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Pitch

LEDDA framework helps urban areas raise funds for climate action, democratize funding choices, and build resilient economies.


Description

Summary

Urban communities worldwide want economies that are stronger, greener, fairer, more resilient, and more diverse. Jobs must be created, climate change addressed, infrastructure repaired, schools upgraded, and more. The LEDDA economic direct democracy framework offers a bold yet practical solution.

The framework synthesizes multiple approaches currently in use in cities and regions around the world into a coherent, consistent, integrated whole. It builds on ideas from buy local, invest local, local currency, local food, local sharing, open source, smart cities, open government, open data, participatory democracy, and related initiatives.

LEDDA (Lē´dǝ) n. Local Economic Direct Democracy Association. A membership-based, community benefit corporation that implements a secondary economic framework as a local overlay to an existing city or regional economy. The framework offers all members roughly equal and direct opportunity to influence their local economy. It is applicable to cities and regions in both developed and emerging or other developing countries.

The LEDDA framework arises from a “systems,” or holistic, view of an economy, which is understood to be a decision-making system that is ripe for direct democracy. Money is viewed in part as a voting tool that facilitates direct democracy. A complete description of LEDDA economic direct democracy is provided in the book Economic Direct Democracy: A Framework to End Poverty and Maximize Well-Being.[1] A free PDF version is available at the Principled Societies Project website, http://www.PrincipledSocietiesProject.org.

This Climate CoLab proposal requests assistance for the Centre for the Study of Governance Innovation (GovInn), of the University of Pretoria, South Africa [2], and the Principled Societies Project USA in building a global partnership of academic, civil society, government, business, and foundation groups that will usher the LEDDA framework through the development and scientific pilot trial phases.


Category of the action

Urban adaptation


What actions do you propose?

Any resident of a city/region can apply for LEDDA membership, as can any local organization. For-profit and nonprofit member organizations might include small businesses, local branches of national chains, schools, churches, research institutes, local offices of national charities, local governments, and public service agencies.

In many respects, member's daily activities would not change greatly. But they would encounter new opportunities due to job creation funding and income support for those who do not hold jobs. More individuals would start independently owned businesses, or would work in them as employees. Incomes would rise and grow more equal over time, and more products would be green, locally sourced, and locally produced. Members would have access to new information about flows of money, and other resources and wastes, in the local economy. They would be asked to make thoughtful purchasing decisions, to participate in funding decisions, and to participate in governing the LEDDA.

As the participation rate increases, quality of life would start to markedly improve. Job quality would rise. Poverty would diminish within the membership, and eventually disappear. Businesses would become more environmentally sound, and funds would be directed toward education, climate change action, infrastructure repair, and health care. Economic security, community resilience, and a sense of shared purpose would grow.

The framework’s eight elements are:

1. Monetary system. A LEDDA issues a local, transparent electronic currency called the token, which circulates alongside the national currency in the local economy.

2. Financial system. The Crowd-Based Financial System (CBFS) engages the entire membership in funding decisions via a novel form of crowdfunding. The CBFS consists of loan, subsidy, donation, and nurture arms. The first three provide interest-free, zero-cost financing to member organizations. The nurture arm provides income assistance to members who are unemployed or not in the workforce. The integrated monetary/financial system is called the Token Exchange System (TES).

3. Market system. Businesses compete as usual, except that more information about businesses and their products is available, and some new businesses created by CBFS funding are Principled Businesses. A Principled Business is a socially responsible cross between a nonprofit and for-profit, unique to the LEDDA framework.

4. Property rights system. Property rights follow national norms but differ in that: (a) Principled Businesses participate in an intellectual property (IP) pool, or commons; (b) restrictions apply on the sale of Principled Businesses and transfer of their assets, not unlike restrictions that apply to nonprofits; and (c) the LEDDA framework is highly transparent.

5. Incentive system. An incentive system that encourages cooperative behavior includes: (a) a reputation system that recognizes reputation as a form of social currency; (b) beneficial social norms; and (c) well-being indexes that assess the effectiveness of LEDDA actions in improving social, physical, economic, and environmental conditions.

6. Governance system. A LEDDA is governed via an online system of direct democracy that engages the membership in creating and amending rules, and setting policy.

7. Conceptual models. Computer simulation and mathematical models help members to improve systems, assess conditions, and make projections. Modeled states and events include currency, energy, resource, and waste flows; human capital and educational needs; well-being; and decision-making.

8. Purpose. The purpose of a LEDDA is to maximize member well-being and benefit the global public.

GovInn and the Principled Societies Project are developing a strategic plan for a global partnership that will usher the LEDDA framework through the development and pilot trial phases. We expect the plan to be finalized in October 2014. The draft plan is summarized below. The viability, capacity, risks, and benefits of the LEDDA framework will be tested throughout development and trial phases.

