Gift Economy

Many anarchists labour under enormous misconceptions as to the concept of a gift economy, how one functions, why it would be desirable, and how it can serve to promote efficiency.  While a gift economy is most closely related to communism, it also plays a significant role in both collectivism and syndicalism.  A syndicate, for example, is just a loose federation of cooperatives, which operate a private gift economy between them.

The first and most common misconception, is that a gift economy works on barter, and involves people directly exchanging goods and services with one another in equal measure.  This is false.  A gift economy is predicated on a trusted circularity of donation, not on any form of balanced exchange.  Participants seek to contribute to the commonwealth of the gift economy to the best of their ability, this then qualifies them to drawn down from that same commonwealth in order to satisfy their own needs.  They must each act in good conscience in order to preserve the integrity of the mechanism.  Initially this would appear to be dangerously unregulated.  While it’s certainly not something that could be implemented overnight, there is in fact a method in the madness.

Most conventional economic activity is “a wash”.  Pay close attention… a certain private business transacts 1M in turnover per annum.  The only part of this that ‘matters’ is the resulting gain or loss.  Let’s say said business makes a gain (profit) of 50K.  The other 950K of throughout thereby cancelled itself out.  950K of sales was generated to cover 950K of operating costs.  On a superficial level, that may as well have not occurred.  The money just flowed through to somewhere else.

Imagine a hypothetical scenario where an economy consists of only two businesses X and Y.  These would of course be entirely mutually dependent on one another.  They would be each others sole customers, and sole suppliers.  Lets say that each business transacts 1M, which is of course with the other.  One’s gain is the other’s loss.  This economy is by definition a zero sum game.  Let’s imagine that business X makes a 50K gain, thereby causing business Y to generate a 50K loss.  In order to accomplish that, 2M of financial transactions had to be processed.  The direct cost of that processing those was 110K.  Had X & Y instead unconditionally gifted one another everything they needed.  Then X would be 5K better off and Y would be 55K better off.  The saving on the transaction cost totalled more than double the potential upside for either.

Financial transactions are very inefficient.  They necessitate book keepers, accountants, regulators, auditors, banks, insurers, payroll, the money markets, Wall Street… the entire financial sector and much of the legal sector.  None of which constitutes actual production.  All of these things exist, simply to facilitate a scenario where Peter is robbed to pay Paul.   The cost of this overhead, is actually figured to amount to around 40% of all productivity… and that’s before we factor in any taxation.

In the previous example, X & Y’s transaction costs aren’t just 110K… they’d come to more like 800K combined.  X would actually be 450K better off and Y would actually be 350K better off, simply by altogether eschewing money.

But how can you be better off when there is no money.  Simple, you are materially better off.  That material still exists regardless of whether it is being measured by money.  X & Y provide their workforces with a substantially higher standard of living.  This may be in terms of more stuff, or less time spent working.  Probably both.

Of course the economy consists of more than X & Y.  All that happens, when a third entity is added, is that the mechanics become more circular, and they remain so as things scale outward.  Beyond that the dynamics don’t actually change.

Money is simply the tool a greedy person uses to cut their nose off, in order to spite their face, allegedly because human nature.  If it’s natural for humans to be stupid, then that notion is indeed irrefutable.

Perhaps it isn’t though.  In that case, all we need do in order to experience significant efficiency gains, would be to implement a little circularity of gifting within a group of like minded allies.  We don’t need to worry about the gains and losses (and tracking them would offset any benefits), because we can safely assume that the combined saving will dwarf those concerns.  Accomplishing this would creates a huge competitive advantage for everyone involved.  In today’s world it would also enable them each to legally avoid tax.  In fact doing so may even generates a tax deduction on other income.  Double whammy!

Are there any examples of this?  Well yes, funnily enough there are…

…the super rich and shameless have set up their own trust based private network of ostensibly charitable foundations.  These donate to one another in a circular fashion, thus generating 90% tax deductions on their own income.  Donald Trump I’m looking at you, among others.

We can all play by these same rules.  The only rule is that you don’t consciously engineer it to balance the books, otherwise it becomes tax evasion.  It has to work entirely on trust.

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