After the Crash: A Blueprint for a Community-Based Economy

workingtogetherIrish Economist Richard Douthwaite, who I have written about twice before, has done (nine years ago) something I had planned to do: Write a book about how to create a bottom-up community-based economy. What’s more, he’s now put it on the web for free, with updates to 2004.

In his previous book, The Growth Illusion, Douthwaite laid out four qualities of a sustainable economic system:

  • the need to end or reverse human population increase
  • acceptance of a responsibility to leave as healthy an environment with as many resources for future generations, as we inherited from past generations
  • valuation of other people’s interest equally with our own
  • acceptance that some things are priceless’ and hence off-limits to economic development — they must not be sold, bartered, destroyed or used up regardless of the economic ‘value’ this might bring

He then went on to describe such a sustainable system at a high level. Here’s his summary:

The new economy must be built bottom-up. It starts with sustainable local economies that would produce the essentials of life from the resources in their areas and thus be largely self-sufficient and independent of each other. This is not to say that they would not trade. They would, but never out of necessity. A local economy that needs to trade is an indication that it is, or will become in time, unsustainable…A greater diversity of diet, clothing, building materials and lifestyles [would result] just as in the natural world where species have their own ecological niches and avoid competing directly. Regional economies would develop by finding good ways to use the resources of their immediate areas to meet the needs of local people rather than the demands of uniform markets far away. New cuisines and vernacular architectures would develop and new cultures would be born, and remain sustainable…provided its population did not exceed its carrying capacity.

In Short Circuit, he’s laid out a blueprint for this new economy. One of the breakthrough ideas (to me anyway) comes right in the Preface, where he says:

Admittedly, most groups’ efforts to develop their local economies are still on the conventional ‘what can we supply to outside markets?’ lines but a certain ‘which of our needs can we start satisfying from our own district’s resources?’ radicalism is creeping in.

As obvious as this is, it had never occurred to me that, beyond creating community self-sufficiency in energy, food (as much as climate permits), and health/biotech, the way to create a viable community is to focus on meeting that community’s own needs, not the needs of the world at large. That means community-based education, utilities, clothing and furniture, manufacture, entertainment and recreation, service of transportation and computer technology, home renovation and repair, social and financial services, and a few other things

The first two chapters of the book reiterate the failures of our unsustainable, ‘globalized’ economy. He tells the story of an Irish island that was once self-sufficient, but which now produces almost nothing and depends substantially on welfare from Dublin. Douthwaite’s summary of these chapters:

The world economy has changed its nature. Since the early 1970s it has become highly unstable and has favoured the rich over the poor. Unfortunately, even if politicians accepted this, there would be very little they could do. In the world economy, only a very limited range of activities is commercially feasible in most communities because of the intensity of competition from outside. We must therefore build independent, parallel economies if we are to fill more of our needs for ourselves.

The next chapters describe how such independent, parallel economies could be built, focusing on:

  • The need for a local, independent, time-based currency for each community (he shows that this stimulates and more fairly values local enterprise, and reduces dependency on and vulnerability to economic activities outside the community, but says existing LETS systems need serious reform through experimentation);
  • The need for a local credit union that invests money from those in the community, in the community, and that insures community members, unintermediated by expensive financial agents, and provides a social dividend to the community (there is a fascinating discussion in the book that concludes the charging of interest on loans is counterproductive, inflationary and unsustainable, and proposes instead that the community itself decide who to loan to, interest free);
  • The need for local, renewable energy co-ops that preclude the need for communities to rely on outside power generation and foreign and non-renewable energy sources, coupled with aggressive community-based conservation programs;
  • The need for community-based, organic farms and locally-owned shops to replace industrial agriculture and massive transportation, centralized buying and warehousing of foods (Douthwaite refers to a 1990 book Shattering: Food, Politics and the Loss of Genetic Diversity by Cary Fowler & Pat Mooney, which explains how the reduction in the number of varietals of all foodstuffs has made our food supply much more vulnerable to plant and animal epidemics, and bioterrorism — has anyone read this book?)

