Local Economies, FREED

Financial REsilience, Empowerment and Development for Local Economies

Communities freed from dependence upon predatory lenders. 

Local traders beneficially reconnected with local communities; anchor institutions, too.

A basic framework which is flexible enough to be integrated with existing projects and be adapted to a wide range of contexts. 

A proposition for a working group to develop a bid to the Growing Great ideas fund.

Context

ONE: Community currency projects, despite best intentions, have mostly failed to benefit those who are most disadvantaged by the financial system in the UK - the structurally impoverished. There are many reasons for this, which all boil down, it seems, to two things; first, that the confidence to experiment with novel money approaches is a privilege that accrues mostly to people who are not in poverty, and second, that none of the schemes have provided immediate benefits to those in poverty, whose most urgent requirement is increased purchasing power in the existing economy. This has somewhat ‘poisoned the well’ for funders and municipals alike.

TWO: The coming years, in the aftermath of Brexit and the rolling impact of Covid-19, seem certain to bring economic hardship - which, as usual will most severely impact the already impoverished. The other sector most obviously in trouble is small businesses - local retail and services most particularly.

THREE: The UK Lottery’s ‘Growing Great Ideas’ fund is a call for ‘deep infrastructure’ projects which benefit communities.

Proposition

That a ‘coalition of the willing’ - people and projects with experience in and commitment to local financial empowerment - come together around a simple core framework which can beneficially connect local communities and local businesses, and support them in developing economic resilience and  empowerment, to co-develop a programme which will support a bid to the Growing Great Ideas fund.

This core idea should be easily communicable, require no understanding of or interest in monetary theory or economics, must obviously provide immediate ‘what’s in it for me’ benefits to early adopters, must be simple to adopt and use for lay people, simple to implement and manage; secure, robust, safe, resistant to fraud and not subject to heavy regulatory burdens.

Additionally, it should be possible to adapt it to a wide variety of circumstances - crucially, it should be possible to integrate with existing projects with momentum, supporting and augmenting them rather than aiming to supersede them.

Read More in the doc.

@Pat Conaty any thoughts re Credit Union engagement?

Please add contact details for any projects you imagine might be interest to be invited to a round-table around this idea.

This proposal resembles extended CBP (community banking partnership) model's we've imagined, described, explored and discussed over may years. The principles and objectives remain sound (in my opinion) by the obstacles remain too. Synergetic high-variety adaptive partnership structures.

W.r.t. credit unions there is a bafflingly obstructive tribalism to overcome, a determinedly self-destructive rejection of value propositions outside the self-imposed "safe zones". I write this as someone with many years' experience connected with a diversity of CUs in the UK. I hope this can be overcome one day, but I'm not optimistic about that prospect. (It may be easier to create a new CU than to change the culture of an existing one.)

Thanks John. I'm glad that the framework is not entirely novel - very reassuring.
I'd be interested to have you expand a little on obstacles - even bullet points would be useful.

I'm not surprised by your comments on CUs, but they are more extreme than I had expected. What a crying shame!
The idea of creating one is not a bad one - but we won't have resource to do that as well as everything else we are doing!. The ambition might be part of the bid though.. Do you know of any progressives in that sector who might be prepared to talk to us - that we could send this doc / invitation to?

My earlier reply has disappeared for some reason, so I'll try again ...

I'm sure the need for such joined-up solutions will have been recognized by hundreds of thousands (at least) over the years, and that speculative conversations will have been had in every language spoken. I can only make reference to what I've seen and experienced, but I believe the problems will assert themselves universally. In short (and the long version would be very long indeed, and I may write a short book about it when I find the time), the problem is the burdens of regulation, governance, succession, cohesion and everything else constrained by Ashby's Law. If I were to go into more detail, this would expand unmanageably. However, perhaps we could go into a little more detail in a one-to-one Zoom conversation.

CUs present a particularly interesting example to illustrate some of the problems, and I don't have time to go into much detail here. Perhaps one of the biggest problems is that even those CUs which can afford to pay staff to deal with the day to day running, those who carry the can, the directors, are all unpaid volunteers (at least in every example I've ever encountered) whose limited time and experience make them extremely averse to risk and experimentation - and that includes an aversion to effective co-operation. The access that CUs have to the most valuable and immediately appropriate skills (which would often be those might seek from retired bank and building society staff) is sparse and inconsistent, and CUs have generally failed to develop effective resource- and skill-sharing networks to even start to address these limitations. There's so much they could do, but their own experience in struggling to maintain their core objectives - helping the most financially stressed to stay out of the clutches of high-interest predatory lenders - leads to a natural and understandable conservatism.

There are many other issues, often interrelated, but far too many to list or connect here. Again, this is something I might be able to explain a bit more clearly if we talk.

What I find particularly frustrating is that these problems could be overcome by effective design, avoiding the sometimes idiosyncratic traps into which individual CUs have wedged themselves. The technology as changed what is potentially achievable, the regulatory constraints are in some ways more flexible (while in others more demanding) and the VSM provides a natural blueprint for an effective way to design a resilient CU network to meet modern needs. I still live in hope that that might happen, and an overview from this perspective is something I hope to find time to write. Eventually.

Meanwhile, the barriers to the creation of new CUs are not just regulatory, although those are considerable (and a few years ago I entered into lengthy and increasingly detailed correspondence with the FSA trying to find a clear answer to one simple question over the interpretation of "common bond" and the possibility of setting a special-purpose CU to "buffer" a business-to-business LT-MC hybrid). A bigger problem is the geographical territorialism and the unfounded assumptions underlying it.

I don't have time to go into more detail here, but I want to add this: I'm not trying to pour cold water on anything you're trying to do. I believe the motives are sound. It's the practicability that concerns me. If you are determined to progress this, I can do a little more than just wishing you good luck. I may be able to help a little in some areas, so please don't hesitate to contact me if that might seem like the case.

John, somehow I missed this - apologies. Thanks for the very clear exposition of the structural and cultural conditions around CUs.

My level of confidence about engaging with the sector was low, and has been reduced to near zero... (I think beneficially).
We lack the capacity - and civilisation lacks the time - to engage with these confused, crippled artefacts of the current system. 'leapfrogging' - culturally, technologically, organisationally, seems an important mode (albeit in recognition that this can only add new layering over the path-dependent system that is human civilisation).
I was asked on a call whether the UK was 'the right place' to be attempting our work.

My response was that it is probably the worst place in the world - but that if we can make it work here, than it should be easier in other places.
Our most exciting and dynamic conversations are with two contacts in India - where the average age is 26 and about 80% of the population are effectively unbankable; at the same time there is an unbroken experience of cultural institutions over millennia, coupled with deep smartphone penetration, and a widespread wish to escape from post-colonial traps..