Update: A more recent generic version of this outline plan has been included in my book, The End of Money and the Future of Civilization, and is excerpted elsewhere on this blog.
Here is a grant proposal that requests funding for the first stage of a comprehensive regional development program that is being implemented in and around Auroville, an international community located in the state of Tamil Nadu in the south of India. The project team offers this proposal as a possible model for the implementation of similar programs elsewhere. – t.h.g.
[Auroville's Conscious Community Exchange System for Sustainability]
Building a Sustainable Economy for Auroville and Its Surrounding Bio-region
Project duration: 6 months (initial organization and start-up)
Total cost of the project: Rs.5 lakhs
Funding amount requested: Full amount
ACCESS (Auroville’s Conscious Community Exchange System for Sustainability)
Project manager: Hetzel, Olivier
Date of application: August, 2007
Local communities around the world need to look for new ways of doing business and innovative means to exchange skills and services in order to maintain and improve their well-being and quality of life. Such new ways can, at the same time, encourage human solidarity, originality and creativity. By employing an approach that is both peaceful and based on private voluntary initiative, it is possible for communities to attain a higher level of prosperity and self-determination, and to contribute to the larger good and prosperity of the region.
Aims and Objectives
The project here proposed aims at providing the economy of the Auroville bioregion with the strength and vitality that is necessary to attain a greater measure of self-reliance and to enhance the quality of life both for Aurovilians and the population of the surrounding region.
This will be achieved by:
1) Organizing a Mutual Support Network that will:
- link existing businesses
- encourage the creation of new ones
This will provide a variety of goods and services from within the network and the local community instead of being sourced from outside the region.
2) Organizing an alternative means of payment known as Mutual Credit Clearing.
This project will be carried out in several stages. An experimental prototype web-based clearing house, called ACCESS (Auroville’s Conscious Community Exchange System for Sustainability, www.auroville.com/access ) was established in Auroville on the 20th April, 2007. The prototype has enabled the initial project team to gain further experience and insight into how to build a more comprehensive system for the bioregion.
The current request for funding is for implementation of Phase I of the project.
Phase I – Education and Outreach (six months)
The first phase will begin by educating various constituencies and organizing solidarity groups that include ALL sectors of the constituent communities:
- the locally owned and controlled businesses
- the commercial Auroville units
- local Governmental bodies
- the non-profit sector
- social entrepreneurs and activists
- Auroville’s service units
- the public-at-large
The first major goal will be to convey the benefits of a mutual support network to as many local businesses and individuals as possible. The administrative office of ACCESS will assist them in finding local sources for the things they need and local customers for the things they provide.
The specific steps to be followed in this phase are as follows:
- Researching and mapping the kinds of goods and services provided and needed within the region and the specific businesses that provide and need them.
- Preparation of educational materials, information packets and presentations.
- Presentations to, and workshops for, businesses, government and civic groups, including, lectures, discussions, interactive activities, movie-showings, Q & A.
To implement the above steps, the following will be required:
- Expansion of the project team to include all the necessary skills for organizing, administering, and promoting the Exchange System.
- Establishment of an office with computers, phones and internet connection.
- Creation of easily understandable information and educational presentations to demonstrate the value and proper use of the system.
- Translation and adaptation of these educational presentations for the village culture of the bio-region.
- Organization and facilitation of short educational training programs with the youth clubs, women associations, businesses, schools, etc. both within Auroville and the villages of the bio-region.
- Creation of a web-based, real time, database listing all the relevant products and services available in the bio-region as a result of the research and mapping process.
(Please see ‘Additional Notes Explaining Phases II-IV’ at the end.)
The members of the community of Auroville (about 2000), guests (500 to 2000 at any given time), as well as the local regional population (over 100,000, including Puducherry) will benefit from this project. The benefits will be both economic and social, as such systems have been shown to foster greater social interactions and cohesion among participants. It can therefore be a potent tool to help bridge the cultural and class distance between the community of Auroville and the local population
- Olivier Hetzel – Aurovilian, business manager, and social entrepreneur, has been involved for several years in alternative economic approaches and is now forming a team of enthusiastic people to carry out this project as part of the Socio-Economic team of the newly formed “L’Avenir d’Auroville” – The Planning and Development Research Organization of Auroville.
- Thomas H. Greco, Jr.- A community and monetary economist, educator, writer, consultant, and former tenured college faculty member who, for more than 30 years, has been working at the leading edge of transformational restructuring. His special interest is monetary and financial innovation. Among other books and articles, he is the author of “Money: Understanding and Creating Alternatives to Legal Tender” (Chelsea Green Publishing Company, 2001). His website is www.reinventingmoney.com
- Martin Gluckman – Newcomer to Auroville. Business man, website designer and software developer who has long experience in using local exchange systems in South Africa.
- Tewa Holloway – Auroville Newcomer. Tewa will take on the role of researching and creating the education and presentation materials, facilitating the presentations and workshops and writing articles for local publications to educate the public and promote the project.
This is a long haul project that will take two to three years of initial implementation, experimentation and development. Phase I covers the startup process and initial organization of local businesses into a regional solidarity circle. It will take about six months to complete.
Measurable results will include:
- The number and quality of educational materials produced.
