Community Currencies
“Complementary currencies could become a key tool to buffer a region from the shocks caused by failures and crises in the official money system.”
-Benard Lietaer-
Shifting our economy and the ways we use money is central to the process of community relocalization. In fact, this may be one the most important tools we have in our relocalization tool box. Recall the notion of a leverage point: a small but decisively important point within a system that if slightly altered can immediately and drastically affect the nature of the system as a whole—like pressure point when practicing self-defense. Many economists predict that currency—the way we use money—is such a leveraging point with our economic, political, and social systems. If we change the way we use money, we will invariably change the entire society.
"Community currencies will help protect our communities from collapsing national currencies."
Most of us, including myself, don’t realize the degree to which money and economics affect everything we do. This lack of understanding is also the reason that we generally assume that there is only one way to arrange our currencies and economic structures, namely, the way we’re doing it now. Many traditional/mainstream advocates of the so-called free-market system have argued that the economic status quo of globalization and exploitation is a natural and inevitable process of human development. They say that it is impossible to have it any other way. Humans are an inherently greedy and competitive species, they say, and therefore only an economic system based on greed will work. This view is perhaps best characterized by a remark that the former Prime Minister of Great Britain Margaret Thatcher once made: “there is no alternative.”
But in fact, there are many alternatives. There are numerous ways we can arrange our economic and monetary systems and a lot of new thinking and energy is being focused by intelligent and creative people to rearrange these policies and structures. If we are able to create new economic structures we could transform our economy from a system which is heading us ever closer to disaster to one that actually helps to solve many of the world’s problems. This would essentially revolutionize the very ways in which we operate, interact, and form relationships with other people, not only in the realm of money and finances, but also in terms of community building and cooperation. More immediately, creating community currencies (as Yellow Springs, Ohio did during the Great Depression) could protect our communities from collapsing national currencies.
One of the most promising ways to change our economic sytem is to create community currencies. The revolutionary aspect of community currencies is that they can operate independently from national currencies, they can include built-in mechanisms that favor the local economy, promote sustainability, and encourage community interaction. Bernard Lietaer, a prominent thinker who has helped develop important ideas around community currencies, and was also heavily involved in the creation of the Euro, has written that the development of community currencies and the potential subsequent economic transformations are, “part of an irreversible process of change in our money system and our societies.” He goes on to say that,
We are now in a transition period, an interval of great risk but also of great opportunity. The risks are not only financial, some of the emerging money technologies could create a society more repressive than anyone of us thought possible. More importantly major opportunities are also becoming available: now more than ever it has become possible to address some of the most critical issues of our times, such as enabling more meaningful work, fostering cooperation and community, even realigning long-term sustainability with financial interests. None of this is theory, real-life implementations have pragmatically demonstrated such results. Combining these innovations can make available a world of Sustainable Abundance within one generation.
Most important in dealing with the threats that are upon us is the ability of these currencies to protect communities from the coming convulsions of a crumbling international economy. Lietaer has written that, “Complementary currencies could become a key tool to buffer a region from the shocks caused by failures and crises in the official money system.” As we have seen, “failures and crises in the official money system” are likely, considering the imminent peaking of world oil supplies, bird flu, the U.S. housing bubble and economic system predicated upon massive national and personal debt, and the overall collapse of modern industrial societies, starting with its insecure and unstable monetary structures.
THE GIFT ECONOMY
The extent to which our lives are dominated by money and the preoccupation with money is incredible. Personally, I would like to see our social and cultural consciousness less dominated by money and more thoughtful of the real wealth around us—clean beautiful environments, family, good food, leisure time with children, and so forth. Richard Heinberg writes that, “At its base, economics is about how people relate with the land and with one another in the process of fulfilling their material wants and needs. In the most primitive societies, these relations are direct and straightforward. Land, shelter, and food are free. Everything is shared, there are no rich people or poor people, and happiness has little to do with accumulating material possessions. The primitive lives in relative abundance (all needs and wants are easily met) and has plenty of leisure time.”
Instead of a social environment dominated by money exchange and transactions, I would like to see a society with more casual, friendly, and community-oriented relationships. Anthropologists call this a “gift economy”—an economy based on gift giving as a primary means of social interaction and exchange. Indeed, the entomology of the word community suggests this more informal and generous relations among people. Cum means together. Menere means to give. Collectively they mean to give among each other.
