Radical Consultation

Secession and Economic Regionalism by Thomas H. Greco, Jr.

A paper prepared for radcon III in September 2006and based upon an outline proposal made in June 2006 to the Second Vermont Republic, the Vermont Commons.

Thomas H. Greco, Jr. is a community and monetary economist, educator, writer, consultant, and former tenured college teacher 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). He can be reached via his website www.reinventingmoney.com, which contains a large volume of text and visual material related to these topics.

As imperial initiatives increasingly misfire and democratic institutions corrode in the face of centralized power and concentrated wealth, there is increasing talk of secession. But what is the point of secession if not to gain a greater measure of independence, self-determination, and community wellbeing, and to escape the debilitating effects of parasitic relationships with central government? That was the reason why the American colonies sought independence from the British Empire and that is the reason why latter day domestic colonies seek independence from the American Empire. It is in the nature of empires to dominate and exploit, and they are inclined to cling tenaciously to whichever hosts they have been able to conquer.

While it is true that artificial nation states are, in various places, disintegrating, the political approach to local and regional self-determination is, in my view, both futile and suicidal, particularly in America. A bloody war was fought during the nineteenth century in order to prevent the southern states from separating from the union. Barring a state of chaos induced by such as an unimaginable natural disaster or a global financial meltdown, why should anyone expect that it would be any different today?

But it does not require direct political confrontation to achieve the goals of regional independence and self-determination. There is another approach that is both peaceful and more likely to succeed. What is required is a deep understanding of the economic and financial mechanisms by which elites are able to dominate from the center. Once it is understood how empire manages to maintain its hold, it becomes possible to disengage in meaningful ways. The keystone in the arch of centralized power, the main element that enables the few to concentrate power and wealth at the expense of the many, is control of the exchange process through the present regime of money and banking.

I propose that groups like the Second Vermont Republic that seek to promote greater degrees of regional autonomy, community solidarity, and healthy local economies should make it a priority to organize a Regional Mutual Credit Clearing Association. That, more than anything else, has the potential to provide a large measure of regional autonomy and to stimulate regional economic, social, and political resurgence. As that association develops and grows it will provide the region with the strength and vitality that is necessary to resist domination by the center, and will provide a large measure of immunity from the national and global monetary and financial turbulence that threatens to intensify in the future. The Vermont association might be called VeRTEx, for “Vermont Regional Trade Exchange.”

The possibilities inherent in such a plan should not be judged by past experience with exchange alternatives. Just as a Boeing 747 bears little resemblance to the Wright Brothers’ Flyer, so too will VeRTEx be quite unlike any LETSystem or community currency with which people are familiar. VeRTEx will be engineered and built to carry heavy economic loads within the local bioregion. This will be a multi-phase project.

Phase I

The first phase would look to be quite conventional. It would begin by organizing solidarity groups that include ALL sectors of the constituent communities, particularly the locally owned and controlled businesses, municipal governments, the non-profit sector, and social entrepreneurs and activists. Out of this must come a general willingness to do the hard work necessary to move together toward regional economic self-sufficiency. The first major project would be the launching of a “buy-local” campaign in which the economic bases and business relationships within the region are clearly mapped. The administrative office would then assist businesses in finding local sources for the things they buy and local customers for the things they sell.

Phase II

But unlike conventional buy-local initiatives, this project would soon implement the second phase, which would be to provide an alternative means of payment – mutual credit clearing. Working capital in the form of conventional money is always 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 effect 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 (like 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 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. The value and usefulness of the system credits must be beyond doubt.

Like any network, this clearing system will become more valuable and useful as it continues to expand. The first fax machine was very expensive but useless. As more fax machines were deployed and connected, the fax became more valuable to ALL users. The same will happen with clearing networks, but it is essential that a network be properly designed and operated from the very start.

Phase III

The third phase of the program is the joint issuance by the members of the clearing association of credits into the general community. 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 there is a sound regional currency based on the productive capacity of the region’s leading enterprises 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 from the machinations of the financial and monetary regime that is operated to serve some else’s agenda.

The externalization of credits from the clearing association can be achieved using any of several available devices. They may take the form of paper notes, coupons, or certificates or they might be placed on stored value cards, like the gift cards that are so common and popular these days, or they could manifest as credits in accounts that reside on a central server that would be accessed by use of a debit card.

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 eventual necessity will be the definition and use of an independent value measure and unit of account. Credit units originally defined as being equivalent to the dominant political currency unit, like dollars, pounds, yen, etc., will shift over to a value unit that will not suffer the inflationary effects of mismanaged 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 will reach critical mass within a short period of time. But each such initiative needs a local champion who is passionate about the project and willing to dedicate themselves to its implementation and success.

July 14, 2006