The domain of the LEDDA framework is cities and local regions. Bold innovation can occur more quickly, at lower cost, and with more political and social support at local levels. The framework is not, however, a replacement for current economic–financial–business–social welfare systems. Rather, use of the framework grows organically within each community, complementing and competing with current systems. It is designed to be self-sustaining, self-promoting, and self-replicating.

Given sufficient funding, the partnership could complete all tasks within eight years. Upon completion of pilot trials, the partnership will determine if it wishes to dissolve, and a global association of LEDDAs will begin to form.

The partnership will act through six related programs:

1. Academic program: to focus on issues of theoretical and practical importance. This work spans multiple fields, and may include field surveys and analysis of public data. It will include computer simulation of currency flow and direct democracy decision-making. Approximately 20 academic studies will be published.

2. Core infrastructure program: to focus on developing the information systems architecture, enterprise software, policies, standards, and procedures that constitute the core LEDDA framework. The enterprise software includes accounting, finance, social networking, collaboration, online payment, and group decision-making applications.

3. Smart-LEDDA program: to focus on developing the information systems architecture and enterprise software that allows a LEDDA to efficiency collect, store, analyze, and communicate data. Through an independent sister project the same architecture serves the smart-LEDDA and smart-cities market, and acts as a bridge between the two. Applications integrated into the architecture could serve local manufacturing, agriculture, energy, water, transportation, health, and environmental operations.

4. Games and tools program: to develop software complementary to the LEDDA framework for use by the public. The games and tools program will produce online applications that educate, entertain, and excite a global audience about LEDDA concepts; that generate data useful to academics; and that generate data useful for testing and refining the framework. One application will be a massively multiplayer online game (MMOG) of LEDDA virtual economies. Another will be a direct democracy tool that helps groups engage in decision-making.

5. Pilot trial program: to plan and conduct one or more live trials of the LEDDA framework. If resources allow, several trials will be conducted spanning developed and emerging or other developing countries. Trials will last approximately two years and be conducted concurrently or staggered.

6. Outreach program: to develop and disseminate educational materials, build community, and engage the public in discussions about the LEDDA framework. Products produced by the other five programs serve as vehicles. Outreach initiatives include a speakers bureau, public relations and social media campaign, one or more videos, and arts projects.

All software and documents developed by the partnership will be released under an open-source or community commons license, as appropriate. The open-source community will be invited to help develop the enterprise software.

A first computer simulation model of a LEDDA economy has been developed and a paper submitted for publication.[3] The model describes token and dollar flows in an average-size US county under simplified conditions, and is illustrative rather than predictive; it is a steppingstone to more advanced models. Its purpose is to describe how the LEDDA framework could increase family incomes, produce full employment, and achieve income equality for members. By the end of the 28-year simulation, the membership channels the equivalent of more than $2 billion annually through the CBFS to fund local nonprofit and for-profit member organizations.

Relation between smart-LEDDA and smart-city

A LEDDA is a member-based association, not a city or public body. A large percentage of a city's population, however, has reason to become a member. Every member family sees an income gain over baseline. Roughly speaking, a LEDDA pays people to participate. In the simulation, 90 percent of a local population eventually joins. As participation rates rise, a LEDDA begins to appear more like a city. But it does not replace city government. A LEDDA does, however, strive to become smart (elements #5c and #7). Thus, as participation rises, distinctions blur between a smart-LEDDA and a smart-city.

Relation between LEDDA framework and climate change action

The LEDDA framework provides incentive, information, means, and capacity to take bold action on climate change prevention and reversal, impact mitigation, and damage repair. The framework offers needed mid- and long-term funding solutions.

Incentive and information:

The LEDDA framework is intended for a global audience and for generating impacts starting in about eight to ten years (after development and testing have ended, and the framework starts to spread). Already today, without the LEDDA framework, the global public has incentive and desire to address climate change. In a 2013 poll conducted in 39 countries, a median 54 percent cited climate change as a major national threat, putting it at the top of the list of items tested.[4] By the time the LEDDA framework begins to generate impacts, it is reasonable to expect that the level of concern will have grown markedly higher. Climate change impacts are expected to intensify in the coming decades.[5]

The framework provides additional incentive and information to address climate change. A LEDDA is not just a local currency system, used for boosting local economic activity. It is a sophisticated, systems-based approach to economic re-organization that holds as its purpose the demonstrable maximization of membership well-being and public benefit. Importantly, the framework contains concrete mechanisms—elements #1 through #7—to fulfill its purpose, #8. Climate change has potential to affect nearly every aspect of human society. A LEDDA collects and analyzes data, and measures and forecasts progress according to well-being indexes that span social, economic, public health, and environmental concerns. It is highly likely that index scores would improve with funding of climate change action.

