Authors: Jeremy Rifkin
More and more people began to experiment with a different type of currency, built on deep collaboration and backed up by new layers of social capital. Alternative currencies, often referred to as community currencies, local exchange trading systems (LETS), or microcurrencies, began to take hold in locales around the world after the economic collapse of 2008. While they had existed before in scattered places, most notably during the Great Depression, their impact was marginal. This newest reincarnation, however, is potentially of far greater consequence to society because it comes at a time when the social economy is enjoying a renaissance, with hundreds of millions of human beings spending an increasing amount of their daily lives engaged in collaborative activities—be it social or economic—on a Collaborative Commons.
The so-called alternative currencies are really social currencies that enable the collaborative exchange of goods and services to flourish in the Commons. As in other areas of the collaborative economy, people are bypassing the middlemen, the fixed overhead costs of big financial institutions, the markups, and the high interest rates imposed by credit card companies, and exchanging their labor time directly with one another. But what makes this different from old-fashioned, one-on-one bartering of services is that Web-generated apps provide individuals with a mechanism to store and use points, represented by comparable labor time, for the
exchange of all kinds of goods and services, in both the social economy and market economy.
There are more than 4,000 microcurrencies in circulation around the world.
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Many of them are based on the labor time one person gives to another in making a good, repairing an item, or performing a service. The hours are stored in a time bank, just like cash, and exchanged for other hours of goods and services. Edgar Cahn, a law professor at the University of the District of Columbia, developed the idea of a time bank. He said it was inspired by people giving blood at a blood bank. The concept is based on a core principle that underlies the social economy—reciprocity. A neighbor helps another neighbor with the expectation that someone down the line will reciprocate in kind.
Cahn’s time bank does not distinguish between different types of labor time. A car mechanic’s hour is worth the same as a physician’s. The notion is that everyone’s time is to be regarded as equally valuable and not subject to tiering based on professional or technical skill sets. Other time banks allow hours accumulated to be calculated by skill. A tax accountant would earn more hours than a car washer. Time banks are operating around the world.
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The Hour Exchange Portland, in Maine, for example, assists people in paying for health care. TrueNorth, a nonprofit health clinic, has entered into an agreement with the Hour Exchange Portland by which its physicians accept time dollars as payments from patients who have accrued the currency for services they provided to others in the community.
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Those time dollars can be used by the physicians to secure services from others through the time bank.
Other community currencies traded in LETS are designed to facilitate the exchange of goods. The WIR currency in Switzerland credits sales against future purchases for its members. When a seller receives credit for an item sold, it can be spent buying another item from another WIR member.
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Community currencies are also employed, in part, to prevent wealth from leaking out of the community. BerkShares, in the Berkshire region of Massachusetts, is one of a number of social currencies that is designed to encourage local buying. Members purchase BerkShares from any of the six banks in the region at the same exchange rate as the dollar, with a little extra bonus. If a member deposits $95, he or she is given $100 worth of BerkShares from the bank, making the exchange a net gain for the member.
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He or she then uses the shares to purchase goods and services in local business establishments, which ensures that the money continues to circulate in the local economy. By using a nonprofit bank as the intermediary, members avoid the additional expense that would be incurred were they to use a credit card or pay by a commercial bank check.
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The BerkShare was introduced in 2006, and in the following five years, more than three million BerkShares went into circulation—a hefty sum for the local economy.
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Alternative currencies have mushroomed in some of the regions of Europe hardest hit by the Great Recession. In Greece and Spain, community currency networks are proliferating.
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In regions where unemployment is high, nonprofits are setting up online sites to connect individuals who have skills to render with those in need of them—creating a distributed, collaborative, laterally scaled microsocial economy inside a centralized market economy that is increasingly inoperable. Microcurrencies have become the new mechanism of exchange, putting at least some workers back to work.
While social currencies cued to locales are proliferating, global alternative currencies that bypass national boundaries are scaling in on the Internet. Bitcoin is a peer-to-peer currency network with millions of bitcoins in circulation. The bitcoin is tradable with other world currencies, and as of November 2013, it was selling around 400 U.S. dollars per bitcoin.
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The creators of the currency, Amir Taaki and Donald Norman, say the idea came to them when they were in Amsterdam, and a friend from the United Kingdom asked them to wire some emergency funds. Their only two options were Western Union and MoneyGram, both of which took a usurious 20 to 25 percent of the transfer in fees. They created bitcoin, an Internet currency, to bypass the fee gouging.
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Futurist Heather Schelgel, who advises the world’s leading banks on transaction standards, doesn’t believe that global, Internet-based currencies will replace traditional currencies, but adds that “as communities begin to realize the possibility of expressing themselves through money, I expect you’ll see hundreds of BitCoin [
sic
], or something similar—or something we haven’t even thought of yet.”
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Others are even more bullish. Jean-Francois Noubel, a cofounder of AOL France, believes it is shortsighted to think that the same disruptive power of a distributed, collaborative, and latterly scaled Internet that gave rise to eBay, Facebook, Amazon, Etsy, and thousands of other ventures wouldn’t make its way into the financial domain. Noubel says he wouldn’t be surprised to see “millions of free currencies circulating on the Net and through our cell phones” in the years ahead.
