<nettime> A Future Parallel Economy - Keith Hudson

[Pit Schultz <pit@contrib.de>]

[this connects to both the work thread and the alternative 
economy debate after metaforumIII last year in Budapest. 
do we have - in fact - almost a non-cash economy on the net? even
if communitarians like to bind it to a back-to-the-village-movement
with all its reactionary aspects and reference to failed hippy-camps, 
its worth to seek for the few radical ideas in a sea of digital
mediocracy. sure the state will not disappear silently. public
institutions could adapt the idea of a shadow economy and support it,
instead of producing unemployment as a luxurious stigma and macjobs-
slavery as the alternative. imagine instead, the state would solidarize
with its citizens against global capital. dangerous - but the idea
that there exist functioning economies partly disconnected from
the flow of money is as simple as provocative. second, money is
based on trust into money, its a circular logic, and it tends 
to fall into pyramid schemes of centralisation (see saskia sassens
analysis of the global city).
the ammount of money made with money in an unbound neoliberal
financial market, needs a growing industry of enforcing trust:
corporate propaganda, prisons, private police, drug war, wired
ideology. even if the following sounds a bit crude we could
open up our eyes between all the millenial hystories for
'stating the obvious' and imagine the possible.
 /pit  ** and now the candies]


A Future Parallel Economy

ABSTRACT

In 20/30 years' time, it is highly likely that all the basic goods and
hi-tech services that anybody has the waking time and inclination to enjoy,
will be almost completely automated required small numbers of high-tech
people. Unless the latter buy far more than they can personally use they
will be unable to sustain optimum production in the normal cash economy.
They can hardly be expected to give surplus requirements away for nothing,
but they might do so in exchange for other more personal services
(community, recreational, craft-training, social, environmental,
educational) which could be supplied by a non-cash economy. It is highly
likely that a dual or parallel economy will result sooner or later. A cash
economy for the production of goods and high-tech services using highly
specialised and highly-paid people; and a noncash LETs-type economy for
personal services using people of all manner and levels of skills and
abilities. These product could only be transacted in a fair and sustainable
way within small communities in personal trust builds up . Because of lack
of need, tradition and experience hitherto, such communities will be rare
birds to start with and would probably need unusual circumstances and
adventitious blends of people and skills (within both economies) in order to
be successful. But once started, lessons learned, they have a chance of
spreading throughout advanced countries.

ESSAY

"There is no such thing as the nation-state any longer. It is becoming just
like England in the time of the War of the Roses. There are competing
leagues of power within each nation. We now have tribalism rather than
nationality. Our law-makers are shadowy bodies rather than sovereign
entities, and there are activities of all sorts which are simply outside the
law. The writ of the Central State has already ceased to run in parts of
advanced countries and, in this respect, we are now returning to the Middle
Ages."

(Norman Stone, Professor of History, Oxford University, in The New Middle
Ages, BBC2, 28 November 1994)

"Since the 18th century, we in continental Europe have had a vision of
historical optimism. This is going to be wiped out. Despair and indifference
are already taking over. We are already seeing the emergence of 'grey zones'
in which any kind of power does not exist any more, rather like the Middle
Ages with its vast abandoned areas. For three centuries, we have been
establishing the State to create order. Today, we are seeing areas
developing without any kind of order or any kind of State." (Alain Minc, Le
Nouveau Moyen Age, in The New Middle Ages, BBC2, 28 November 1994)

The Parallel Economy

In this essay it is envisaged that the economy of the post-industrial era
will be a hybrid one in which a cash economy and a non-cash economy exist
side by side. Each of these economic systems will have its own circular flow
of activities and payments but, to a significant extent, they will also
interact with each other in the exchange of goods and services that each is
efficient at supplying. The background to this state of affairs is that
full-time conventional employment in the advanced countries will continue to
decline and that governments will be increasingly unable to meet the level
of payments to the unemployed, the sick and the old that we have become used
to in the last two or three decades. In the years immediately ahead, we will
experience what Norman Stone and Alain Minc have called "The New Middle
Ages", a period of chaos (and extreme distress for many) but that, out of
this, will inevitably grow a more permanent and sustainable non-growth
global economy. It will also be suggested that the new parallel economy will
only be able to evolve successfully within a village or small community
context. The reasons for this will be sketched out more fully later but, for
now, we may note that such a village will be entirely self-supporting. Cash
inputs to the village will come from a minority of its inhabitants who
supply their skills to high-tech firms (mainly multinational companies) and
the non-cash inputs (services) will come from the majority of the villagers.

