In our economic ecosystem the first two sets of sub-system boundary issues to consider are:
- that the major producing organisations’ boundaries separate them from their clients/customers
- that their boundaries separate them from other similar organisations, with which they compete.
In an economy that is dominated by exchange through money, the personal relationship between giver and receiver, and the trust and support that goes with it, are marginalised. “…the shift away from self-reliance has led to the dismantling of the social ties and values that unite communities, or even whole cultures. The market values of competitiveness and individualism have replaced the community values of solidarity and cooperation.”[29]
As discussed in the previous section, the control variables are the needs of the producer, not a ‘best match’ criterion. The result is that the desires of those people who have money are manipulated so that they will want more, while those people without money are ignored.
The resulting social fragmentation leaves significant numbers of people outside of or at the edges of the economic system. Their sense of exclusion encourages crime, vandalism, social and emotional problems, drug taking and general poor health. All of these add to the costs of keeping society functioning.
Transactions can become highly contentious and a source of conflict with people feeling exploited over the wages they are being paid or the prices they are being offered. The results of this are major overheads to transactions of various forms, in wage bargaining, strikes and other disruptions. Much productive effort is absorbed by the financial system itself: handling cash and credit, banks, insurance companies, financial security systems.
The boundaries between competing organisations lead to much duplication of effort in research and development. Significant innovations are kept in commercial confidence, and protected by patents and lawsuits so that best practice cannot be shared by all. To increase or maintain market shares, goods may be shipped around the world to compete with near-identical goods produced locally. Organisations devote significant proportions of their productive effort to competition that might otherwise be devoted to the satisfying the needs of their clients.
The result of all these effects is an enormous inefficiency. The efforts required for transaction costs, to resolve conflicts, in duplicated efforts, in producing things other than what are wanted, in the cost of crime and ill health, all add up to a gross productive effort far in excess of what would suffice to provide comfortable lives to the population. The converse of this is that in a sustainable economy organised so that producers and consumers were all pulling in the same direction, peoples’ wants and needs could be satisfied with much lower levels of production. And of course much lower levels of production would mean much lower environmental impact.
A third, looser set of system boundaries of relevance is that around trading communities. In ecosystem terms, it is analogous to the food web. Organisations up and down the supply chain are necessary to each other“s survival. In isolated or relatively closed trading communities it is clear that there is a mutual dependence among all.
One means of bounding a trading community is through a shared currency or exchange mechanism. This may be a conventional currency, an international common currency like the Euro, a local currency such as LETS, Time Dollars or WIR[30] [31]. It may be the circulation of necklaces and armbands in the Kula ring of the Trobriand Islanders as described by Malinowski[32] [33] or simply the informal exchange in a suburban baby sitting circle. For the purposes of this paper, the key difference between these forms of trading community is in the nature of the relationship, and in particular in the degree of trust.
The exchange or reciprocity spectrum:
Our use of conventional currencies for transactions is at roughly the mid-point of a spectrum of modes of exchange. Sahlins discusses this spectrum of reciprocities in some depth[34], looking across a range of cultures.
At one end of the spectrum there is ‘generalised exchange’ which includes gift-giving, mutual aid within a family or between friends, and working voluntarily for a common purpose. This characterises a relationship in which all parties give and receive, but with no attempt to seek an exact balance either for a single transaction or overall.
Generalised exchange presumes an ongoing relationship based on trust so that people can expect some return for what they give. Harriss says, “…if these social relationships generate some degree of trust, then transaction costs can be lowered, so making for greater efficiency in the use of resources.”[35] Generalised exchange has lowest overheads, as there is the least need to keep records of what is given and received, and least conflict over the fairness of a given transaction.
In the middle is balanced exchange, either as direct barter or using some token or exchange medium such as money for all transactions. There is no assumption of an ongoing give and take relationship so that balance is sought for each transaction. Balanced exchange has higher transaction costs, because of the need to create and handle the exchange medium, the need for savings, loans, insurance, etc. and because of the various conflicts across system boundaries described above.
The other extreme is negative reciprocity, where there is no agreement on the giving and receiving, such as cheating or stealing. Clearly the relationship is one of opposition, not support.
Conventional economic transactions can vary widely along the reciprocity spectrum. In a small shop with regular customers, the relationship may move towards the generalised end. As people know and trust each other, casual credit may be allowed. On the other hand, firms which use high- pressure marketing and cold calling may have a relationship with their customers more like that of predator and prey.
Transactions in local currency schemes tend to be at the more generalised end of the spectrum. Credit is automatically available to people who would have difficulty obtaining it through conventional financial institutions. There are usually no interest charges, and no legal sanctions for default. Thus balance is approximate and pressure to maintain it is social rather than legal. The schemes tend to be small, so people generally know each other somewhat. There are reports of reverse bargaining, where customers offer more of the local currency than they are asked to pay. This shows a concern for the other“s welfare, rather than an attempt to get the best deal.
Local currencies are generally much less formal than conventional currencies. The forms of exchange they facilitate can be extended to no currency at all, if there is sufficient trust within the group. Certain offerings can be free, or given to a community account. This would be fully generalised exchange.
Harriss talks about the development of trust in cooperative organisations based upon “shared knowledge and expectations”, and that “discussion of problems led to a reframing of them, as the understandings of all those concerned underwent change.”[36]
Exchange at the generalised end of the spectrum is the key to getting out of the competitive trap in which producers cannot take measures to reduce their environmental impact unless their competitors do so also.
So what can we conclude about the desirable sub-system boundaries for sustainable economic activity? From the perspective of the ‘nervous system of an organism’ metaphor, we are looking for:
- a reduction of the producer/consumer divide by mechanisms which move exchange towards the generalised end of the reciprocity spectrum
- a reduction of competition towards a more collaborative, niche-based relationship between similar providers. Each group would have its role in the whole that complements that of the others. If groups are not in competition, there is no problem in sharing information, best practice, and giving mutual assistance.
The later section on ICT-based tools considers ways of furthering these goals. This will include means of easily setting up groups with a cooperative economic function based on local currencies or fully generalised exchange, and ways of furthering trust through discussion, shared experience and tools for building consensus.