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4 - Launching the Club de Trueque
- Georgina M. Gomez
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- Argentina's Parallel Currency
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- Pickering & Chatto
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- 05 December 2014, pp 61-80
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Summary
The Club de Trueque appears as a pioneering complementary scheme to make an income in a period of economic hardship. The notion of a group of neighbours making their own money to exchange commodities in a suburb of Buenos Aires sounds extraordinary. However, the CT was the final outcome of a series of small innovations achieved by trial and error. The process included considerable hesitation and frustration on the part of the organizers.
This chapter looks at the CT as an example of a social network that made its own market institutions to exchange goods and services. The monetization of their system of payments with scrip was part of that construction. The CT is hence presented as a scheme that combined small innovations with overall continuity in the line of Argentine history.
All over the world market institutions are being organized as clubs to trade an endless variety of commodities, from new financial instruments in New York to maize and potatoes in the Andes to unwanted Christmas presents through Internet auction sites. Complementary currency systems, as presented in Chapter 2, are another example of these organizational efforts. The owners of the commodities search for an institutional infrastructure where their goods can change hands, and in circumstances when it does not exist, agents can elaborate it. Those fit in the category of designed institutions. Markets are defined as a mode of coordination under scarcity in which transactions are mediated by prices over which buyers and sellers compete and reach agreements.
The Social Organization of Exchange
Modern societies are characterized as market societies, with monetarized exchange of goods and services dominating circulation and organizing the social order. Markets are a mode of coordination, in the sense that they present relatively stable relationships of otherwise disparate activities or events. Coordination means that tasks and efforts are made compatible, while bottlenecks and other disjunctures are eliminated. Agencies are ordered, balanced, brought to equilibrium.
Works Cited
- Georgina M. Gomez
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- Argentina's Parallel Currency
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- Pickering & Chatto
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- 05 December 2014, pp 227-246
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Argentina's Parallel Currency
- The Economy of the Poor
- Georgina M. Gomez
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- Pickering & Chatto
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- 05 December 2014
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The story of the Red de Trueque in Argentina (RT) exposes the problems of creating a grassroots market system parallel and complementary to the official economy. The RT was launched in 1995 by a group of environmentalists who exchanged goods and services at their own 'market' using a system of mutual credit. The group grew and they printed fiat money to facilitate exchange. The scheme was rapidly replicated across Argentina as the country's official economy faced meltdown. At its peak, the RT had 2.5 million participants and 4,700 marketplaces. However, although the organisers set codes of conduct and bodies to enforce them, it was impossible to deal with such a large self-regulated market and it collapsed to about a tenth of its peak size in a matter of months.
This is the first book in English to analyse the rise and fall of RT. Gomez advances institutional theory by exploring how structural reforms disrupt institutions, here resulting in segments of unstable and uncertain economic action within the social structure. She identifies rules of governance and sustainability for institutional settings in which compliance is voluntary and state regulation is minimal. Finally, Gomez conceptualizes the economy of the poor and disenfranchised as an economic area driven by the need to survive, thus structured by specific institutions different to those guiding the economic action of the non-poor.
List of Figures
- Georgina M. Gomez
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- Argentina's Parallel Currency
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- Pickering & Chatto
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- 05 December 2014, pp ix-x
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3 - The Political and Economic Context in Argentina
- Georgina M. Gomez
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- Argentina's Parallel Currency
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- Pickering & Chatto
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- 05 December 2014, pp 35-60
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Summary
A wave of structural reform or adjustment programmes (SAPs) was implemented throughout the developing world during the 1990s, inspired by the neoliberal view of how the economy should work. In the perception that institutions guiding economic agents’ behaviour were counter-productive to the ways in which the neoliberal governments envisioned the economy should function, institutions became the target of SAPs. Institutions were earlier defined as rules of action, following Hodgson. The objective of the reforms was to improve the overall efficiency of the economy by changing the rules of production and market exchange that organized it. The focus was on correcting the distortions caused by ‘excessive’ regulation, mainly the state's but also those resulting of social practice. Policies aimed at eliminating, reconfiguring or replacing the old institutions, seen as inefficient, by new ones. It was assumed agents would adapt their behaviour as the government advanced in the reforms.
However, the institutions subject to reform were part of the social structure, in the sense that they organized social life around rather stable patterns or behaviour. The adaptation of agents’ actions was not as direct as initially believed. This chapter coins the term ‘institutional gaps’ to address the phenomenon that occurs in the institutional structure during the period of time until economic agents adapt their behaviour to the reformed or new institutions. Old habits, routines, stable patterns of behaviour and expectations no longer match the reality of an economic structure modified by policy makers. While agents struggle to understand the new institutions, their resources are redundant or underutilized. Although this is often regarded as a short-term problem, it can actually persist for some time and even become permanent.
