Protocols for postcapitalist finance: A reply

Abstract

Protocols for Postcapitalist Expression is a book published by members of the Economic Space Agency. Its objective is to frame protocols (social agreements) on which to build the conditions for an economic system that is distributed (no centralised control) and can express network views about what constitutes, and how to measure, ‘value’ (value beyond profit). An insightful review by William Morgan (2024) probes some key dimensions of our project. This reply both reframes some of William’s insights and takes issue with others, especially those which emphasise a Hayekian interpretation.

Introduction

The Economic Space Agency (ECSA) formed around deconstructing the power of capital, especially finance and its innately centralised form, and reconstructing an alternative of distributed power, creating new economic space and giving people agency to operate and navigate it. It is a call to rethink how we can build the conditions for a postcapitalist economy, and our momentum is about the interaction between building the protocol (distributed economic grammar) and the economic, social, and cultural dimensions of postcapitalist possibilities.

We start with the latter. The balance sheet showing the current capacity for building an alternative to capitalism is cause for concern. It reveals rapidly depreciating assets: a social democratic agenda in full defence; a Marxism that sees moving beyond nineteenth-century questions as ‘unorthodox’; a working class that increasingly cannot recognise itself, and social diversity mutating into individualist rights. The other side of the ledger shows growing liabilities: an ascendant, confident new right, growing inequality, environmental change to which there is but perfunctory policy response, state-underwritten financial institutions with an ever-expanding propensity to serve the demands of capital.

Those of us who aspire to hold open the possibility of a feasible postcapitalism must recognise that an audit reveals massive political insolvency and no momentum for turnaround. To focus on advocating ‘progressive’ state policy seems an agenda, for the foreseeable future, of predestined irrelevance. Perhaps all that can save the left is a private equity buyout!

ECSA and its Protocols book is a project designed to move beyond seeking the political solidarity of articulate critique (Bryan et al., 2023). Its project is to utilise distributed ledger technology and an expanded accounting grammar as a foundation to explore how something progressive can be built that is both specific to the current period of financially dominated capitalism and utilises (rather than resists) current financial analytics. There are of course no truths here, but a couple of core propositions warrant noting at the outset:

1. 1. The revelation in 2009 of blockchain ledgers (in the form of Bitcoin) created the possibility, largely neglected over the subsequent decade, of a record-keeping system that does not have to replicate a capitalist mode of calculating. It does not have to adopt its unit of account, its accounting system that defines all entries by reference to profit criteria. Nor must it replicate the state’s money – its functions, issuance, or verification system. Perhaps, we need to recognise, finance is not the natural enemy of postcapitalism. Indeed, its reach, both spatially and temporally, embeds a sociality that is invaluable. But how can we use this technology to shift the debate about finance and money beyond the critique of monopoly power and beyond state-underwriting of private credit issuance, to questions of who has the right to issue credit, and of what conditions would give that issuance social reputation and trust? How can credit be the glue that binds a network in cohesion rather than the wedge that fractures it in exploitation?

2. 2. This same distributed ledger system opened the possibility for distributed social decision-making, and at scale (something coherently coordinated and way beyond the spatial reach of community economies). Data gathering and mining could record and process infinite voting processes. The challenge for postcapitalism is how to make this capacity for real-time decision- and sense-making about what to produce (or ‘perform’), what constitutes ‘value’, and how to govern value creation and surplus production and distribution, without deference to know-all central planners and without descending into endless consensus-seeking collective meetings that require time to stand still. What if distributed ledger technology could enable decision- and sense-making via automated market order matching, credit clearing, and portfolio rebalancing, all at scale and without the need for a central clearing house? This is the protocol ECSA is building (the economic space protocol) and whose grammar is explained within Protocols. We hold that the new substrate of high-speed computer networks with which the economy is catching up is a critical new basis on which to imagine, and then design, the essential elements of a postcapitalist alternative. But for this to become possible, we need also to expand the economic calculative logic with which we currently compute.

