the Circles currency is not set up for external trading; it is an internalized system where each Circles participant is given their own individualized crypto tokens to be used in a closed, mutually agreed upon network or group of networks. In such an arrangement, there is no easy way, even for an individual, to sell their Circles money outside of the network. Importantly, while the individualized approach to Circles money issuance prevents any entity from gaining a singular sovereign control over the currency, the Circles monetary arrangement can still be leveraged to achieve commons-based, use-value centred ends. In other words, the currency’s power is devolved to the Circles communities themselves who can decide on what can be denominated in Circles tokens and hence what counts as ‘valuable’. In this way, these networks can use the Circles system to foster intentional economies that are not driven by purely exchange-value determinations. In the longer term, then, if the Circles networks were to significantly grow and interconnect, these economies could offer ever more options to exit capital and, as per their main aim, find a significant reprieve from the apparatus of capture via a guaranteed income. The second approach to pursuing a more expansive, commons-based currency of account centres on establishing a money form that can be used by the issuing entity to directly subsidize a commons-based subeconomy. The aim in such a project is ultimately to assist in the compeerist goal of a transvestment of capital-controlled wealth to the commons by engaging state-based money. In other words, such a currency strives to be more than simply complementary. In the most ideal scenario, then, a highly competitive commons-based subeconomy using its own sovereign currency could establish current account (trade) surpluses with market-based economies. The resulting boost in access to state-based currencies could then be used to acquire critical assets held by capital, including land, infrastructure, and means of production. While there are not many, one example of a project that roughly adopts such a vision is the anarchist-inspired FairCoop and their FairCoin currency. The aim of this project is to create a FairCoin denominated marketplace that would ultimately confer quasi-sovereign currency privileges to FairCoop (König et al, 2018). More specifically, FairCoop has here taken control over a significant chunk of initially created FairCoin (estimated to be about 20 per cent of the total) while the rest of the currency was either gifted to other actors or was created as part of the cryptocurrency’s decentralized, proof-of-cooperation mining process. Yet, with the FairCoin that were internally held, FairCoop has pursued various commoning efforts, such as the funding of Freedom Coop, which offers legal and banking services to self-employed individuals looking to make a living outside the exploitative grip of capital or the state. Importantly, with a cryptocurrency that is designed to engage other forms of money in the open market, the challenges that emerge are distinct from those faced by basic-income crypto projects, like Circles. To begin, we should note that FairCoin, at least, is not burdened with the need to continuously release its currency, hence dampening inflationary pressures. Instead, the issuing of currency can be more intentional and limited with the aim of controlling its overall value. In line with this reasoning, after an initial airdrop (free distribution) of coins and a limited period of mining, FairCoin put a cap on currency creation. Such a cap makes sense given that a decay of FairCoin value would undermine the likelihood of its adoption as well as the wealth position that FairCoop has created for itself. Nonetheless, if the currency’s value significantly increased, a fork in the blockchain could be instigated to allow for further money issuance, an option that has not been ruled out (König et al, 2018). A much more far-reaching and complex problem, however – one that the Circles currency manages to circumvent – pertains to the danger of succumbing to speculation, hoarding, and value fluctuations, as FairCoin is not shielded from being treated primarily as a store-of-value asset. This issue comes especially into play because FairCoop has not achieved a big enough economic realm denominated in FairCoin to establish an autonomous, externally backed pool of market value. In response to FairCoin’s wild fluctuations, and in an effort to ensure the currency can function as an effective means of exchange, a minority of FairCoop stakeholders have proposed pegging FairCoin to a more stable, state-based currency (Barinaga and Ocampo, 2019). Achieving such a fixed exchange rate, however, is not tenable if FairCoin is to remain a tradable, means-of-exchange form of money, as this would require costly currency market interventions to maintain the targeted currency value. More specifically, such interventions require large sums of valuable state-based tender that are generally not available. The dominant view within FairCoop, therefore, is to continue allowing the market to determine FairCoin’s price. Supporters of this line of thinking argue that swings in value must be accepted as an inevitable component of the strategy they have adopted (FairCoin, 2018). In fact, the market-oriented strategy adopted by FairCoin entails a recognition that value fluctuations can cut both ways, and thus have the potential to be exploited. As such, we can see that an underlying, initial aspiration within the FairCoin project was to essentially hack the unstable cryptocurrency markets by playing the store-of-value game, even if the eventual goal was to become an expansive currency of account (not unlike Bitcoin’s potential trajectory). Initially this appeared to be a promising strategy. In 2017, riding a wave of Bitcoin fuelled upward speculation, FairCoop was able to garner a significant amount of state-based reserve currencies for its FairCoin holdings as the coin’s value reached €1.2. In the end, however, there was ultimately nothing FairCoop could do when the bubble popped and FairCoin’s price came crashing back to earth, demonstrating the extreme difficulty in replicating Bitcoin’s route to widespread adoption based on its acceptance as a store of value. After hitting rock bottom, the FairCoin project has begun picking up the pieces in a bid to re-establish its worth. As of this writing FairCoin’s exchange rate stands between €0.05 and €0.08 euro cents. At this juncture, arguably the only way FairCoin could truly alleviate the challenges it faces is if it could significantly broaden the microeconomy