Grassroot marketing: are we in for a sustainable society?: Voice of ...

Ian: I thought that we could start off and say, we?ve heard a lot about this term ?,?. What does this actually mean in the broadest terms?

Well, sustainability is defined by the UN as the ability to meet present needs without compromising the ability of future generations to meet their own needs. That?s the sort of broad, generally accepted term of sustainable development actually. So, that obviously encompasses what to do about natural resources and the impacts on the environment.

The basic question I suppose one is to ask is whether human societies are superior to or subservient to the economies that operate within them. I mean, in short ? do we want a market society or a social market. So, the question really is what is economics for? Who is it for? And that would involve social questions, as well as environmental ones and also ethical ones as well. So, one can look at this question of sustainability from all of those different angles.

Ian: And what is it that?s driven this course, this movement of people to try to readdress how the economics works? Not just tinkering at the edges but actually to fundamentally look at it and say ? do we want this kind of society? Why are people so concerned about it?

Well, I think it is not something that simply reasoned as the result of the financial crisis, it is something that?s been brewing for a long time and it is also the result of a confluence and a range of issues. Climate change, whether it is manmade or not, and even if one is undecided on that question there seems to be a consensus that climate change is happening. So, there is that aspect of it.

Then there are also the demographic transformations that have been going on now for quite a while. And for example aging populations and people living longer as a result of advantage in healthcare and so on ? that then affects the ability of society to maintain systems of social welfare and so on. So, there are the demographic issues.

Then there are of course the more immediate financial issues and that the collapse of the economic orthodox that has really grown up over the last 50-60 years, since the end of the World War II and the predominant Anglo-Saxon model of free market capitalism. And that?s been found to have broken to a greater or lesser extent and within that the banking system and so on. So, all of these questions have collided so that people are beginning to really reappraise the basic assumptions and see if there is a better way. This is from a macroeconomic perspective.

At the same time the advances in information and communications technology have also resulted in an empowering of the grassroots. So, there lots of new different systems that are being tried at the grassroots level, for example, peer to peer financing and so on and so forth. So, all of these things feed into the debate. Actually, the old clich? goes, the Chinese curse is - may you live in interesting times. Well, we certainly live in interesting times and that time is bringing forward also sorts of new ideas.

Ian: What are some of these new ideas? Are there some that you could explain in a little more details, some of maybe the more popular, influential or maybe even radical ones?

Well, yes, I mean I touched on one and that was the idea of peer to peer financing. So, originally the idea of the concept of peer to peer first came into common parlance in the music industry. If you remember the software program Napster which basically took the main record companies out of the equation and enabled people simply to share digital musical files in this case between one another from the Internet because the Internet itself is essentially designed on a peer to peer system rather than essential hub and spoke model. So, it is a much more organic structure. It can find its most direct or efficient routes from person to person without having to go via central system.

And that is now finding its way into all sorts of things, and not least the finance. So, for example you have people through kind of peer to peer system lending to one another rather than going to banks as primary lenders and people setting their own interest rates. In the betting industry one has that rather than going to a betting shop, where the bookmaker sets the odds, people can set their own odds. And the same is happening in money when people can set their own interest rates and people can choose to borrow or lend to a rate that suits them and always commonly agreed between not directly individuals as such but between a decent mediated group of people who then come to an agreement and the market sets its own rate.

And the same is happening in investment as opposed to debt based money where people can choose to invest in new startup companies. So, you have companies like ?feeders? and so on which are called crowdfunding, crowdsourcing. So, in those areas where basically the banks used to have a monopoly on, or hedge funds of the higher level in terms of equity investment, it is now being democratized and that?s offering us some very interesting scenarios.

In another area, in the area of money itself people are beginning to reappraise what money is in its most basic form. And basically, money is simply a form of enabling multilateral barter as opposed to bilateral barter, it is simply a medium of exchange. And so, for example you have a complimentary currency or community currency movement. For example in the UK there are at least two towns now that have their own local currencies, Bristol and Totness, the Bristol pound and the Totness pound.

What one is finding with this is that because the community acceptance is limited, it means that the capital that is exchanged is contained within the community and so there is no capital flight outside of it because you can?t spend the Bristol pound outside of Bristol. And so, the wealth is retained, it reinforces community and it speeds up the transactional process because there is a basic law that says that all of the things being equal, the smaller the scope of acceptance ? the more rapid the circulation of the currency within it that defines that community.