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Social Entrepreneurship
New business models are beginning to emerge alongside new funding vehicles and social currencies to accommodate the requisites of two very different economies—one, a capitalist economy operating in the market, and the other a social economy operating on the Commons. The new business models are an attempt to find value in the spaces where the two economies enjoy symbiotic relationships. We already discussed cooperatives. From the perspective of their architectural design and operating protocols, they are best positioned to bridge the gap between the two economies and find value at the edges where potential synergies arise.
In the United States, the “benefit corporation” is an interesting new business model that’s attempting a makeover of the conventional capitalist corporation to allow it to be more agile and able to maneuver in the hybrid world of markets and Commons. Patagonia, the California-based global sports clothier, with annual sales around $540 million, is the most prominent company to date to make the switch to a benefit corporation.
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Benefit corporations, which are now recognized and regulated as legal entities in 18 U.S. states, offer entrepreneurs a form of legal protection against outside investors who might force them to give up their social or environmental commitments in return for new financing.
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Although benefit corporations operate as capitalist companies and are responsible to their shareholders, their new legal status enables them to put their social and environmental mandates up front without risking the wrath of investors interested only in optimizing shareholder value.
The benefit corporation is part of a larger wave loosely defined under the rubric of social entrepreneurialism that’s captured the imagination of a younger generation coming out of business schools around the world. Social entrepreneurialism casts a wide net from the nonprofits that are the mainstay of the Commons to the traditional shareholding companies that are the dominant enterprises in the marketplace. The two models—nonprofit organizations and profit-directed corporations—are not only interacting at the edges where the social and market economies meet, but are also taking on some of each other’s attributes, blurring the distinction between nonprofit and profit-seeking enterprises. Social entrepreneurship is the big tent where the profit-making and nonprofit worlds are creating all sorts of new business arrangements and protocols to accommodate a dual-tier commercial space made up of both the market economy and the Collaborative Commons.
Social entrepreneurialism has its roots in the nonprofit community. The paring down of the welfare state in the United States, the United Kingdom, and elsewhere in the 1980s and 1990s created a crisis and an opportunity for the nonprofit sector. The shrinking of government programs to aid the needy left disadvantaged communities at risk. Private philanthropy attempted to fill the vacuum by financing nonprofit initiatives, but the available revenue to communities paled in comparison to the lost revenue stream when the government began to exit. Caught with an expanding social burden and less revenue to meet critical community needs, nonprofit organizations began to look to new business models that could mesh with their primary mission and provide a supplemental source of revenue to continue operating and expand their services. Countless nonprofit organizations established a fee-for-services component into their playbook. Nonprofits—whose managers were previously skilled in seeking government grants and philanthropic contributions from foundations to administer programs ranging from the arts and recreation to food kitchens and health
clinics—began recruiting a new type of leader versed in entrepreneurialism but committed to using his or her skills to advance the social well-being of the communities being served.
With government disengagement, new for-profit startups also began to eye promising business opportunities in the social sector and came in from the market side to fill the vacuum. Peter Drucker, the management guru, talked up the idea of doing good and doing well. He made the argument that the problems of chronic poverty, poor education, environmental deterioration, and a host of other societal ills were best addressed by letting loose the creative juices of entrepreneurialism. Schools, day-care centers, low-income housing projects, and scores of other activities and services traditionally embedded in the governmental domain became fair game for commercial exploitation.
Meanwhile, as described in chapter 7, in the 1990s, a new generation in the United States—the first to be exposed to service learning in high schools and colleges—began to enter the economy. Service learning’s pivotal role in creating the mindset for the new social entrepreneurialism has never been fully recognized or acknowledged. Young people weaned on participating in and contributing to nonprofit projects and initiatives in communities at risk got a taste of a new way to find meaning and self-worth, beyond the strictly commercial opportunities offered up by the marketplace. Their enthusiasm translated into a new career path, at least for a significant minority. Social entrepreneurship was born.
Defining social entrepreneurialism can be a slippery business. While profit-making enterprises emphasize what they call the triple bottom line of “people, planet, and profit,” a term coined by John Elkington in 1994, nonprofit organizations prefer “people and planet before profit.”
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An in-depth survey of 80 social entrepreneurs, from both the profit and nonprofit sectors, highlights some of the subtle differences in how they approach the same set of circumstances. To begin with, the profit-making social entrepreneurs are motivated by the prospect of commercial opportunity, while the nonprofit social entrepreneurs are more focused on addressing unmet social needs. Second, both entrepreneurs are risk takers, but of a different kind. The former bundles risks in terms of return on investment. The latter rarely risks their own funds. For them, risk is bound up in their social “reputation” in the community. Third, while both profit-seeking and nonprofit-directed social entrepreneurs believe in the centrality of their role, the study found that nonprofit “social entrepreneurs more clearly must include and, indeed, must share credit for success with a collective of volunteers and beneficiaries.”
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Whatever the differences, it is interesting to observe the various ways that the profit-seeking and nonprofit-directed social entrepreneurs are edging closer together, especially among millennials, who are feeling their way toward new business models that combine attributes long associated with
each respective domain.
The Economist,
in an editorial titled “Capital Markets with a Conscience” described the evolution of social entrepreneurialism.
The notion of social capital markets can seem incoherent because it brings together such a diverse group of people and institutions. Yet there is a continuum that connects purely charitable capital at one extreme and for-profit capital at the other, with various trade-offs between risk, return and social impact in between. Much of the discussion . . . is expected to focus on that continuum and to figure out, for any given social goal, which sort of social capital, or mix of different sorts of it, is most likely to succeed.
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