The depth and speed of the reforms are critical dimensions affecting agents’ adaptation to the reformed structure, as well as their agreement with or resistance to the policies. All in all, institutional change resembles a ‘bricolage process’, the mixing of this and that, of the old and the new. The construction of the new concept of institutional gaps represents an effort to take a meso-level look at the effects of macroeconomic reform, which in turn feeds back on the macro level.
CONTENTS
- Georgina M. Gomez
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- Argentina's Parallel Currency
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- 05 December 2014, pp vii-viii
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7 - Smaller Scale Trueque
- Georgina M. Gomez
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- Argentina's Parallel Currency
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- 05 December 2014, pp 133-154
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Summary
The collapse of the Redes de Trueque in the second half of 2002 and the first half of 2003 was like a big-bang, to the point that some observers announced the Trueque was dead. However, it was far from dead. The CT just became much smaller, of a scale comparable to other experiences of CCS around the world. They also changed in various ways.
In the years of exponential growth, CT had mostly lost the connection to their local communities and participants could come from quite far. After its decline in 2002–3, the coordinators and the most committed participants in each CT got to make critical choices again. The most pressing decision was whether to keep the node open and, in that case, under what conditions. That is, whether to operate independently or articulate to a network with other nearby CT. In 2004 the surviving nodes inaugurated a new stage in their development, one of empowerment of the coordinator and reconnection to the local level. With a smaller scale, the local context and the non-economic motivations for continuing with the Trueque regained significance.
CCS are an institution that localizes economic activity, while at the same transforming the quality of the exchanges. In the last two decades, a few hundred regions, localities and communities in both the developed and the developing world have created community currency systems in an attempt to increase the control over their resources. Their purpose is not to disconnect from the national economy, but to complement and adjust to it.
This chapter discusses four rationales for the creation of CCS to study the motivations of CT to continue after 2004. The first discussion is to what extent seigniorage constitutes an attractive income for the leaders of the Trueque. The second one is that Trueque changed the qualitative characteristics of exchange, embedding transactions in social relations which go beyond income generation. The third one is that it protects the local economy and stabilizes it through the national business cycle. The last one is that it provides households an extra opportunity to diversify their sources of income. Monetary networks and complementary currency systems are used as synonyms in this chapter.
1 - Economic Life as an Institutional Process
- Georgina M. Gomez
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- Argentina's Parallel Currency
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- Pickering & Chatto
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- 05 December 2014, pp 1-20
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Summary
In ‘The Lottery in Babylon’, the Argentine writer Jorge Luis Borges describes a world in which nobody has a fixed position in society.
Like all men in Babylon, I have been proconsul; like all, a slave. I have also known omnipotence, opprobrium, imprisonment. I owe this almost atrocious variety to an institution which other republics do not know or which operates in them in an imperfect and secret manner: the Lottery. I have not looked into its history. I come from a dizzy land where the lottery is the basis of reality.
In the story, while the Lottery started out like any typical lottery, it evolved into one which not only gives prizes to the winners, but also inflicts consequences on the losers. Further evolution increased its complexity; the Lottery Company has total power and everyone participates. If fortune smiles on the player, he or she can win promotion into the councils of authority. On the other hand, if the player makes a bad choice, different kinds of infamy follow. The Lottery Company dictates all aspects of everyone's life. There are various conjectures on how it started:
Some said the Company had not existed for centuries and that the sacred disorder of our lives is purely hereditary, traditional. Another judges it eternal and teaches that it will last until the last night. Babylon is nothing else than an infinite game of chance.
For most readers of ‘The Lottery in Babylon’, such an uncertain social life seems atrocious. While there is a structure and an order in that society, they are quite unbearable for the majority of people in the world. Still, in the 1990s life in Argentina was a microcosm of that in Borges’ Babylon. Reforms inspired by the neoliberal policies of the government established the ‘capitalist market’ as the basis of reality. The state retreated, giving comprehensive powers to ‘the Market’, in the belief that it would create a powerful and efficient economy. The government had enough support at that point to impose the reforms. The goal was to unleash ‘market forces’, but no one questioned how the market started, who was behind it, and what its limits should be, even though it affected everyone's lives.