And the whole complimentary currency movement is one that is very interesting. One can build into one?s own designed money in this way the Bristol pound, whatever values one would like to reinforce in the community. For example, in what one allows or chooses to have that currency exchanged for. So, you can build in for example health benefits. You can say that in exchange for one hour of care for a person who needs care I will receive a currency unit that I can then exchange in the local gym or whatever. So, one can build into money all the kind of values, the community values that one would like to reinforce.

And in Japan for example, there are I think over 200 of these purpose specific currencies that performed various functions. That is another area, a gross level where the whole concept of money and economics is being redefined almost on the fly.

Ekaterina: Then, doesn?t it lead ultimately to a fragmentation of the existing entities, shall we say state entities? Doesn?t it in a way take us back to the Middle Ages where there were town or city states with their own currencies, with their own economies and economic systems in a way?

In a sense it does, I mean there are various sort of theories of what one might call ?market free?. Where we go next? This does in a sense involve revisiting previous centuries, and most notably the 18th century, and looking at how the existing banking system, that is now command and control with the Bank of England in the UK and the retail banks, how that system can itself adapt and transform to take account of these new things.

The Governor of the Bank of England Eddie George has said that the future will involve a multiplicity of different currencies. And perhaps within that even national currencies might ultimately fade away so that you?d have a very diverse local economy of various currencies and then one global reserve currency overarching it. That would then mean that there are ways in which currencies themselves would be limited in purpose specific but can be exchanged between one another because at the moment there are no boundaries on capital as such. And that is seen increasingly as part of the problem.

For example there is a professor in Oxford University envirologist and his research is now being taken very seriously by the Bank of England. He?s looked at the existing banking and financial system in the way in which viruses attack organisms. For example he looked at the HIV-virus and he noticed that there were certain notes which were about its super spreader system. In the current system we have a very sensitized and highly connected financial system which means that if one part of it becomes infected, then the whole becomes very rapidly infected.

And so, a future which involves discrete currency centers can perhaps be more resilient to any kind of infection in one part of it. In the way the Internet itself is highly resilient because it is decently mitigated and very much an organic-like structure that wherever there is a flaw in one part of it a route around that can be very rapidly and efficiently found.

Ekaterina: But does that mean that perhaps the banks would need to find ways to react so that they wouldn?t lose much of their influence because in that case the current banking system seems to be growing obsolete? Is my understanding correct?

I think that they are already to a certain extent taking account of this new at the moment still very hypothetical scenario. The imagined future would be where banks become less of credit issuers themselves and more guarantors of credit, so that they become more service providers bringing capital providers and capital users together. You?ve mentioned earlier that it might involve going back almost to the Middle Ages. Well, not quite but the 18th century is looking increasingly like it might be a viable template to revisit where you are looking at new structures within which to do business.

In the 17th century and you had the creation of the joint stock company which then became the joint stock limited by guarantee company. Those basic structures, the organisms are the heart of the economy, the fundamental units of doing business are also being looked at and they would involve new kinds of partnerships that would involve between the credit providers, investors and investees (the users of that credit) in a new partnership structure that involves sharing of risk and reward between investor and investee.

And in that scenario the banks would be intermediaries providing the guarantee underpinning that joint enterprise and bringing the two sides together and really charging for the service and acting as custodians. Banks already do that to a certain extent. Their custodian function is one of their primary areas of business. And what I?m suggesting and what others are suggesting is that that aspect of their business will become of greater significance in future rather than their own credit issuing in debt based money through loans bearing interest. That would be the way forward.

In fact, actually there is one very significant area of the financial economy that is already doing that and that is Islamic finance of course. Their models of joint enterprise and doing business that don?t involve the creation of debt money bearing interest is a very significant and growing aspect of the financial architecture. And the UK in particular is looking at that very closely to become a key player in Islamic finance.

That doesn?t happen to be limited purely on religious or ethical or doctrinal grounds, it is also a very effective way of limiting risk because one of the lessons of the financial collapse is that when you outsource risk through instruments like credit default swaps and so on, you don?t actually minimize it, you make it more opaque and in fact arguably increase it. The further away the risk is from the money being invested, the less able you are to quantify it and to limit it if it becomes a problem.

Source: http://english.ruvr.ru/2013_01_11/Grassroot-marketing-are-we-in-for-a-sustainable-society/

december 21 2012 norad 12/21/12 bruno mars winter solstice Jabari Parker 2012