APRIL 1989 - VOLUME 10 - NUMBER 4

A Public Service Economy

An Interview with Edgar S. Cahn

MULTINATIONAL MONITOR: How did your barter project get started? EDGAR S. CAHN: This is a crazy country. We let our social problems back up; we put people on the scrap heap in one way or another, and we have no way of putting people and needs together. We used to use money to put people and needs together. We used to pay the people to deal with the problems. And it is abundantly clear that for the foreseeable future there will not be the supply of either government or private money to address social problems of the magnitude we face. And so l began to ask myself, 'Why couldn't we create a new kind of money?" ...Money [is] just a meeting of exchange and store value--it [doesn't] have to be government-created. We have green stamps, we have municipal bonds, we have a whole variety of specialized negotiable instruments. We have frequent flyer coupons.... So I then began trying to think through what that [new] currency would require. And once I thought it through [I] began circulating a concept paper, trying to find out whether I had created any major theoretical fallacies. It all seemed to be so simple that ... something had to be wrong with it. And then having thought through the theoretical issues, [I] got it enacted into law, first in two states and the District of Columbia. I got the IRS to rule that it was tax-exempt and not barter in the conventional sense--in the commercial sense. ...[I]t ... was a little bit like a blood bank. You gave time helping someone else now, you got credit for that time in the bank. You or your family could spend those credits when you needed similar kinds of services down the line. It then moved to a different dimension. It started with the elderly, the well- elderly helping the frail-elderly. It moved from there to a different kind of exchange: .. .young people doing yard work, shopping, home repair, heavy lifting for the elderly and giving their credits to their grandparents. Or... the elderly doing day care for kids, for welfare families or welfare mothers, and in return, those families would be part of a drivers' pool evenings and weekends for the elderly. At that point it begins to look like a social service barter system. An intergenerational barter system. [Then] you added another feature, that you could transfer those credits to a 501 (c)(3) or a membership organization, so that people could pool their credits. All the members of a church could earn credits, give it to the church [and] the church could then take care of those members who were in need as they got sick or had problems. That begins to look like an insurance scheme, and a risk pool, where membership organizations engage in self-help. Then you begin to build an estate guarantee. So the question is, what happens if nobody is there, five years down the road? The state of Missouri was willing to say, if nobody is there, we'll honor the credit and we'll actually use our own money to go out on the market and buy those services for you. And Florida's law says something similar. Other laws don't say that, they say we'll back it up with preference for services. Given two people who equally need x kind of service, we'll give preference to those who have earned service credits. But they don't say we'll [make] an absolute commitment [to] buy those services. ...[There are] issues of price and exchange and how you can have one hour equalling one hour when the market price varies. The question was whether different relative price systems could exist side by side and, in fact, ...I was abolishing pricing by saying an hour equals an hour equals an hour for relatively unskilled, but not exactly by market standards equal, labor. The question became ... how were unequal exchanges possible? And why would people participate in disadvantageous exchanges? MM: What's the answer? CAHN: The answer is because they are only disadvantageous if you view them [solely in terms of] ... deflation, marginal value equals marginal cost. [But] you [have to] figure in both extrinsic and intrinsic reward. You figure job satisfaction, the joys of altruism, the sense of self-esteem, as part of the reward....The greater the sense of self-esteem the less the extrinsic payment has to be....It is clear that if you try and pay people, that they view that sometimes as an insult. I could not ask my mother-in-law to go clean someone's house for market wage. I could ask her to do it for service credits, because it simply lifts you out of the whole hierarchy....The intrusion of money ... undermines the intrinsic rewards and the sense of self-esteem that comes from doing certain kinds of things. MM: How does it differ from volunteer work? To use your example, if you asked your mother-in-law to clean that house as a volunteer, she would probably do that as well. CAHN: She might or she might not. The problem with volunteerism is that it tends to be sporadic, tends to be something that you can't fully count on and tends to depend upon the particular approval system that the person coordinating the volunteer system is able to generate. As a volunteer you've got to pat yourself on the back. The nice thing about service credits is that you get automatic pats on the back. The earning of credits [also] provides in part a socially-acceptable excuse for people to do what they would do anyway, or would want to do. We live as strangers. We lack