The political claim, therefore, is not to provide the seeds of a mass movement, but to open, within capitalism, a spread of calculative systems and values. The invitation to people at large is to ‘live in the spread’; to ride the volatility and fashion the direction of the future within. We want to offer a put option on capitalism – we’ve called it ‘the big put’ ¹ – where people can pursue alternative modes of value calculus and the capital market is offered a means to bet against itself (and, in the process, to fund the buildout of a postcapitalist alternative). Whether this should be depicted as an evolutionary process is a moot point, for the conditions of coexistence and of rupture are dramatically different from conventional evolutionary politics.

These are the conditions that have motivated the writing of Protocols for Postcapitalist Expression. The book has three authors but is the product of input from a team of economists, anthropologists, finance and media theorists, philosophers, software engineers, artists, and game designers. You can scarcely imagine the challenges of combining this portfolio of skills, insights, visions, and, indeed, prejudices. The author-interactions that entered the book are also nurtured by the format of its publication. Protocols was released open access, with audio, PDF, and ePub versions available, with integrated footnotes and glossary. Its ‘co-publishing’ design, as William Morgan’s (2024) review emphasises, gives focus to ongoing reader-interactions.

It is, no doubt, a difficult book to review, and it has been a delight to read William’s engagement. His opening proposition, that our project has vast ambitions, is deeply affirming of the visions that inspired us. His focus on protocol design rather than political advocacy signals a clear understanding of the priorities of the book. Nonetheless, identification of vast ambition invariably comes with a ‘but’ and William has posed some key areas on which to focus.

From ledgers of exchange to ledgers of value flow

Let me step back, just a little. Postcapitalism is about authoring futures. It needs a creative protocol that makes use of the capacity of ledgers to record not just monetary exchanges but also the social agreements contained in the financial contracts that are represented as asset-liability pairs. A ledger system can be used to organise; to create networks which record agents’ relationships or dependencies in their current state, where individual agents can change that state via their interactions with the network.

So how, given this area of design emphasis, do you get to the key areas of investment and production (or what we prefer to call ‘performances’) and issues of measuring value? This is the challenge taken up in Protocols. We nominate two points of emphasis to focus our engagement with William.

One is to unpick the connection between markets, prices, and profit. We want markets, for they are the immediate alternative to both authoritarian decree from above and the black hole of infinite collective deliberation. And we need prices: items registered on a ledger need some quantified units. But we do not want exclusive reference to profits as the motivation or the underlier of units of measure; at least not capitalist-defined profits. (We envision an economy that generates and distributes ‘surpluses’, but we cede the term ‘profit’ to the capitalist lexicon.) A rejection of profits, and prices calculated according to profitability, is a critical condition for thinking value differently: that is, being able to value quantitatively according to the intentional, economically-encoded ethical values of a network. We do not want to focus on the capitalist discourse of ‘externalities’ that trigger state levies and bounties to incorporate social priorities; we want those priorities to be encoded and expressed in the measurement of output value; we want to be able to reveal production for the commons as value creating by its provider, and without the state being that provider (or funder). The key here is how things get ‘recognised’ by the network (that is, reported, accounted for, and calculated), for that determines what gets recorded in the ledger – what constitutes an asset and a liability. A point of emphasis, therefore, is accounting as communication: a transmission of information across the network that both depicts the current state of the network and places each agent within the network view. A different accounting grammar lets you count as the network determines; not as capital determines. This network can produce, attribute value, and reproduce by its own, chosen criteria.

Does Hayek fit?

I am not sure that this emphasis comes through in William’s review. His interpretation, explicitly in the spirit of Hayek, seems to hold that markets, prices, and profit form a trinity. At ECSA, we acknowledge that Hayek emphasised, in a way the neoclassicals could not, the importance of the economy as a network and prices as sensory information. But we push back against Hayek’s reduction of information to price units referenced to profit criteria, or at least challenge what constitutes a measure of ‘price’. Instead, we address ‘economic media’: a data flow much broader than price. William suggests that, in emphasising this contrast, we have not taken the best of Hayek’s (later) writing’s and it is Hayek the psychologist, rather than Hayek the economist, who best articulates the non-reductionist approach. There is no desire on my part to explore the faces of Hayek here, for our objective is not to revitalise Hayek’s vision or reputation. Indeed, William’s attempt to do so, by invoking the ideas of Hayek the psychologist, carries the cost of drawing attention to Hayek’s own wilful support for, and affirming advice to, a range of authoritarian political regimes. Economists have a history of being blind about social context; psychologists do not. Best, I think, to leave Hayek in the company of economists, as just a price theorist.