it denotes. How big is big enough remains an open question, but it would be wrong to assume outright that a commons-based economic realm could not reach the needed scale. Take the example of the Seychelles again, which maintains the smallest economy to employ a free-floating independent currency. This economy maintains a GDP between US$1 and $2 billion per year and has managed a remarkably stable currency over time. Then, consider that the total sales of the Mondragon mega-cooperative is well over $10 billion. Clearly, there could be commons-aligned economies that are big enough. Following from this, then, rather than trying to build up a commons-based currency from the bottom, with dreams of hacking the cryptocurrency market, as with FairCoin, a more promising approach would likely be one that was more orchestrated and started big. This would mean launching a means-of exchange currency with the backing of an already well-established pool of market value. Such an initiative could be spearheaded by a massive cooperative like the Mondragon Corporation, or through a broad alliance of cooperatives, non-profits, and open-value networks, which could account for an even larger economy to be denoted by the new currency. Of critical importance here, however, is that the currency is launched with all of this backed value from the outset. The organizational effort and far-sighted intentionality required to launch such a large-scale, commons-based cryptocurrency would, without a doubt, be considerable. The odds of success, furthermore, would be greatly dependent on the broader monetary context. This context, of course, is primarily controlled by the state. Lest we forget, it is the state that maintains ultimate authority over the legal status and allowances afforded any alternative currencies. Presently, in the most liberalized capitalist economies, cryptocurrencies are legal and increasingly subject to codification and control. Somewhat paradoxically, the more states seek to restrict cryptocurrencies via regulations and limiting laws, the more they seem to gain recognition and stability as a viable asset. How far these states are willing to allow cryptocurrencies to function as actual means-of-exchange tender is another matter, however. While Bitcoin’s impact on national economies and their money system is understood to be mostly negligible for the time being, there is no saying that this would continue to be the case if cryptocurrency adoption and use, especially as a unit of account, were to significantly increase. A basic concern here is that the state’s monetary and fiscal tools to shape the economy could become fundamentally hampered (Claeys et al, 2018). Undoubtedly the biggest possible potential threat in this regard is that posed by big corporations, who could also benefit from establishing some form of centralized means-of-exchange tender for themselves. We can point here to the big US airlines’ rewards programmes as a precursor to such currencies, where the points that can be redeemed for air travel have become a financialized micro-economy in their own right, becoming a leading source of revenue for these companies (Genter, 2022). Currently, large tech firms are exploring similar possibilities with the help of crypto-based technologies; while Meta (Facebook) has thus far been stymied by regulators in pursuing their vision of the ‘Diem’ currency, Amazon is forging ahead with a more careful exploration of their internally used Amazon Coin. If regulatory limits were removed, it is not difficult to imagine how the massive amount of value that is funnelled through such corporations could quite easily be leveraged to launch an immediately sizable, sovereign cryptocurrency. Once established, corporations could then use such currencies as units of account for their goods/services and as the de facto money used for intra-company transactions, possibly including the payment of wages (depending on laws). Additionally, massive initial (and subsequent) coin offerings could be initiated to access state-based tender. Importantly, the significant state-based currency reserves controlled by these large companies would also enable them to engage in currency market interventions to partially control their own currencies’ value. Not least, if the corporation’s private tender were to become broadly adopted, it could even garner seigniorage privileges, meaning that the issued money could be used to purchase goods and services without it returning to make claims on the corporation’s assets. The fate of commons-based sovereign cryptocurrencies, then, which are unlikely to match the power of those linked to big corporations (at least in the near term), will likely depend on how states respond to such monetary developments. A state largely in the grasp of capital-oriented interests could theoretically be persuaded to cede even more of its monetary power to corporate actors, opening up a complex monetary environment characterized by a multitude of interacting and competing state, corporate, and possibly some minor commons-based currencies. At the same time, a nationalist turn could lead to the outright banning of all non-state-based monies as the state seeks to re-establish its own power over the monetary realm; China, for example, along with a handful of other countries, has already adopted this approach by outlawing the use of Bitcoin. From a compeerist perspective, therefore, the most favourable scenario would be one in which the state significantly restricted the development of expansive means-of-exchange tender controlled by profit-seeking capital, while leaving commons-oriented crypto projects largely untouched. Yet such a policy adoption would, naturally, depend on the state finding common cause with commoners. Indeed, in the final analysis, and in taking the top-down (sovereign) and endogenous, bottom-up (crypto) approaches to exiting the monetary banking apparatus together, the likelihood of success for either hinges, as with so many other compeerist initiatives, on the continuously evolving relation and power dynamics between the state, capital, and the commons. It is the charge of compeerists to greatly increase the power of the commons in this dynamic if the envisioned transition out of capitalism is to ever transpire. To succeed in such a task will ultimately necessitate a widespread socio, cultural, and political upheaval demanding that the rationality and practice of the commons and commoning be embraced as a political-economic alternative to capital. The question of how such an upheaval could come about, and what it could result in, is the focus of the final part of this book.