Select Committee on European Union Fourteenth Report


Dr Edgar Cahn, President and Founder of the Time Dollar Institute

The Committee wished to meet Dr Cahn because of his work on the digital divide. In fact Dr Cahn has developed an alternative theory of social economics and his projects are attempts to put this into practice. Dr Cahn outlined the thinking behind his Time Dollar Institute.

There are two economies.

  • A market and money economy based on specialisation.
  • A family, neighbourhood and community economy.

Society is slowly becoming aware of the externalities that money and the market economy imposes on the non-market economy. Money gives importance to mobility and price; it gives a high value to scarcity and devalues common values; the money market has been subsidised by the labour of women and minorities. It was therefore necessary to create an alternative currency.

This started with a number of questions. For example, why are programmes for social relief, operating on the principles of the market economy, usually ineffectual? Is there not another way that does not rely exclusively on specialised labour? A family, for example, runs on the basis of self-sufficiency and co-operation, not on the pricing system, which obtains in the money market. Dr Cahn developed a "currency" that strengthens the community economy and supports the mechanism of peer groups and extended families. There are a number of projects, most in the US but some in the UK and Japan, which offer systemic support for the family co-operative system.

This currency is "timedollars". In a project, participants earn timedollars for a range of community activities, which go well beyond usual definitions of work, for example taking a wheelchair-bound person shopping or looking after children. The timedollars earned can then be spent on similar services. There are also opportunities to purchase second hand computers. Dr Cahn referred to the work of Youth Courts in which young people become involved in judging others and for which they earn timedollars. There are now 10 such juries in the US, and a Grand Jury has been set up to oversee the system.

There is a timedollar computer base, which provides security for what is, in effect, a form of non-monetary exchange of labour and goods. Trust is a consequence of memory and Dr Cahn drew an analogy with DNA. Human cells changed within a fairly short period, but the DNA structure, memory, held the framework together.

Dr Cahn believes that e-commerce offers potential for good but should only be approached from an unfamiliar viewpoint. The digital divide is merely another way of posing the question "how do we draw people into the e-economy that are not there already?". This is the thought process of the money market where most interactions are between strangers. All that e-commerce does is to increase the speed of these interactions. This does not build sane societies.

It is essential that socially valued activity be considered the equal of work. The way to empower the powerless, and the poor, is to lend them the means to improve themselves and to insist that they repay in community service. This is where the money market and the community market interact. The big question is how to make e-commerce a catalyst to bring about social change. A major consideration is access to governmental aid systems.

The Time Dollar system appears to be spreading faster in the UK than in the US, perhaps because the UK has a cultural tradition which recognises certain social goods. This does not operate in the same way in the US: "We worship money".


Dr Cahn's presentation prompted a number of questions, which we were not able to pursue. Is the timedollars system essentially different from the tokens in a baby-sitting circle? How does the system interact with the market economy? It was clear that the results of the projects are mixed. To see the latest situation consult the Time Dollars website:

11 April 2000

Andy Pincus, General Counsel, and Elliot Maxwell, Secretary's Special Adviser on E-Commerce, Department of Commerce


There is nothing unusual in recent events: the Internet stimulates competition and competition means losers. For example, MicroStrategies lost two thirds of its value in a single day.


The administration established an e-commerce Working Group, which meets every two weeks to co-ordinate policy. It has forty members (it had been bigger). This may be an unwieldy number but there seems to be no other solution. As an example of the lack of co-ordination Mr Pincus mentioned the issue of drugs by Internet: an announcement had been made which was not consistent with general policy. Informal and formal consultation is important when policy is being formulated, including with NGOs and consumer groups which are less well organised.

Issues of e-commerce trade policy had led to a formal structure for liaison but "Joined-up government" did not have much appeal in the US. Outside big companies little thought is given to the impact of technology; NGOs tend to be fearful of it and react defensively.


  • The main policy thrust is that there should be no legislative discrimination between online and offline commerce.
  • The US has problems with the EC Data Privacy Directive but the current discussions on "safe harbours" appear to be heading towards a compromise. The issue is not that there are different systems but that both should be interoperable. In the US the private sector has taken the lead because this is the source of innovation. In the EU it appears that governmental regulation is the order of the day. The objective of both groups should be co-operation and legal compatibility.
  • Business wants the rule of origin approach whereas the NGOs wants destinations to be.
  • There are concerns about the speed of deployment of broad band, particularly in inner city and rural sites. Government programmes are trying to remedy the imbalances, and the government is also encouraging the private sector to do likewise.
  • Prosecution. There are problems over privacy implications. For example law enforcement agencies have proposed that ISPs retain "click data" for set periods of time to enable them to track back "up the pipe". However, there is a strong feeling that law enforcement agencies should not be given more authority.