a set of social conventions in our society that make it permissible to help each other or to ask for help without generating various kinds of tensions and without an etiquette and a protocol that makes that permissible. At the very least this provides a new etiquette. What appears to happen in fact is that the very process of earning the credits knits groups together.... They begin having pot-luck lunches; and they begin forming neighborhood crime watch things, and they begin looking after each other and checking in; and they begin to set up food bank coops. [It] seems to act as a catalyst for the creation of group cohesion in a society where that kind of catalyst is difficult to find.... From my point of view, service credits do something else. Every deed giving generates demand....Every time you give something, ...you then become a potential purchaser. It's potentially a very powerful form of enfranchisement for groups whom the market system either rejects or discriminates against or has no use for, because it means that so long as there are other human beings in need, there is a guaranteed market for your time. It will take time before service credits can be used to purchase as many of the range of services as I would like. We've focused on things like child care, education, courses that you could pay for with service credits, and care for the elderly. [The] Ford Foundation wants to sponsor a project whereby AIDS victims, friends and concerned people about AIDS can enlist and earn service credits [for personal use] should they ever test positive, or [they] can give [them] to an organization that they are associated with so that ... the organization can use [the credits] to purchase [care] for anybody who becomes too ill or too frail... If one looks at the difference between market forces, market approaches to social problems, or just the market, and institutional approaches, institutional approaches quickly atrophy....The institution gets so involved in institutional maintenance....And its core staff has to focus on raising more money to deal with fixed costs.... The beauty of the market is that it's got its own ebb and flow and dynamic; demand stimulates supply and supply stimulates demand. It seems to have a vitality of its own that has a qualitatively different feel from institutional attempts to target needs or problems. What I'm trying to do is create a hybrid of the two. MM: If someone performs services for the elderly and in exchange gets a service credit for schooling, isn't the cost of that work being borne by the school that honors the service credits? CAHN: Well, when you try and develop the program step by step you obviously pick those services where the marginal cost of producing one extra unit of education, like one extra chair in a classroom, is as close to zero as you can get. So you're looking at where you've got excess capacity, like the airlines have excess capacity and hotels have excess capacity, so in effect what you're doing is using a barter system to deal with excess capacity or excess supply without undercutting your basic pricing structure....A university will continue to charge for its courses, but it can acknowledge service credits as a way of filling its chairs. But also ... it may find ... that it can begin to introduce things that would otherwise have prohibitive labor costs by bartering its excess capacity for services that it would like to give but cannot afford, whether those are baby- sitting services or transportation services or tutoring services....You begin identifying those places where the marginal costs are as close to zero as possible and where the substitution of barter labor enables [an institution] to meet a need that advances its mission. MM: But doesn't that also have a disadvantage in that it undercuts the people who have been employed in those university services? You're replacing paid workers and paid jobs with barter jobs that presumably are not used by people as their main bread-winning activity. CAHN: Well, I don't see the displacement taking place.... People cannot afford decent daycare for kids. There are a lot of people who cannot afford adult education courses, and the taxpayer keeps being unwilling to expand the education that the society needs to impart. We can't afford home care for the elderly and Congress and the Reagan administration vetoed [Claude] Pepper's [D, FL] bill to give home care. So we're dealing with a range of things that we don't have money for. There are social costs to the fact that human beings can't afford them, like they go into nursing homes, they stay unemployed, they develop health problems that are avoidable, or they become latchkey kids and ... school dropouts. ...The problem is that there is a real conflict between the function of money as a medium of exchange and its function [as an] independent ... commodity. ...We are now really dependent on foreign investment and on exchange rates between the dollar and the yen and the dollar and other currencies to determine what we can afford. As a nation we face the gloomy prospect that for the foreseeable future ... the labor costs in employing our poor to produce will exceed the labor costs of [employing people in] the Third World. Which means that..., if our goal is production for export, and that's our vision of prosperity, the only way we can do it is to move toward automation and increase the productivity of our workers so that there will