The opportunity for peer-to-peer lending is certainly enabled by the Internet, and has recently been the subject of a bold experiment (thanks to Lavonne at Born Famous for this link) called Kiva, that builds on commercial Grameen-style microlending experiments by allowing people to lend money to those in struggling nations and track the value produced by that investment through online newsletters. These loans bear no interest but have a very high repayment record. For those demanding a better return than this, and wanting to keep their investment in their own community, an increasing number of businesses are seeking funds online and offering attractive interest rates. For example, this socially and environmentally friendly Toronto-based business is looking for expansion funds. The risks are relatively high, but if I’m going to take a financial risk I’d rather take it with a business that’s trying to make the world better, is located in or near my own community, and which I can personally visit and be welcomed at beyond the annual general meeting.

I have argued in Natural Enterprise that with organic financing, lending may not even be necessary, except for large community-wide infrastructure (like wind turbines), which financing can be considered a ‘prepayment’ by community-members rather than a loan.

I’d like to see Douthwaite expand the book to deal with other core economic activities and how they would work in a community-based economy: specifically education, health care, clothing manufacture and construction & renovation. I don’t see any of them as especially problematic.

Douthwaite’s conclusion is that a competition-based ‘market economy’ simply would not work as a community-based system. For a start, a completely different set of measurements, less quantitative and more oriented to well-being and equality than to profit and growth, would be required. The idea that the ‘profits’ of community enterprises belong to the whole community and should be reinvested in accordance with the whole community’s consensus will take some getting used to. So will the development and acceptance of community operating principles based on the collective interest, rather than self-interest. The networking of small enterprises to replace single, large, hierarchical enterprises, on the other hand, will likely be easier to accept, as the wisdom of this type of operation is already gathering broad acceptance. So will the idea of democratically choosing who to form community with and make a living with, instead of having to accept one’s neighbours and employers as an economic necessity — though it will take us a lot of practice to learn to choose our community-mates well.

The conclusion of Short Circuit profiles the town of Maleny, Australia, which for 25 years has been trying out much of the community-based economy model that Douthwaite’s book espouses, mostly successfully, though the learning experience, and experiment, continues.

If Douthwaite and other economists are correct, and the massively dysfunctional so-called ‘market’ economy is doomed, we need a lot more such experiments, a renaissance of the commons, an understanding of collective processes, and a great variety of models, from which we can learn how to replace it when it collapses.

(The drawing above, entitled ‘Working Together’, by Sioux artist Ioyan Mani, is one of a stunning collection of drawings available for viewing and purchase here)

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7 Responses to After the Crash: A Blueprint for a Community-Based Economy

  1. Indigo says:

    You probably recall a couple years back when I was writing on my blog about the intentional community formation group I was a part of. It managed to help its members clarify our intentions more, but mostly what we found was that we had such different visions, that there wasn’t enough cohesiveness to get anything really going. We had to work on developing about 3 different communities to satisfy the different goals and there wasn’t enough energy for that. Even once you agree on the value of community and self-sufficiency and so on, it gets hard to pick out a community of like-minds. What if you agree on energy resources but not on evolution versus creationism in the schools? and so on. It takes a huge pool of people you are drawing from to come up with enough to populate the diverse communities that come together with enough cohesiveness to live and work together and commit to each other in the long run.The issue of competition from outside the community is a key element too. If others are exploiting the land and laborers they will always be able to produce products that come with a lower dollar cost, though the total cost is much higher. Expecting masses of people to day by day elect to pay more when other options are readily available is asking too much. But if you mostly earn on money that is good within your community, you get a little extra help with the self-discipline to live by your values each day. hey, every bit of help makes a difference.Nice post. thanks.

