I was invited to be interviewed about the commons and mutual credit for a show on the radio station ‘Voice of Islam‘ called ‘Beyond Capitalism: Mutual Economics’. I agreed, and the show went out on Feb 8th.
Here’s a recording of the show. My part is between 27.48mins and 42.10. Below is a transcript.
Hi Dave. We want to talk to you about mutual credit. What is a mutual credit system, and why is it different from other forms of credit?
It’s not like the general system of credit, because there’s no money involved.
How does that work then?
It’s more like an accounting system – accounting for who’s done what for whom in the community. Imagine a network of local businesses that trade with each other. They can have a mutual credit system amongst themselves, and each business gets an account. If you sell something to another business in the network, your account goes up, and theirs goes down by exactly the same amount. But it’s just numbers in an account, not money – it just accounts for who’s done what. Because there’s no money involved, there’s no interest charged. I know that charging interest on loans I problematic in Islam. In fact I think it’s banned isn’t it?
Yes, to some degree. It’s certainly not promoted. But how does it work. It sounds a bit theoretical to me.
We’d approach a network of businesses. For example, we’re partnering with an organisation called Mutual Credit Services. They’re working with various groups in Liverpool to build a big credit clearing network. They’re working with the city council, the Federation of Small Businesses, the Chamber of Commerce. (NB: from a credit clearing system, small groups of trading businesses can be found that can have a mutual credit system with each other). They provide the software and accounting systems for existing business networks, and each business gets an account, as I said. They can carry on trading with their normal trading partners, but they don’t have to use money – which really helps with their cashflow.
So who loses out? Would it be the banks?
Well I guess if anyone loses out, yes, it would probably be the banks.
And who would win in this system?
Small businesses. In Slovenia, they’ve had a national credit clearing system since independence in 1992, and research there has shown that for small businesses in the scheme, there’s a reduction in the need for hard cash of 25%. That’s huge.
Why haven’t you been on the show before?
Well, there’s also the International Reciprocal Trade Association – a trade body for what they call ‘commercial barter schemes’. But actually, it’s not barter, because you don’t have to find somebody who has what you want and wants what you have. You trade with the entire network. The IRTA is international and very commercial, very capitalistic. The total amount of trade they estimate happens in mutual credit around the world each year is $14 billion – so it’s not a small thing. But we’re talking about building mutual credit schemes that are owned by the community.
I want to clarify something. Is it like favours – you build up numbers to show how often you’ve helped another company?
Not helped. It’s just trading. Say for example, imagine you’re an accountant, and you do the accounts for a business, and you charge them £100 (that would be a very cheap accountant, but…). In your mutual credit system, if the value of one credit is set at £1, you don’t actually need a £ – it’s just numbers. So you’ll get 100 credits in your account. If another business in the network is selling something that you want for 100 credits, you can buy it with your credits.
So you’ve invented a new currency?
Not really. It’s more of an accounting system. You can see who’s done what for whom.
Sounds cool. Is this recent, or has it been around for a while?
Actually, the banks do credit clearing amongst themselves. So the banks don’t pay all the debts they owe to each other, they just tally up everything at the end of the day, and they just clear a lot of it. For example, if I owe you £10 and you owe me £10, neither of us has to go out and find £10 – we can just clear it. That’s the same principle with which business networks can clear debt. Algorithms can find loops of debt within a network, and within a city, you can wipe off millions of £ worth of debts. So it’s very good for small businesses.
You’ve explained it well, and believe me, if I can grasp this, it means that a lot of people will grasp this.
Small business people are very canny – they’ll get it right away. And they do.
In your terminology, you also use ‘commons economy’. I don’t know anything about this, but it does sound a little bit like communism.
Oh, no, it’s actually the opposite of communism.
Could you please explain?
Well, if violent men seize power and promise to distribute it to communities, they never do. Communism is about state control, and commons is about building a new economy from communities. It’s nothing to do with the state at all. I understand why Muslims don’t like communism – the two don’t mix very well, do they?
That’s why I was asking.
The only similarity is the first 4 letters.
Got it.
The commons ideas are based on Elinor Ostrom’s commons principles, and it’s all about local people owning and controlling their own resources. And there are new commons ideas now that will prevent corporations or capitalist businesses from buying community assets, that will remove the need for banks, that allow different towns and sectors to federate to form the basis of a new economy.
You mentioned that we need to be prepared for every collapse scenario. What do you mean by that?
I think it’s becoming less controversial now. I think more and more people are realising that the current system destroys nature, which is our life-support system. And that’s very dangerous. Biodiversity loss and climate change are accelerating and they’re out of our control now. There’s going to be more and more drought, desertification, which will mean mass migration, food price increases, and eventually food shortages. Maybe social unrest, maybe more wars for resources. And while all this is happening, 2008 showed us how fragile capitalism is. There might be other curveballs – for example, more pandemics, because the destruction of nature means that once remote wild animals will come into contact with humans for the first time. Antibiotic resistance is accelerating etc. All civilisations collapse at some point, and the risk now is that Western civilisation will collapse too. There’s a book by Joseph Tainter, the Collapse of Complex Societies, about how societies become more and more complex, and more and more resources have to go into just maintaining that complexity and bureaucracy, rather than providing the essentials of life.
I want to ask a really silly question, although you might have already answered it. How are we going to undo corporate capitalism?
We’re not going to try to undo it, or confront it, we’re just going to start building things in communities, and if we can build commons, including affordable housing for example, with security of tenure (because tenants are members), and provide jobs – then we won’t have to work hard to persuade people. People will really go for these things.
They really would. Do you think capitalism may be running its course, i.e. coming to an end?
Just between you and me – and everyone else listening – I do, yes. I think it damages nature so badly. But we’re not taking to the streets or confronting anyone. We’re just building useful things in communities.
Yes, you’re about taking action. Could you tell us a bit more about what you’re doing?
Our partners, Mutual Credit Services, are designing models for the commons economy. I’m also part of a group called Stroud Commons, and we’re trying to implement those models in Stroud, Gloucestershire. We have a core group, plus a group looking into building a land commons, there’s a housing commons group, a leisure commons group – and we’re talking to people wanting to build commons in about 20 other towns in the UK, and in some other countries too.
Could I just ask you a question? I don’t know if you’ll know the answer. Islam is non-materialistic and spiritual, but places like Dubai and Qatar are making Islam just as capitalist as the West. How do you reconcile Dubai with Islam?
Do you know how I reconcile it? Islam is 1400 years old. The Saudi state is less than 100. We don’t equate the two at all. If you speak to 10 different Muslims, they’ll give you different answers, but I personally don’t think they’re going in the right direction.
OK. That makes sense.
Dave, you make more sense than anybody in the room right now. I’m wondering where you’ve been. We really appreciate what you’re doing, and hope you keep doing it, and raising awareness. People can find out more at Lowimpact.org. Thank you very much Dave, for coming on the show.
Thank you very much. If you subscribe to the blog, you can keep up with any new developments.