Frontmatter
- Georgina M. Gomez
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- Argentina's Parallel Currency
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- Pickering & Chatto
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- 05 December 2014, pp i-vi
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5 - From Club de Trueque to Network
- Georgina M. Gomez
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- Argentina's Parallel Currency
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- Pickering & Chatto
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- 05 December 2014, pp 81-106
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Summary
While the first Club de Trueque was basically another case of social networks making market institutions, the second stage of the evolution of the Redes de Trueque in Argentina was undoubtedly unique. During the period between 1996 and 2002, the RT grew more than any other CCS in terms of scale, scope, regulation and geographical coverage. First dozens and then hundreds of CT emerged across the country, each one with their own rules and currencies but all integrated in a single network with a common regulatory body. This type of organization was unseen in the history of complementary currencies.
Increase in scale and scope of markets implies a transition from personal transactions to impersonal exchange. Commerce becomes more complex, giving birth to uncertainty and rising costs of trade generically known as transaction costs. The growth from personal to impersonal exchange demands more sophisticated institutions to reduce uncertainty and complexity. It implies a challenge on the efficiency of the system, its distribution of power and the inter-personal social relations on which it relies. Efficiency is defined as the minimization of waste, which includes costs of all types.
The analysis in this chapter starts from a small market, as the Club de Trueque was in the beginning. Transactions were embedded in a network where all traders knew and trusted each other and personal contact was enough to regulate economic action. However, as the amount of participants and the complexity of the exchanges increased, clearer and more transparent rules on an impersonal basis were needed. The making of those institutions demanded further innovations and intricate negotiations between the original organizers, the new leaders and the plain participants. How did this process take place? What drove the emergence of institutions of impersonal exchange? The word ‘Trueque’ is used henceforth to denote an economic activity, whereas RT addresses an organizational structure.
Costs and Benefits of Expanding the Market
Specialization and division of labour have made possible improved productivity arising from technological change, better resource allocation and specialized production, the key underlying features of modern market economies.
Notes
- Georgina M. Gomez
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- Argentina's Parallel Currency
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- 05 December 2014, pp 199-226
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6 - Governance of the Networks
- Georgina M. Gomez
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- Argentina's Parallel Currency
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- Pickering & Chatto
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- 05 December 2014, pp 107-132
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The Redes de Trueque were sustained by civil society organizations that created institutions in a process of trial and error. They structured several rules and organizations, even complementary currency systems, in an effort to make impersonal exchange less uncertain and risky. But there was an underlying issue of governance throughout the process. One conflict was over who ruled the Trueque, already discussed in Chapter 5. There were equally important questions on the legitimacy, representativeness and accountability of the leaders. Why would people abide by the rules defined by and for the RT? Some of the RT leaders referred to principles like solidarity, common values and ideology, but these could neither be assumed nor checked. After 2001, when the once articulated Trueque network broke into several Redes de Trueque, each group sought to define its own institutions.
This chapter discusses the rules of governance and sustainability of the Trueque and their complementary currency systems. It covers the period of the bubble of the Trueque (2001 to 2003). It includes the worst economic crisis ever experienced in Argentine history, with a fall in GDP of 10.9 per cent in 2002 alone and a vigorous economic recovery with growth rates around 9 per cent for the years that followed (2003–6). It also covers the months when the Trueque achieved its maximum scale of 2.5 million participants (first half of 2002) and then plummeted to 250,000 members (second half of 2003). The chapter argues that the governance systems framed by the emerging networks were of various degrees of sustainability, which explains their differential resistance to the decline.
In the prologue to States and Markets, Susan Strange tells the story of a shipwreck and what happens to three groups of lucky people that survive in lifeboats. The first of the three boats has an officer aboard who keeps a cool head and guides his group to safety on a deserted island. He then organizes the building of a shelter, collection of food and water, and a rough signal system to attract the attention of any passing ships. Gradually, the survivors get used to following his instructions and they do pretty well.
9 - Conclusions
- Georgina M. Gomez
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- Argentina's Parallel Currency
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- Pickering & Chatto
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- 05 December 2014, pp 181-198
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This study showed that the Trueque had a strong anti-cyclical component but other factors are necessary to explain its emergence and growth. In macroeconomic terms, there was no reason why the economic activity in the Trueque could not have taken place in the regular economy. In theory, there was no need for a special currency, since the resources (physical and intangible) were there.
So why did the production of the Trueque not occur in the regular economy? The difference lay in the institutions that governed the ‘active’ and the ‘idle’ (unemployed or not economically active) parts of the economy. The Trueque coordinated actors and resources into production and exchange in ways that the regular economy could not. It filled the institutional gaps left by the missing mediating mechanisms in the regular economy. Therefore it was not lack of resources that deepened the crisis in the Argentine economy and kept its agents unemployed, but the lack of institutions by which they could be coordinated. There was no impediment in the static conditions (that is, the resources available) but in the dynamic ones (coordination mechanisms). In short, lack of critical resources and downturns of the business cycle are not the only causes of unemployment. The lack of appropriate institutions to coordinate the use of resources also needs to be examined.
