(DRAFT FOR DEGROWTH CONFERENCE – LEIPZIG 2014)

1. The importance of Average Value of Labour Time in interest-free credit systems:Toward sustainable degrowth (DRAFT FOR DEGROWTH CONFERENCE – LEIPZIG 2014) Maurizio Ruzzene (Associazione per la decrescita): ruzzene@gmail.com

2. 1. THE QUESTIONS AT STAKE:TIME BASED CREDIT SYSTEMS AND AVERAGE VALUE OF LABOUR TIME o Time-based credit systems (TBCS) offer many advantages over official and alternative currencies and for degrowth (Slides 2 and 3) but they alsoface problems that undermine their development (Sl. 4) o Reference to labour time of average value is mainly used to overcome these problems (Sl. 5 / 7) But to render it more effective we have to better consider the way and problems of social settlements of average value of time value (Sl 8) oCredit systems based on labour time of average value can be decisive for financing public economies and for social security savings (Sl. 9 / 11), particularly in country with high public debt as Italy (Sl. 10) o They can question the hegemony of speculative financialization, and improve the prospects of a sustainable degrowth (Sl. 12)

3. 2. Time based credit systems and degrowth 1. Time-based credit systems escape the growth mechanisms implicit in payment of interest 2. They link economic processes to a relatively stable and limited value basis 3. Time-based credit systems can subtract sectors and resources from capitalist economic growth and exploitation of resources: 4. Finally they can promote local economies without implying closed communities, rather sustaining a new universal ecological protectionism

4. 3. The advantages of time-based credit systems - Since time-based currency systems have their own stable value base, they can avoid any link with official currencies, as well as inflation and legal problems . • They need not be material money but simplya system of electronically recorded credits. • Time-based currency systems can spread and be used on a universal scale - They foster more equitable economic exchange and can help re-establish a sense of limit or measure for the development of services activities.and for economic cost. • Time-based currency systems can also act as a basis for broad planning of sustainable use of resources available to communities

5. 4 . MAIN LIMITS OF ALTERNATIVE CURRENCIES TBCS share certain problems with other alternative currencies, and they also have their own specific problems. ° Major problems and limits of most alternative currencies are: - too small scale and excessively limited aims and functions; - management costs usually exceed advantages, leading to failure in the medium or long term ° Specific limits of time-based credit systems: - abstract interpretation of egalitarian principles in time-based exchanges; - difficulties in accounting for costs in official currency sustained to produce or provide many goods and services .

6. 5. IMPORTANCE OF LABOUR TIME OF AVERAGE VALUE ° above mentioned problems can be solved by usinglabour time of average value - It make possible to exchange hours of services activities having different exchange values - by referring to an hourly wage of average value it becomes possible to convert all costs in official currency into time-based credits ° All credits have to be recorded in time-based units, even if they are partly derived from resources paid in official currency but some conditions are necessary: 1. credits in time units must be completely independent of official currency; 2. there must be a clear distinction between the steadyunits of account or measurement and the variableexchange valueof different activities

7. 6. CONCRETE EXPERIENCES: FUREAI KIPPU AND ITHACA HOURS ° In the Fureai Kippu system personal bodily care can be valued double with respect to lighter activities, but all credits are registered in standard time units - However, Fureai Kippu does not consider costs sustained in official money, nor allow exchange of credits in care services with other kinds of services ° These functions can be performed by the Ithaca Hours system. - Ithaca Hours sets a standard price ($10) for an hour of work and this makes it possible to exchange different types of goods and service; - users however are free to decide a different exchange value for their goods or services. ° Although this, management and production costs are high compared to their advantages and the number of users in the circuit cannot grow This is probably due to limited functions attributed to Ithaca Hours The widening of the function of alternative currencies depends on the amplitude of their social basis, and this in turn can depend on how AVLT is established

8. 7. POSSIBLE WAYS OF DETERMINING AVERAGE VALUE LABOUR TIME ° Fureai Kippu and Ithaca Hours are main examples of two different ways of considering the Average Value of Labour Time; - Fureai Kippu has the easiest and least controversial reference to the AVLT, it simply refers to standard physical time, perceived in the same way everywhere; but it cannot consider costs sustained in official money. - Ithaca Hours allow exchange of any activity with any goods and services by reference to an average hourly wage (established in the contest in which it operates) ° But How can we determine an average hourly wage? That is: how can we establish maximum and minimum wages? ° Two main methods are possible: an empirical or statistical method and an ethical or political method.