Moreover, the framework lessens economic pressure to resist climate change action. It provides a new business/financial model and incentives that compete with profit maximization, which can drive decisions that inadequately account for environmental impacts.

Means and capacity:

The LEDDA framework provides means to fund climate change action. The framework infuses a local economy with democracy. This occurs in three arenas, the first two of which use money (tokens and national currency) as a voting tool: (1) members make informed purchasing decisions; (2) they contribute to the CBFS and choose which for-profit and nonprofit applicants to fund; and (3) they govern the LEDDA using online direct democracy. By design, incomes for members rise and become more equal over time. Thus, members gain more or less equal voting power in arenas (1) and (2).

Members could address climate change through informed purchasing and CBFS funding decisions. The latter is a form of participatory budgeting. The CBFS is a profit-neutral funding mechanism, not an investment-for-profit system. As such, funding decisions are not driven primarily by profit motives, but by community concerns.

Last, the LEDDA framework provides capacity to address climate change. If results similar to the simulation model can be produced in a real LEDDA, even an average-sized US county could channel billions in funding annually through a CBFS. There would be ample funds to address climate change action, infrastructure repair, and other needs.


Who will take these actions?

A diverse global partnership is desired, as the framework spans climate, economic, finance, law, governance, poverty, labor, manufacturing, agriculture, energy, technology, big data, computer science, art, media, ecology, public health, and engineering topics. And a large partnership is desired in order to better provide needed expertise and convey news to a global audience of partnership events, actions, and results.

For all but the core partners, the partnership is informal and nonbinding; each partner can engage at an intensity and on topics of its choosing. In general, partners can engage at peripheral, proximal, and core levels. The initial core partners will be GovInn and the Principled Societies Project. Others may be added over time. Core partners are responsible for decision-making, funds management, and day-to-day operations of partnership programs. There will also be opportunities for the public to engage in discussions and to offer comments.

Lorenzo Fioramonti, Ph.D. is director of GovInn. John Boik, Ph.D. is director of Principled Societies Project.

GovInn and the Principled Societies Project is organizing a team of scientists, executives, systems architects, lawyers, and technicians to implement partnership programs. Multiple groups have shown preliminary interest in joining the partnership, when it is established.

The partnership might eventually spin off a for-profit, socially responsible business that would compete in what could become a multi-billion-dollar global LEDDA market. With parallels to the Redhat business model, the spin-off would offer maintenance, training, and support services for the open-source enterprise software developed by the partnership. The spin-off provides a pathway to attract impact investing funds.

Principled Societies Project is currently acting under the auspices of a nonprofit fiscal sponsor. If funding is secured, it might apply for nonprofit status itself, or on invitation merge with a US academic center.


Where will these actions be taken?

Work on behalf of the partnership will occur around the world. For example, computer modeling and software coding could occur in any country. Pilot trials could occur in multiple countries. A central staff working for or with the Principled Societies Project in the United States will manage the code development process.

After successful completion of the development and pilot trial phases, the LEDDA framework will be available for implementation by interested groups in cities and regions around the world, where it is not forbidden by law. In the United States, for example, no new legislation would be needed to implement a LEDDA. Certain legal issues remain to be addressed, but these are not expected to be prohibitive. The needs of every community are unique, and the LEDDA framework will be flexible enough so that cities/regions in developed and emerging or other developing countries can benefit from implementation.

Soon after the pilot trials end, a global association of LEDDAs will likely form in order to facilitate spread, boost trade, set standards, and promote regional integration and cooperation. The association would be governed by a direct democracy process, somewhat similar to that used by individual LEDDAs.


What are other key benefits?

Additional benefits include:

1) Shared access to IP developed by Principled Businesses. Through use of an IP pool, knowledge flows freely and innovation and scientific progress occur at a maximal rate.

2) The CBFS funds a diverse network of locally owned businesses and nonprofits. Diversity builds resilience.

3) Communities become more self-sufficient and less vulnerable to disruption. While trade remains important, a greater percentage of goods and services is produced locally.

3) Planning for human and natural resources occurs as a component of the CBFS funding process. Planning can help communities anticipate needs and set aside buffers.

4) Community engagement deepens. A LEDDA infuses a local economy with democracy; members become more involved in guiding their communities.

5) Transparency in the LEDDA framework helps build trust and prevents abuse. Trust encourages cooperation.

6) Income equality builds trust and lessens social tensions. Poverty is eliminated within the membership.