Following this reasoning, the participation of the disenfranchised middle class emerges as critical to the take-off of the Trueque. Participation in the regular market was not available to the new poor, who had no jobs and no other income. On the other hand, transferring goods and services as gifts or charity or within a reciprocity network, as often observed among the structural poor, was not an acceptable solution in a middle-class context. The Trueque took elements of both and adapted them in the club market: it mixed the institutions of the market with the social cohesion of a closed network. What would have been a gift became a commodity to exchange, though for community money, not regular money. Transfers were facilitated by the non-state money of those who accepted it by becoming traders in the club market.
2 - Perspectives on Complementary Currency Systems
- Georgina M. Gomez
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- Argentina's Parallel Currency
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- Pickering & Chatto
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- 05 December 2014, pp 21-34
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The Red de Trueque in Argentina is one of the many cases of resurgence of non-state monetary systems. Such systems are known with different names in different countries: community or complementary currency systems (CCS), moneda sociale in Italy, local exchange and trading systems in the UK, Canada and the USA, and monnaies parallèles in France. This section reviews the literature on community, complementary or local currency systems.
According to the broadly accepted definition of Ekins and Max-Neef CCS are a self-regulating economic network in which members issue and manage their own money in relation to the needs of a bounded community. Lee refines the concept to a local system of production, multilateral exchange and consumption articulated through single-purpose money independent of, but often related to, the prevailing national currency. The CCS is a complementary economy, fully not-for-profit and operates at the community or inter-household level. In practical terms, it functions as a local association whose members offer and request goods and services priced in a local unit of exchange and then trade those commodities with other participants.
A CCS is created bottom-up by communities and it combines income and identity generation. Other authors (for example, Blanc) emphasize that they are an essentially local phenomenon and affect the local economy, in contrast to official money circulating in a whole country and abroad. The purpose is normally not to disconnect from the national monetary system, but to complement it, adjust it or adapt it. Although they have different names, such systems all share the characteristic of using an interest-free means of payment created by a non-state civil society actor.
As they spread across the world, community currencies adapt to local differences and legal frameworks in a variety of ways. Some communities issue notes or cheques to cancel payments which are accepted by another member. Others fix a unit of value, expressed in hours of work, notwithstanding the type of work offered. The British LETS functions mainly on the basis of an accountancy system: people who provide a good or service receive a ‘credit’ in their accounts which they later use to buy from other community members; everything is managed by a central administrator and a computer.
Index
- Georgina M. Gomez
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- Argentina's Parallel Currency
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- 05 December 2014, pp 247-254
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8 - Replacing Money for Economic Development
- Georgina M. Gomez
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- Argentina's Parallel Currency
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- Pickering & Chatto
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- 05 December 2014, pp 155-180
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The circulation of complementary means of payment is usually restricted to a locality or region. The attempts to extend the crédito massively across Argentina, as PAR did, did not work out in the long run. The restriction of the créditos to the boundaries of a locality or region achieved better results and in the cases in which the complementary currency mediated a significant proportion of the local exchange, the Trueque became a key institution to reduce poverty and promote local economic development. This chapter discusses in detail the rationale of CCS as a tool to support the local economy.
The role of the Trueque as an instrument to promote local economic development will be studied by delving again into the micro-world of the nodes after 2004. The data on which it is based was collected during the second quarter of 2004. The survey received 386 effective responses, but only the 140 responses of the participants in the 4 CT of the ZO visited during fieldwork will be reported. The ZO was chosen because its explicit emphasis on promoting local economic development. The cases of ZO and of Gente Linda are also reported here because of their exceptional concern for promoting the regional economy. In no way do these two networks constitute average cases, but they are examples of ways in which CCS can have an active role in promoting the local economy.
There has been a ‘rediscovery’ in the last decade that in regions where there are strong institutions, proximity is a crucial factor in improving economic performance. This is the central argument of the Institutional Regionalism perspective according to which economic performance depends not only on positive macroeconomic conditions but also on local institutions that channel and promote selective cooperation between agglomerated actors. It claims that ties of proximity enhance cooperation and learning, integration of local public goods and other assets that have a direct impact on a region's competitive potential. To quote MacLeod & Goodwin, ‘the capacity to territorially embed global processes in place is now conditional upon a plethora of social, cultural and institutional forms and supports’ (original emphasis).