The Grey Economy

The Decline of Public Welfare

Looking at (a) in slightly more detail for a moment, we are not suggesting
that there is, or will be, any sort of overt large-scale conspiracy on the
part of multinationals to defraud government taxation systems. The grey
economy, as far as multinationals are involved, will grow as an almost
accidental byproduct of the complexity and volatility of their operations as
they strive to survive in an increasingly competitive world. Increasingly,
their financial accounts will become unravellable by government departments
within sensible periods of time. It has also become very clear in the last
decade or so that the net profits of the largest multinationals can
fluctuate enormously between healthy profits one year and huge losses the
next because strategic decisions are becoming increasingly sensitive to
subtle changes in conditions. The result of all this is that the overall
profits of multinationals, on which the taxation of many governments are
based, are edging lower and lower from year to year. (This probably
corresponds to the post-war phenomenon of a steady decline in the annual GDP
growth in all advanced countries, not yet understood by economists.) Thus,
government taxation based on company profits, will also tend towards zero in
the coming decades. As far as (b) is concerned, the steadily declining
number of individuals in well-paid jobs will also reduce government
taxation. When recessions occur, "middle-skill" jobs decline due to
automation and rationalisation, but, during periods of economic growth, the
new jobs tend to be either low-paid low-skill jobs (so-called McJobs) or a
much smaller number of highly-paid high-skill jobs. The former, of course,
pay little (or no) tax, and the latter, although being highly taxed in
theory, usually have methods of reducing their full burden of taxation. The
vast middle-skill majority of jobs, on which the taxation of governments
have mainly depended, is declining steadily. The overall situation,
therefore, is of the multinationals displacing nation-states as the
economic, and thus political, powers of the world, and that governments will
be increasingly unable to supply the level of welfare services on which
large numbers of people have relied upon in the advanced countries. The
curtain is coming down on this era and a new, and more problematical one, is
starting.

The New Middle Ages

It is not to be supposed that multinational firms will be the only form of
commercial enterprise, nor that national governments will disappear
entirely. Multinational firms will be heavily concentrated in those sectors
producing mass quantities of resources, standardised goods or services for
which there will always be a large demand (e.g. electricity, insurance,
cars, TVs and their successors, basic food such as bread, etc) and hence
they will have a huge and predominant effect on the global economy. However,
many other national and international firms, of many different optimum sizes
will remain, as also a great many extremely small firms supplying goods and
services within small areas. What has also been a trend of great
significance in recent years is the enormous growth in short term contract
employment and subcontracting by small firms to much larger firms, usually
involving highly specialised skills. These skills are usually very expensive
and so the larger firms, including multinationals, find it convenient to
hire them as and when they are needed and not to take them on the payroll
permanently.