What are the proposal’s costs?

Based on the draft strategic plan, total cost for the six partnership programs is approximately $55 million, divided over eight years. The total cost is similar to that of other large software development and research projects. Funding sources are likely to include donations, grants, and donations-in-kind by individuals, businesses, governments, and foundations; impact investors (supporting the for-profit business spin-off); and revenue generated by partnership activities. The latter could include monetization of the multiplayer online LEDDA game. Fundraising will occur on a global scale, and multiple crowdfunding events are envisioned.

We expect that funding will be secured in stages, based on successful completion of stated milestones. Annual costs for the first two years are about $2.6 and $3.2 million, lower than in later years. Deliverables produced in the first two years will help to excite funders and the public about activities planned for subsequent years.

The costs incurred by a community to implement a LEDDA are not prohibitive. And once a LEDDA is established, it is financially self-sustaining; a small portion of CBFS funds are used to meet management and governance needs. As the network of LEDDAs increases in size, opportunities grow to assist newly forming LEDDAs with skills, knowledge, and seed funding. The LEDDA network is self-perpetuating.


Time line

If adequate funding is secured, major milestones over the eight-year project could include:

Year 1: Start operations on all six programs except smart-LEDDA and core infrastructure. Complete two academic studies.

Year 2: Complete two academic studies, the LEDDA economy and direct democracy simulation models, and a video documentary.

Year 3: Start the smart-LEDDA and core infrastructure programs. Complete two academic studies, a crowdfunding campaign, arts projects, and coding of the online LEDDA game and direct democracy application.

Year 4: Complete two academic studies and a crowdfunding campaign.

Year 5: Complete three academic studies, a planning study for the pilot trial, and a crowdfunding campaign.

Year 6: Complete three academic studies, a crowdfunding campaign, and coding of the Smart-LEDDA and core infrastructure software.

Year 7: Start pilot trials. Complete three academic studies and a crowdfunding campaign.

Year 8: Complete three academic studies, a crowdfunding campaign, and pilot trials.

Staff will range from 11 to 52 full-time workers, depending on the year, not including coding volunteers. Staff may be employees of the Principled Societies Project or “on loan” from other organizations. They may work in Principled Societies Project offices or elsewhere.

Once the LEDDA framework has been successfully tested, it will be available for implementation. In the early years, only a few implementations will likely occur. But each successful implementation will encourage other LEDDAs to form, and add to the body of knowledge and skills.

If the LEDDA framework delivers expected benefits, it is possible that within 25 years a substantial percentage of individuals in cities and regions throughout the world will experience higher incomes, greater income equality, lower unemployment, and increased well-being. LEDDAs could collectively raise the equivalent of trillions of dollars for climate change, infrastructure repair, education, and other needs.


Related proposals

The LEDDA framework builds on ideas from existing community development, knowledge-transfer, and decision-making initiatives. Naturally, there is some overlap between these initiatives and the LEDDA framework. Similarly, some overlap exists between other Climate CoLab proposals and the LEDDA framework. While it builds on existing initiatives, the LEDDA framework is novel. It represents an integrated, viable synthesis of original and existing ideas, as summarized in the eight framework elements.

The Token Exchange System, in particular, has some relation to the 2013 Climate CoLab proposal “Local currencies for community resiliency and action,” and to the 2014 proposals “Reinventing money to address climate change” and “Global 4C: Empowering humanity for carbon transition with smart money.” The first lists the TES as an example local currency system. The last is intended for government consideration in international negotiations on climate and economic policy, rather than urban adoption.


References

[1] John C. Boik. Economic direct democracy: A framework to end poverty and maximize well-being. SiteForChange. 2014. http://www.PrincipledSocietiesProject.org

[2] Centre for Study of Governance Innovation, University of Pretoria, South Africa. http://www.governanceinnovation.org

[3] John C. Boik. "First microsimulation model of a LEDDA community currency--dollar economy." Working Paper 0001, Principled Societies Project, revised Aug 2014. http://ideas.repec.org/p/psp/wpaper/0001.html

[4] Pew Research Center. "Climate change and financial instability seen as top global threats." 2013. http://www.pewglobal.org/2013/06/24/climate-change-and-financial-instability-seen-as-top-global-threats

[5] Intergovernmental Panel on Climate Change. Summary for policymakers. In: Climate change 2014: Impacts, adaptation, and vulnerability. Part A: Global and sectoral aspects. Contribution of Working Group II to the Fifth Assessment Report of the Intergovernmental Panel on Climate Change. 2014. http://ipcc-wg2.gov/AR5/images/uploads/IPCC_WG2AR5_SPM_Approved.pdf