be a high-paid elite, but that we will have nothing for those large groups of people whom we've abandoned and whom we fail consistently. Once we get all this prosperity by production for export, [we] will then have to figure out what part of it we can afford to dole out to them on a trickle down theory. At the same time ... this theory of production for export requires that there be markets out there in the rest of the world.... I see production for mutual consumption, production for self-consumption, family consumption, and neighbor consumption as an alternative [model of economic development]. And I see the lack of money, the lack of a viable medium of exchange as a critical factor in unleashing ... the human resources that we have in our society, that could be utilized to address mutual need. MM: So this is a system that would operate on the margins of the existing economy, as opposed to replacing it? Or could it ultimately replace it? CAHN: I don't see it as ever replacing it. I see it as most usefully confined to the labor element, rather than the capital element or the material element of goods. I think people will always want imported goods, so to speak, or goods produced outside of whatever this local area is. But initially I see it as a vehicle whereby this society can begin to redefine work for its citizenry, and redefine the meaning and nature of work and useful tasks....The major surplus of the post-industrial and industrial society is time, is leisure. We find all manner of ways to distribute and redistribute that. But basically we end up distributing it by saying we are going to give it all to the elderly. And then we ... create castes of people whom we define as involuntarily useless, and whom we relegate to a lower moral pecking order. I think there are more equitable ways to redistribute time. The question becomes how you mobilize and how you allocate a society's ultimate resource, which is the time of its citizenry, to deal with social needs. There is no reason why that surplus cannot be reallocated more to mothers rearing children, or fathers rearing children, to people engaged in study at different intervals in their life, who wish to plan second and third and fourth careers....What this currency does is enable people who are consumers only to redefine themselves as producers, and then to engage in a participatory way in the society's dialogue around the distribution of time. MM: And how do they redefine themselves? CAHN: By becoming workers and earning credits doing socially- useful tasks. MM: And they are now idle because they can't find work in the conventional labor force? CAHN: They are idle for a whole variety of reasons, ranging from discrimination to the fact that the labor market requires forty- hour weeks or prefers to buy in big chunks rather than little chunks, to the fact that older workers keep being more expensive by virtue of accumulated raises and benefits invested, pensions and so forth, so it's better to sluff them off and retire them. To market imperfections. MM: And what about substituting people working for credits for those who are working for wages? CAHN: The substitution is arguably a problem, and I think it's going to have to be worked out on a practical basis. There are a whole range of relatively unskilled entry-level jobs in the human service professions ... which are critical access points, particularly for minorities. ...They are underpaid and we can't afford to pay them more than the market wage. I'd rather that their wage be supplemented with the ability to buy decent day care for their kids, the ability to buy shopping services, home repair services, so that they get an augmented wage without ... escalating the price upwards.... MM: Would you argue that a mixed wage would increase the pressure to increase the money wage? CAHN: Of course you could, but the fact is that the money wage in the society is dependent upon things like what the Federal Reserve establishes as the discount rate, foreign exchange rates, and so on. I don't want the things I care about in this society, whether people can survive, subsist, get on with life, determined by what goes on in the Federal Reserve, what the international exchange rates are, what kind of insider deals are cut on Wall Street. I want to be able to create in some sense the possibilities for communities and groups of people to be somewhat insulated from those pressures, and right now the people who are hit hardest by any recession, who have no way of moving back and forth and protecting themselves, are those who are most disorganized, least able to cope and who are at the bottom of the pile. They are the folks who bear the brunt of all those adjustments. ...This society uses the unemployed as inflation fighters. Anytime we're dealing with inflation, we simply increase the number of unemployed. We do that in a number of ways, but we peculiarly do it by increasing the price of money....I want to create a supplemental currency that in effect can expand its supply as the regular supply of money contracts, and can expand it infinitely if necessary to make sure that people at least have the capacity to buy those basic services that they need and at least can use the few dollars they have to buy the things that can only be bought with dollars. I think it provides, in effect, a fallback currency. MM: It seems that the way it plays out can be different, depending on the setting. CAHN: One of the places I've been asked to look is a Navajo reservation where in effect the dollars flow off into the border towns within 48 hours after they hit the reservation. ...If you charge mixed prices, like a local grocery store charges service credits for delivery of the groceries, or gives you one-third off, or discounts so you pay for one-third of the groceries with service credits and the other two-thirds with dollars. That enables that grocery to compete with the regional supermarket or the supermarket that's externally owned. It enables them in that context to capture dollars and keep them circulating in the community, because you will go to places where you can spend your service credits and you won't go to places where they won't accept your service credits.... MM: This could have a somewhat different impact when it's thrown into a situation where you have powerful employers with capital, because the workers are in a weak bargaining position, and employers may be able to use the system to save money, or to save on labor costs. CAHN: Of course that's true. Just as the employee stock option plans have sometimes worked as a source of soaking the workers for a source of capital when no other source of capital was available and what they've gotten was a piece of crap. And sometimes it's worked as a form of democratizing capitalism. That's a matter of the con-text of the situation. ... [But] we're so far away from that possibility. [At this point] the people who are going to earn service credits are going to do so primarily because they care, not because they think that service credits have more purchasing power than dollars, but because their desire to be perceived in a certain way is such that they want to use their time in this way. What we have to do in this society is begin relating intrinsic and extrinsic rewards of work in different ways. ...What service credits do is they lock earning capacity and job to the meaning of work. [Now] the relationship between the extrinsic reward and the ethical value of what you do�those two are wholly severable. We need to find ways to tie them together. MM: Can you give some very concrete examples of particular programs and particular places and things? How they work, and the like? CAHN: Right now programs are going in seven places. They are focusing entirely on services to the elderly. ...In Brooklyn its a combination of the Hassidic Jewish and Italian communities working together as an extension of an HMO. The HMO is functioning as a social HMO, including in its medical services social support services that people need to contribute directly to health and illness prevention and health maintenance. But they can't afford, with the monies that are available to buy enough of those services�transportation, home care, shopping, whatever. So they're using service credits to create an effective supplemental insurance program. So instead of paying for an insurance policy with dollars, you're paying for it with labor. In Boston you've got it going in a primarily Italian area with an Oriental influx, too. In San Francisco you have it going in a primarily Hispanic neighborhood in the Mission district, operated in conjunction with a hospital on Knob Hill that is a high prestige hospital, and this hospital is trying to do outreach to the community....Hospitals are playing a major role in all of these because in some sense that's their way of dealing with competition from the for-profit chains. If they can say we care about you after you leave the hospital and here's how and here's why MM: How exactly do hospital programs work? CAHN: It's very simple. People earn credits as part of a service credit program. If they go into a hospital, as part of their discharge plan, in addition to what Medicare or Medicaid provides, they can use this to extend or expand whatever home care services they get. ...Greater Southeast Community Hospital in Anacostia [in Washington, D.C.], runs a nursing home, a senior center, a multi- service center, and a variety of other programs. It was one of the first in the country to run a service program, and it has people doing transportation, home care, teenagers will do shampoos and hair sets for older women who have arthritis and trouble lifting their hands, to help them make themselves presentable. Some senior citizens are doing adult literacy tutoring, others are providing rides and transportation, teenagers are doing gardening and shopping services, some folks are doing light home repair and cleaning. MM: What is the government's role, exactly? CAHN: It keeps the bank accounts of credits and debits. It doesn't have to do the accounting, which is a management function day by day, but it knows how much you've got in your account and how much you spend. MM: Do other health care providers feel threatened by this? CAHN: Well, I've talked to the Gray Panthers and I've talked to some community health workers, and they have not perceived this as a threat. At the point it gets to be a threat, I've said to them what they ought to do is unionize the service credit workers, and let them pay the dues in services credits. This is not an anti- union or union busting thing; what we're doing is expanding the workforce. If you want to fight for them to get more benefits, if you want to speak for a larger workforce, then unionize them, and you can use those service credits to buy health care, and provide services for your union members.