In recent years, we have already seen the decline of the economic and
political power of national governments, in rather the same way as the
powers of local governments declined decades ago in all advanced countries.
In the future, national governments will probably decline to something
equivalent to the English County Council or something less than the German
Laender or the American State. Even the future of national defence policies,
the sine qua non of the nation-state, is problematical for two reasons.
Firstly, because even quite small terrorist groups with brief-case sized
nuclear bombs will be able to hold national governments to ransom quite as
effectively as a "superpower" nation can do now at enormous expense with
their large airforces, aircraft carriers, attack helicopters and nuclear
submarines. Secondly, because it is highly likely that multinational firms
will also gain military capabilities (even now, the US government could not
start a ballistic war from silos without the assistance of technical crews
from large defence companies). However, multinationals will be very opposed
to large international wars because they might lose too much. Their
manufacturing assets are distributed in many different countries and some
would be destroyed by a major war. Politically, multinationals will have the
economic power and technical ability to neutralise the possibility of the
old-fashioned type of wars by dictatorships or nationalistic politicians. In
the meantime, and probably for a considerable period to come, we will have
complex and ever-shifting balances of power between all of sorts medium and
large economic and political players such as rising multinationals,
declining nation-states, federal and local governments, United Nations
agencies, OECD, trading blocs such as the EC, NAFTA, OPEC and APEC, etc, and
it will be a confused situation. This is the "New Middle Ages" into which we
have already entered as noted by Norman Stone in the opening quotation. We
foresee enormous suffering among large parts of the populations in the
advanced countries, particularly in the cities, as well as in the
under-developed countries. In fact, because of the internationalisation of
production facilities by multinational firms in an increasing number of
countries, the distinction between advanced and under-developed countries
will become increasingly blurred until it vanishes altogether in a few
decades. Economically, the economies of nation-states will become like Swiss
cheeses, full of holes of various sizes. In some countries the holes,
representing abandoned industries, lawless cities and dense areas of high
unemployment, will be very large; in others, there will be fewer and smaller
holes. But, essentially, all countries will have the same sorts of economies
and won't be able to be clearly identified as "advanced" or "undeveloped" or
"newly-industrialising" as we do today.