The point at issue is not, as William presents it, that ‘price preserves traces of the original input knowledge’; it is (a) that we cannot remain silent about how prices are calculated (their units of measurement) and (b) that we want not ‘traces’ of past knowledge, but a fully vibrant recording of data.

Our second general point follows directly. It is appropriate to ask why this emphasis on the richness of data preservation is so critical. The answer is that the prices we are interested in are stake (investment) prices, much more than output prices. (We call it ‘stake’ rather than ‘investment’ to differentiate this market from a standard ‘stock’ market.) Most historical advocacy of postcapitalist economic relations has emphasised the ‘freedoms’ of decentralised consumer markets, but preserved investment for more centralised determination. We concur that staking decisions are more important to network dynamism than consumption decisions because staking is a commitment over time: it critically links the present to the future in deliberative and (hopefully) sustainable ways. Focusing on the market for stake gives the acquirer of stake skin in the game, and trends in the momentum of the stake market reveal long-term priorities across the network.

A market for stake: The key to distributed value

The stake market, in this context, must encode more than ‘price’ if it is to deliver critical signalling to the network. Stake offered to the market must encode information about the social priorities which will be expressed in the performances and outputs it funds. Stake must carry a value proposition (a verifiable claim that performance outputs create social benefits), not presume a profit proposition. Buying and selling stake is thereby a social debate about value propositions. As staking momentums shift over time, so too does the network’s overall view on ‘what creates value’ change over time. The granularity of information required for this process must be revealed and preserved. In an era of Big Data, it is possible to preserve this information in a way Hayek could not have imagined.

For staking to play this pivotal role of simultaneously funding investment and debating value-creation proposals, it cannot be driven by private wealth accumulation. In this network, staking cannot be funded from accumulated wealth. Staking must be a reciprocal relation between each agent and the network of ‘other’ agents. ² The following protocol is therefore critical: to acquire stake in another agent, each agent must relinquish stake in itself. The more an agent wants to acquire ownership of other agents, the more they must relinquish their own stake. It should be clear now why it is critical to avoid confusion with a capitalist stock market.

Further, for staking to be a transparent, network-wide articulation of ‘voting’ on value priorities, reciprocal staking cannot be a barter relationship (a one-to-one relationship); it must be a one-to-many relationship (each agent with the network) through an impersonal, distributed stake market with automated matching, netting, and clearing. William’s review does not feature our specific proposals about an automated staking market, though the general issue arises later, in compatible ways, in the context of his valuable discussion of ‘federated learning’ and data sharing.

So we will briefly follow up on issues of staking, to clarify issues raised in William’s review. Reciprocal staking will see agents taking a financial (and emotional) interest in a range of other performances. They will, over time, come to hold a diversified portfolio of stakes from across the network (interests in different value propositions) both directly and transitively. Indeed, the more stake ownership becomes diversified, the more each agent’s private interests come to look like the interests of the network as a whole, and self-interest is increasingly subsumed into a collective view of ownership.

This vision is key to the network holding open a range of value propositions (not collapsing to a monologic like profit) while the network as a whole nonetheless shares a coherent agenda. The momentum being sought is not a capital market ranking of investment success, but nodes of gravitation on social views of value: not ‘market efficiency’ sorts of criteria, but Eigenvector centrality in a network of influences. The goal is to hold open a range of views about what constitutes ‘value’, and the stake market, with all its comprehensive data, will be a commentary on those values and how they are shifting over time.

The contingency and volatility of the future is what we want to embrace and incorporate into the concept of value; volatility and contingency are not to be seen as distortions of an efficient capital market. Others have written, including recently in this journal (Ecks, 2023; Elder-Vass, 2023), about the virtue of broadening what we mean by ‘value’ in an economic sense and opening it to the possibility of ongoing change. We believe reciprocal staking is a practical means to encode that process: it involves economic commitment to a future that agents are themselves designing in the process of making.