  • Self-regulation is essential: it makes industry pro-active. The private sector has already established a number of 'seal' programs to bring about trust. The task of government is to empower consumers.
  • The question of domain names is important and the government has to think of the international implications when dealing with domestic policy. The ICANN group is a good example of how to deal with such issues.
  • Denial of service attacks have brought about new ideas on security but industry will deal with it. It is an international issue, which was why there might be a governmental role. As for prevention, it does not really matter whether it is private sector, or government and private sector. What matters is that best practice is followed. The US has set up a private sector group to deal.


  • There is concern over the 'smart card'. The US argues that it should not be used to restrict access by non-Europeans.
  • The EU domain name (.eu) is not a country code and the US is anxious not to see the codes opened up to other non-territorial organisations interested in acquiring their own domain names. The thrust for this seems to have come from the EC not Member States.
  • Digital signatures. It is not feasible to say that a particular technology is legal and another is not. The US urges the EC to consider two things:
    • Let the market pick technologies. (The Directive didn't quite cover this, but it was essential that there should be no barriers about redress).
    • Closed systems. If a community of companies regard e-contracts between themselves as legally viable then other countries should recognise them too. Reference was made to automobile industry encryption systems.
  • There are clear problems with digital signatures. For example, many jurisdictions require certain notices or disclosures and these have to be given in writing. The NGOs doubt that consumers would see e-mail documentation as having the same force of law as the written document. The President has directed the Federal Government to look into these issues.


The Federal government does not have a forum in which to discuss issues with states and there is no analogy with the EC/EU system. The National Conference of Commissioners on Inter-State laws has tried to develop a minimum set of laws for e-commerce but commerce is traditionally a matter of State law and the States are beginning to break ranks. Maryland has been the first to produce a suite of regulation for e-commerce. When California sought to introduce laws on e­commerce it removed a number of the elements recommended by the NCCIS, dealing particularly with trust issues. The e-commerce industry sought redress in Congress, arguing that uniformity was necessary if the market was not to be choked off.

With respect to financial services, some States had "gold plated" the basic minimum legislation. This had led also to a call among other States and industry for a stronger Federal lead ie more than a minimum set. There was a competition among the States as to who could be the friendliest to e-commerce. It was now fashionable for each State to head towards the status of "e-government". Maryland had set itself up as a place for settling cyber-disputes; Delaware had attracted corporate registration; Virginia claimed to be the first to create an e-commerce friendly environment.


Countries had sought to sign bilateral agreements with the US because they needed the investment. It was an attractive inducement to require these countries to accept the same system as obtained in the US (and by extension, Western Europe). "China will be a hard sell because self-regulation is not a big thing there." The Japanese were more willing than the Chinese to try self-regulation. It was a question of "did they want to be part of the system or not?"


It is important to separate the sales tax issue from the others. There are thousands of different tax jurisdictions in the US. Sales tax is based on the location of bricks and mortar facilities: the law argues that sellers do not have an obligation to collect tax unless there is a physical connection with a particular State. It was still too early to tell how the States would deal with the impact of e-commerce on sales taxes. The system is complex and the States do not have the political will to change or to simplify the taxation system. In the future they will probably try to create a simplified template, though this could be difficult to implement.

Mail order sales are virtually exempt from tax. This is tolerated because it has a limited effect but this might not be the case with e-commerce when sales tax constitutes on average 40 per cent of States' revenue.

The EU has taken a strong position on the question of digital goods but it was difficult to see that it would be enforceable unless ISPs acted as government agents. And there was a question of equity. If downloadable goods were tax free, what about similar physical goods? For example, digitised software vs. software in a box. And if the US States were to introduce a simplified tax system, what would happen when goods were supplied from Canada and Mexico (NAFTA)?

The issue of international taxation is becoming increasingly important. In practice there is less controversy about income and corporation taxes and the OECD appears to be coming up with an acceptable solution.

e-Commerce holds great promise for SMEs and the Small Business Agency (SBA) is trying to manufacture extension partnerships to help them.

On the issue of relocation to avoid tax, States have different environments and, outside the issues of e-commerce, States compete to attract business. In the field of e-commerce, probably most inducements took the form of tax breaks for "server farms". Numbers of States have tried to improve the flow of skilled workers through special education schemes in the hope of attracting IT companies.


Consumer protection and international co-operation on the prevention of crime (currently the subject of G8 discussion) will soon come to the fore.

Mr Pincus will probably leave the Department of Commerce before the new Administration comes in. Asked if there was any unfinished business, Mr Pincus said that his wish would be to persuade companies to take the self-regulation challenge more seriously. Business had always been defensive towards government, and it was difficult to get them to be proactive in a policy issue such as regulation. It is the more established companies that take the lead—they have the resources to do so.

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