- The number of presentations given and the size and scope of the audiences.
- The amount of data collected in mapping the regional economy.
- The number of businesses contacted.
- The number of new business relationships established as a result of this project..
- The number of members recruited into the exchange system.
An intermediate report on Phase I will be submitted in December 2007, and the final report in April 2008.
Current and Future Funding
Seed funding of 1.000 euros has already been received in 2003 from Margrit Kennedy – writer and activist of the complementary economy movement and author of Interest and Inflation Free Money. Of this, Rs. 50.000 remains available.
It is anticipated that the Exchange System can be self-supporting within two years. Revenues sufficient to cover administration and maintenance of the system will be generated through fees for services provided. These may include small fees levied on each transaction, annual membership fees, brokerage fees, and advertising fees.
[Pro-forma Budget omitted]
Additional Notes Explaining Future Phases II-IV of the Project:
Phase II – Organizing a Mutual Credit Clearing Association
The following are NOT a part of the current proposal, but are included to provide a fuller picture of the overall vision and long-range plan and an insight into the future potential.
The second phase will provide the participants of the project the possibility of an alternative means of payment. This payment alternative is known as direct credit clearing. It involves a process in which a business’s accounts payable are offset by its accounts receivable, and would be organized under a mutual credit clearing union. (Direct credit clearing is a process very much like the one used by banks to clear checks drawn upon one another, and the mutual credit clearing union is analogous to a bank clearing house.)
Working capital in the form of conventional money is often scarce and expensive for most businesses. Mutual credit clearing is an extension of the common business practice of selling on “open account,” but it is done on a more organized multi-lateral basis which has the benefit of sharing the risks and enabling a participant’s sales to pay for his/her purchases without the use of any third-party credit instrument such as conventional money.
As a member of a mutual credit clearing exchange, a business can have an interest-free line of credit, it will be able to acquire the things it needs without the use of cash, and because it accepts payment in the form of exchange credit, will be a preferred source of supply for others who are members of the exchange. In the credit clearing process, a member’s sales pay directly for its purchases.
In allocating lines of credit, it is important, especially in the beginning, to allocate the greatest share to “trusted issuers,” i.e., those that have the largest sales volume and whose products and services are in greatest demand within the local region. This is the key to maintaining a rapid circulation of credit through the system and avoiding defaults. The value and usefulness of the system credits must be demonstrated beyond doubt.
Like any network, this clearing system will become more valuable and useful as it continues to expand and a greater variety of goods and services become available within the network. By way of example, one may note that the first fax machine was very expensive but useless. As more fax machines were deployed and connected in an expanding network, the fax became more valuable to ALL users, even as prices plummeted and quality improved. The same will happen with clearing networks, but it is essential that a network be properly designed and operated from the very start.
The specific steps to be followed in this phase are as follows:
- Identification and recruitment of a few “trusted issuers” (i.e.: established businesses) to begin the process of credit clearing.
- Determination of credit limits to be applied to each account.
- Selection and mounting of an online software platform that can provide the needed functions.
- Commencement of payment using the credit clearing process.
- Recruitment of additional participants and extension of the “overdraft privilege” to more users as their sales grow and their creditworthiness is demonstrated.
This phase seeks to optimize the structures and processes that have been developed over the past three decades within both the commercial “barter” industry and the grassroots, non-profit sector. It will build upon the experience of successful prototypes like the Swiss WIR Bank and some of the major commercial business-to-business exchanges that are in operation around the world.
Phase III – Issuance of a Regional Currency
The third phase of the program is the joint issuance of credits into the general community by the members of the clearing association. This is done by the association members buying goods and services from non-members using some form of uniform credit instrument, which all association members are obligated to redeem, not for cash, but for the goods and services that are their normal stock in trade. Now, that provides a sound regional currency based on the productive capacity of the region’s leading enterprises, a currency that can circulate among any and all. The availability of such currency to supplement the flow of official money insulates but does not isolate the local economy. Just as a sea wall protects a small boat harbor from the turbulence of the open sea, a sound regional currency provides a measure of protection from the turbulence of the global economy and centralized finance.
This externalization of credits from the clearing association into the general community could be achieved in a variety of ways, including their representation as balances on stored value cards, or in accounts that reside on a web based tracking and accounting software accessible by computer and cell phone.
Phase IV and Beyond
As the effectiveness of this general approach becomes manifest, additional refinements and adjuncts will suggest themselves and be added in later phases. One particularly useful refinement, as local clearing networks become interlinked across national boundaries, will be the definition and use of an independent, non-political unit of account based on a concrete standard of value. Exchange credit units originally defined as being equivalent
to the dominant political currency the Rupee, will shift over to a value unit that is objectively defined in terms of valuable commonly traded commodities. Such a unit will facilitate exchanges across national borders by obviating the need for foreign exchange, eliminating the exchange rate risk, and will be immune to the inflationary and deflationary effects that beset national currencies.
The remaining design details and implementation strategies need not be described here. Suffice it to say that all of the necessary science is well established and all of the major system components are readily available. With a modest amount of funding, such a system could be quickly launched and has the potential to reach critical mass within a short period of time. Each such initiative requires adequate start-up funding and local champions who are passionate about the project and willing to dedicate themselves to its implementation and success.