Postcapitalist finance

What about finance? I started this response by extolling the importance of finance, both in capitalism and for postcapitalism, and then hastily diverted to investment. To be clear, when we raise the issue of credit, it is important to not get the wrong idea. In the economic space protocol, there is no central issuance of ‘money’ and there is no individual issuance of ‘money’ either. ³ Inside the network, credit, along with stake, plays a critical role of bridging the present to the future. Stake makes this bridge piece by piece, for all stakes are different, but for credit to play its bridging role it must be all of the same kind. Credit gives a network liquid cohesion and coherence, and this is what makes finance – a ‘different’ finance – so critical. Within the network, credit is not an exploitative relation of debt and interest payments, but something agents issue to each other to provide liquidity. (Think of trade credit between contracting enterprises, not bank credit; time to clear, not interest payments). This is the concept of cooperative finance (CoFi) William highlights. It is a term we use, but we cannot take credit for inventing it. ⁴

The incentive to issue is apparent. If all agents are reciprocally staked across the network, this forms collateral for lending and, as all performances need credit, they have no reason to not issue credit to others. Moreover, while there is a now-familiar problem that trade credit meets blockages and clearing processes can freeze, the economic space protocol’s automated clearing can close these loops. This does not mean there are no financial challenges; just that the simple ones are eminently resolvable.

When agents issue collateralised credit to each other, the critical question is: what can be counted as repayment of credit. The answer is remarkably simple, though perhaps unexpected. What repays credit is the creation of outputs that the network, via its staking decisions, declares to be value. ⁵ The pieces fit together as they should in any sustainable financial system: agents commit to stake ownership and endorse the value-creating performances it enables. The outputs created and, most specifically, the claims to value creation are ‘backed’ by the reputation of stakers. The output is deemed by the network to embody value. And as such, they can clear credit across the network. This matching, netting, and clearing is what the economic space protocol enables as an automated process. Moreover, to reiterate, the staking process attaches to differentiated value propositions, but the outputs that come from these distinct and diverse value propositions can all be used to clear credit because the network, through the staking market, has endorsed each of these value propositions. Changes in network view about what contributes value are expressed through shifts in agents’ staking preferences – de-staking of performances deemed to not be generating network-approved value, seeing stake price falling, and vice versa for emerging value propositions.

This is, to adopt William’s invocation of Hayek, about finance as creating a sensory order. But there are two dimensions that should not be conflated. One, compatible with Hayek, is that the credit system converts (collapses) all these value propositions expressed in staking decisions to a single unit of measure that has a single meaning across the network (because all credit is the same). But the second dimension, outside the domain of Hayek’s markets, is the necessity of preserving the rich data that describes performances, for while there is a stake market, it is not mediated by money. Each stake is expressed in its own unit of account, and where stake exchanges for stake, there are ratios, but no single unit of ‘price’: stake markets do not reduce stakes to a single unit of account. (This is, we believe, the spectacular achievement of the design of the economic space protocol: that it can inscribe selected value propositions and makes them interoperable by automated matching, netting, and clearing, without reduction to a single unit of account.)

Is the problem ‘extractive’ finance or ‘capitalist’ finance?

What follows is a political disagreement with William about current impediments to the ‘sensory order’ of finance. For William:

[T]he telos of finance is neither profit nor accumulation. While these factors motivate individuals and inject fuel into the financial system, the essential byproduct of this system-as-a-system is sensation and the secretion of a financial sensory order. The essence of finance is to be found not in turning gears profit seeking, but in the systemic output of prices discovered. (Morgan, 2024)

The question that must follow is this: what it is about historical forms of capitalism that has inhibited the price discovery machine? The answer, although William doesn’t go here, must lie in other political and economic institutions that override the potential latent in market processes. The ‘essence’ of finance is not just an abstraction or ideal type, but something that seeks realisation in a particular historical configuration of institutional forces. For Hayek, these forces most closely align with what we call capitalism and the rights of private ownership, but the historical creation of centres of financial power has contaminated the sensory process (and here Hayek’s personal support of fascist regimes in the name of releasing the power of the sensory process cannot be overlooked). What William is probing in interesting ways is whether these forces may alternatively align within ‘postcapitalism’ – or is it that postcapitalism should most closely align with these forces?