9. 8. EMPIRICAL AND POLITICAL APPROACHES TO ESTABLISHING AVLT ° In an empirical approach, reference can be made to existing maximum and minimum hourly wages ° In an ethical approach, communities using time-based credit systems determine the socially acceptable maximum and minimum wages ° Both the empirical and ethical methods raise some problems, especially with regard to wider sharing of the choice made. ° to reach widely* shared criteria of equity and economic utility It seems appropriate to find a compromise between the empirical and political approaches; ° Finally we have to remind some important issue: a) The exchange valueof different activities can be determined by the exchange “agents”; b) credits must always be recorded in standard hours of work c) the convertibility of time-based credits is only formal, done for computing reason, However it is not useless

10. 9. THE UTILITY OF AVERAGE VALUE LABOUR TIME(AVLT) ° Though only on paper, identification of an AVLT is usefulespecially to measure the advantages of recording credits in time-based units instead of official currencies. These advantages are particularly significant in the long-term credits and retirement savings. ° Major advantage of time-based credit systems: inflation and speculative dissipation of money are always greater than the low interest rates and yields conceded by banksand the financial system; by contrast, time-based credits remain constant in time and can better provide access to public services concerned with care. ° The importance of recording retirement savings and pensions in time unitsis especially great in countries subject to enduring high inflation,high public debt and long-term productive stagnation ° All three conditions were persistent in Italy over the last 40 years. Italy is therefore an ideal example to demonstrate the advantages of a time-based credit system over official currency and finance.

11. 10. SOME EXAMPLES FROM ITALY ° In 1970, 100.000 lira saved (today €50) was equal to a month of work of average value. In 2010, 40 years or a working life later, the same amount saved (€50) is the mean wage for only one day of work. ° If this saving had been recorded in time-based credits in 1970, it would still be in 2010 the equivalent of a month of work or 180 hours, which is worth about €2000 today in Italy (about 4,000,000 lira). ° By keeping their value, time-based credits would have multiplied in value by about 40 compared to savings in official money. Or the latter would have depreciated to one fortieth the value of time-based credits. ° Next big financial crisis will probably destroy the private pension fund system, and public finance will have to come to the rescue. This will inevitably increase the level of Italian public debt undermining the public retirement system

12. 11. TIME-BASED CREDITS AND FUNDING OF PUBLIC ECONOMIES ° Credits based on average-value labour time can reconcile the needs of individuals, public economies and the community; they can promote sustainable economic, ethical and ecological values - time-based credit system can protect individual savings from inflation and from being destroyed by financial crises - public economies can avoid paying interest and therefore avoid increasing public debt - community can finance public economies and care-related activities, free of interest, rents and profits, in exchange, everyone can obtain credits ensuring their right to quality services in their old age, at a lower cost - furthermore, time-based credit systems can develop through broad federative agreements of national and even transnational dimensions, to support all the activities that take greater care of common life conditions

13. 12. CONCLUSION: AVLT CREDITS AND DEGROWTH ° Time-based exchange and credit systems may challenge the hegemonic role of finance capital and the incessant push for economic growth Time-based credits can keep public spending and debt within sustainable limits The whole system of financing public economies could become more transparent and controllable Credit systems based on AVLT could strengthen responsibility of individuals and government A good chance for strenghtening a sustainable degrowth

14. THE END THANK YOU! The Importance of Average Value of Labour Time in Interest-free Credit Systems: TOWARDS SUSTAINABLE DEGROWTH. (DRAFT FOR DEGROWTH CONFERENCE – LEIPZIG 2014) Maurizio Ruzzene (Associazione per la decrescita): ruzzene@gmail.com