The Self-Sufficient Village

However, we foresee that appropriate small-scale economic systems will also
be able to develop within this complicated situation, and we can consider
self-sufficient villages as typical examples. For the time being, they will
be comparatively rare, living on the sufferance of effete governments rather
than be actively opposed by them. Ignoring for now the difficulties and
mistakes that will have been experienced on the way towards these
self-sufficient communities, let us imagine a village, of perhaps between
100 to 250 households, in which only about 30 to 100 people will be working
full-time for a cash income, in many cases for a multinational which has
operations over the whole globe. As staff or subcontractors, these villagers
will be working from home or perhaps a small office suite, supplying their
specialised skills through what is now known as the "information
superhighway". These individuals will be paid very high salaries or fees and
will be able to buy many more consumer goods than they have the personal
time or need to make use of. They will, in fact, do so for a very good
reason. They will be able to exchange their excess consumer goods for the
services and facilities supplied by the rest of the villagers. These will
include security of their person and property, health care, sanitation and
waste disposal, some home-grown fresh food, some electricity generation
perhaps, sports and other recreations, an attractive local ecology, child
care and nursery, primary and junior education for their children, property
maintenance, and several more. All these services can be supplied very
cheaply by the villagers but they would be very expensive if the richer
individuals moved elsewhere to more affluent housing developments having to
purchase all their services from commercial firms at the going rate. Most of
the villagers don't need cash, nor is there any way of getting hold of it
because the national government has long since been unable to supply it to
the unemployed, needy or old. They will, however, be able to supply almost
everything they need by exchanging services among themselves and by
receiving working capital (for equipment or materials) or consumer goods or
cash (for exceptional circumstances, such as specialised surgery in distant
hospitals) from the minority of villagers who are importing money from the
global economy in exchange for their specialised skills. The villagers (both
the "unemployed" and the fee and salary earners) will even be able to have
holidays simply by booking accommodation in other villages around the world
with which the village has reciprocal arrangements. Although most of the
fee-earning specialists will probably want to stay in regions in which they
were born, there is likely to be considerable competition between
neighbouring villages in order to retain their own high-earners and possibly
attract others. So each village will want to supply first class services,
offer excellent facilities and recreations, and will endeavour to maintain
and even re-create an attractive natural environment around itself. It will
probably not want to grow too large because all the evidence that's
available from anthropological and sociological sources as well as
organisational experience suggests that 500 inhabitants is probably about
the maximum optimum size for most "general purpose" villages. (Of course,
towns and cities will still exist when they have something very special to
offer by way of architectural or cultural attractions to tourists, but it is
unlikely that the very large cities, products of the Industrial Revolution,
will remain viable.) A village of about 250 households would probably be
able to supply all the basic services and recreational facilities that most
of the villagers will want, both the cashless ones and the income providers.
Most of the skill and service exchanges will take place between villagers
who have no cash at all. Transactions will have to balance out overall, of
course, and perceived to be fair or the system would break down. Some have
proposed some sort of accounting system (as in LETS schemes) in which
transactions are recorded for balancing purposes but this is still open to
abuse by malingerers or the deceitful. And then there's the problem of how
to build up enough "credits" to see one through reitrement and old age. The
only real protection against abuse or over-complication is the visibility of
the transactions as they occur daily among the villagers. Peer pressure
against malingerers or deceivers would be considerable and they would soon
be "outed" if they persisted (perhaps re-creating the Medieval charivari!).
In a situation in which individuals must co-operate or perish, then a fair
system of equality of transactions inevitably follows.* And, in the case of
an individual who has done his or her full share of work and
responsibilities over many years, the collective village memory would be
sufficient to ensure that they will be continued to be looked after in their
declining years. Governments, and by this we mean career politicians, civil
servants and their departments, would not be comfortable about the evolution
of these new social structures because they threaten to invalidate their
future. But governments are already becoming increasingly frangible under
all the new pressures from the new technologies and the multinational firms.
In an age of increasing unemployment and social mayhem, they will not be
able to do much about it all sorts of new social and economic enterprises,
particularly if they are based on modern communications. As for the
multinationals, they will be largely indifferent to these social
developments in the short to medium term because they will still be
expanding their operations for a considerable time to come. In particular,
their consumer base will be growing in the newly-industrialising countries.
However, when this phase slows down because of competition on the one hand
and fossil fuel constraints (availability and price) on the other, then they
will start to take an interest. Their future depends on mass production and
consumption of their goods. In later years, multinationals will be
increasingly interested in a parallel economy because it will mean that the
"over-purchasing" of their products by their staff and sub-contractors, even
if "given away" to others, will maintain sales. The fact that their mass
produced goods reaches the public via the specialists has the same effect as
if they were sold to the public individually. So, although it is in the
interests of multinational firms to cut costs by continuing to get rid of
direct workers in the coming years, it is very much in their interests to
pay generously, and perhaps increasingly so, for the relatively small number
of specialists that they will need. Of course, one unwritten assumption has
been present throughout this essay. This is that people do have a need for
people, for a community, for the convivial companionship that humans have
always had in tribes and villages. In the last few decades, we have all
become individualised by sophisticated marketing methods and the
availability of a wide variety of goods at every possible income level. This
hasn't worked. What we have now is a society racked by fear and insecurity.
We need to re-establish those community bonds which are part of our very
being.

Conclusion

The mini-systems that have been suggested here will grow in the interstices
of the present power blocs and we do not see them occurring widely for a
considerable time to come. There will also be a large number of failures
but, one by one, some projects with special initial circumstances and
combinations of skills and personalities will be able to survive and
succeed. When the factors for their success have been clearly understood and
new traditions established, then they will inevitably proliferate and spread
widely into the new political niche that is now opening up, just as a new
species does within the natural world. As described above, the economics of
such a self-sustaining village is relatively straightforward. There is no
reason why it should not succeed. It will be desirable for the individual as
well as the large multinational corporation. What will be difficult is
overcoming political intertia and also breaking the mental habits that have
been inculcated by the consumer era of the past few decades. But, already,
there are many interesting community experiments going on and it is only a
matter of time before the first success stories begin to be known.

ŠKeith Hudson December 1994 The Job Society, 6 Upper Camden Place, Bath BA1
5XH UK Tel: (01225) 312622 Fax: (01225) 447727 E-Mail: k.hudson@bbcnc.org.uk


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