It’s an interesting conundrum. The basic question is whether the cartelisation of capitalist finance is the critical problem: would ‘democratic’ finance (the supposed antithesis of cartelised finance) within capitalism be the remedy, or is there something endemic in the capitalist nature of finance?

It is in this context that a reader will understand why William gives so much attention to the book’s Foreword by a member of ECSA, Jonathan Beller. (It is unusual to give such attention to a Foreword.) As William well captures, Beller is passionately critical of the power of finance and this critique is central to his call to arms – to invoke a history of radicalism and resistance to capitalism and to situate economic space protocol in the service of radical traditions of class struggle, anti-racism, and challenges to colonial, imperial, and monopoly power.

William notes that this is a different discourse from what appears in the book proper, where the latter is clearly more embracing of the tools of finance. The different discourses identified by William are real, and the difference is embraced by ECSA and, in certain ways, by William: we garner support in a range of different discourses, and Beller is appealing to one of the most important. But probably the point William is seeking to elevate is that Beller’s critique of contemporary finance is cast as a critique of capitalist finance: its capitalist dimensions and its form as institutional cartelisation are merged by Beller into a single proposition. It is critical to William that these be separated: to share certain parts of the critique of cartelisation, but strongly reject its coupling with market-based capitalism. Whether the institutional form and the underlying ‘logic’ can be separated is a legitimate debate. The fact that Beller, in the Foreword and in his recent books, elaborates the postcapitalist possibilities of economic media and radical finance should be noted.

Conversely, William is clearly more attracted to the book’s focus on the techniques of finance, identifying them as not having an innately profit-driven design. Maybe Protocols has conceded too much to a separation of historical and institutional form from protocol logic, and thereby conceded too much to an essentialist depiction of finance, but it is our means to give focus to the neglected issue of protocol design. The result is that ECSA and William can agree on a focus on finance as technology, and debates around this, while disagreeing on how historical depictions of institutional orders inflect the adoption of these techniques. That is, they are not ‘merely’ techniques, and so ‘postcapitalist economic expression’, as context for the application of such techniques, cannot be disentangled from the techniques themselves.

This divide is hard to work through without invoking and reciting well-known debates. The broad sweep of our analysis wants to focus on how markets elicit vast amounts of information and, as is now apparent in the era of Big Data, how it captures not just price data but masses of information about the buyer and/or user – their activities, their networks, their risks, even their velleities. In contemporary capitalist society, it is used to surveil and extract profits; in a different context, appropriately delineated data could be distributed information for economic coordination. But we dispute the supposed ‘neo-Hayekian’ solution that lies in well-defined contracts which somehow serve to reconcile capitalist pursuit of profit with collectively expressed social goals. We do not believe this reconciliation can occur within capitalism, nor for that matter, within Soviet-style socialism or what gets called ‘scientific’ Marxism. Each involves an idealism of both their democratic information flows and their coordination capacities.

Living in the spread

But none of this makes Protocols the complete, practical manual for postcapitalism. No one believes that the formation of a postcapitalist economy will take place as a one-off exercise, without fierce contestation. Questions of what, exactly, one can do with this new medium; who would join this network, and how; how the inside of the network is bridged with the outside (inside tokens in relation to outside dollars; Wall Street value categories in relation to network value categories), are all right now at the centre of discussion, debates, and development within ECSA and beyond. We welcome people to join in this process. Although protocol must be complete to be coherent, there is no suggestion that complete protocol offers a model to be taken up in toto. We talk of people ‘living in the spread’ between capitalism and postcapitalism and we called our book Protocols for Postcapitalist Expression. Ours is a program of on-going and never-ending design and the book a work of advocacy, hoping to open the spread and encourage the wider exploration of possibilities.

William and ECSA disagree on some big questions but share some deep and distinctive agreements on others. These agreements and disagreements are all entwined. At ECSA we embrace this as the terrain for fruitful mutual exploration. It is the basis of our ‘co-publishing’ agenda. As William expresses it, ‘co-publishing represents a digital means for bringing antagonistic perspectives into conversation’. William’s review, and this reply, are an expression of co-publishing.