  2. Chris says:

    This is all gorgeous Dave. The various schemes you’ve come up with that are completely against human nature. Since one of your main “theses” about humans is that they are a minor quirk in the universe, why do you continuously preach on how to change these humans from destroying gaia. I mean, because we are from gaia and just some dumb version of an animal from gaia aren’t we to be left alone just like the mushrooms and the squirrels in your backyard and whatever species you feel sorry for at the moment?

  3. Do you have a link to the Douthwaite ebook mentioned in the first paragraph of the post?

  4. medaille says:

    I like this string of posts that you’ve been running as its coaligned with what I’ve been thinking about a lot lately. I found a couple of points really interesting.1: acceptance of a responsibility to leave as healthy an environment with as many resources for future generations, as we inherited from past generations2: valuation of other people’s interest equally with our own3: acceptance that some things are priceless’ and hence off-limits to economic development — they must not be sold, bartered, destroyed or used up regardless of the economic ‘value’ this might bringAll three of these can be changed fairly easy if the infrastructure of the community is set up properly to promote decisions with similar patterns as those above. The primary way to achieve this is to reduce the infrastructural pushes for competition and selfishness. This necessitates a way of regulating resources to prevent haves and have-nots from forming to a large extent.[Quote}The need for a local, independent, time-based currency for each community (he shows that this stimulates and more fairly values local enterprise, and reduces dependency on and vulnerability to economic activities outside the community, but says existing LETS systems need serious reform through experimentation);This is going to be exactly the same as what we have now. It is still fundamentally based on Social Darwinism and will reinforce competitive patterns which help reinforce selfishness. While it would be possible to create socially responsible cultures in a population and still have competetion, you would be struggling uphill. A better solution would be have a co-op or a local government which was self-managed, which distributed resources to individuals based on their requests. The management group would be resonsible for allocating resources in a manner that balances two needs. 1) The big need is that it tries to maximize the good done for the community. 2) It satisfies the individuals needs by ensuring ample access to the resources and prevents corrupt usage of resources.A resources allocation of this method would reinforce the patterns of small self-sacrifices for the good of the greater community. This would help in promoting socially responsible behavior, because it is no longer important to worry about the self, because you have an entire community also worrying about your self. This puts the person in a mindset to weigh the pros and cons for the community in all aspects and not just in monetary terms.I agree that it’s vital to keep the local economy (as determined by resources not time or money or whatever) chugging along and not to be a heavy trade based economy.If you are going to continue down this path for developing a community, I would suggest that its essential that you read Ivan Illich’s “Tools for Conviviality.” It offers a lot of insight into the commercial processes and points out the innate flaws in the industrial process which need to be considered for a healthy community.

  5. Dave Pollard says:

    Indigo: I agree that getting cohesiveness and durability of self-selected communities is a big challenge. It’s one of the reasons I am so intrigued about Social Networking, which I believe will ultimately make this process easier. It’s a matter of self-managing expectations and balancing ideals with what’s real. That has a lot to do with love, which allows us to get past petty differences. Without love, self-selected communities won’t work.Tyson: Oops, wonder where I lost that link? It’s here: The idea that the currency is time-based (i.e. an hour of everyone’s time is worth the same) is designed to alleviate that competition. Your idea sounds intriguing, but it also metes out power, and where there is power there is opportunity for corruption and inequity. And I second your suggestion that readers check out Illich for more ideas along this line.

  6. kerry says:

    I haven’t read the book, but I’ve been trying to build the idea of these local communities online with linked blogs at One of the links to Ukuvuna – permaculture for sustainable communities – gives me a lot of hope.

  7. Jan Steinman says:

    You write “where there is power there is opportunity for corruption and inequity.” This may be true, but I am wary of “word police” who caution us about “power,” “judgement,” “control,” et. al.These things are bad when they are used badly, without respect for all involved. Power is a wonderful tool when wielded equitably! The Fall “Communities Magazine” has a wonderful essay on power and leadership in community.

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