The importance and ritual of giving and exchanging gifts is the glue that binds communities. Anthropologists call this reciprocity. Whenever the reciprocity and the gift-economy break down, so does the community at large.
Modern industrial civilization has replaced the gift-economy with a highly individualistic economic system that is all but devoid of ritual, reciprocity, respect and love between the exchangers. Thus we can see the breakdown of communities the world over not as a random, unconnected process, but rather as a systemic effect of an imperfect and immoral economic system.
Describing the evolution of a community currency system in Takoma Park, Maryland, Lietaer writes that, “It turns out that the complementary currency and the directory are just the oil to lubricate the imagination, an excuse to make the first contacts. Most actual exchanges use the complementary currency only for part of the transaction, sometimes not at all, and involve exchanges that weren’t even thought of as items to be listed initially in the directory. Gradually, neighbours get into the habit of just helping each other out as gifts, without any currency exchange.”
Thankfully, there is an easy way of reviving the gift economy. Make and give gifts. Make up new holidays with families and friends. Celebrate more often! Emma Goldman once wrote that if you can’t dance, it ain’t the right revolution!
Many of us have also become disillusioned with this so-called “capitalistic” economic system. For these reasons many people are calling for the complete destruction of all economies and money systems. But these suggestions that we should abolish all economic systems are unrealistic, as forms of trade, bartering, and money systems have historically evolved in practically every culture and seem to be almost a natural evolution within human societies. Rather than abolishing money and monetary systems, we should look to transforming and harnessing their power to create a more just, sustainable, and satisfying world for the two-legged, the four-legged, the swimmers, the fliers, the creepy crawlies, the rooted, and all of our other brothers and sisters.
THE BEAUTY AND STRENGTH OF A LOCAL ECONOMY
A local economy is an economy where local people are employed by local businesses who are supported by the greater community. A local economy is one in which people are interconnected and interwoven into a common fabric that is integral to the health and strength of the community.
Let’s take a look at why local economies are so important and why recentering our economies around communities and bioregions will bring about greater health, beauty, and resilience. Kirkpatrick Sale, in his classic book on bioregionalism, Dwellers in the Land, puts forward a list of reasons why a “careful and deliberate policy of self-sufficiency” will eventually lead toward long-term economic stability and health. They are:
1. A self-sufficient bioregion would be more economically stable, more in control of investment, production, and sales, and hence more insulated from the cycles of boom-and-bust engendered by distant market forces or remote political crises. And its people, with a full close-up knowledge of both markets and resources, would be able to allocate their products and labor in the most efficient way, to build and develop what and where they want to at the safest pace, to control their own money supply and currency value without extreme fluctuations—and to adjust all those procedures with comparative ease when necessary.
2. A self-sufficient bioregion would not be in vassalage to far-off and uncontrollable national bureaucracies or transnational corporations, at the mercy of whims or greeds of politicians and plutocrats. Not caught up in the vortex of world-wide trade, it would be free from the vulnerability that always accompanies dependence in some degree or other, as the Western world discovered with considerable pain when OPEC countries quadrupled the price of the oil it depended on, as the non-Western world experiences daily.
3. A self-sufficient bioregion would be, plainly put, richer than one enmeshed in extensive trade, even when the trade balance is favorable. Partly this is because no part of the economy need be devoted to paying for imports…Partly this is because enterprises can devote themselves to their own markets and undertake what Jane Jacobs calls ‘import-replacement,’ a process with economic and creative multiplier effects that enrich all segments of the economy. And partly this is because the region does not have to spend its money on one of the all-important costs of any commodity—in many cases the predominant cost—of transportation.
4. A self-sufficient bioregion would be in control of its own currency, so it could receive immediate feedback on the workings of the economy and avoid the structural flaws that beset most regions whose money is largely controlled from without. Local currencies, moreover, can be kept steady and basically free from inflation (especially if hoarding is discouraged by taxing accumulation), can be manipulated to bolster faltering industries or services, and can usually be confined to the region to encourage reinvestment and prevent the flight of capital.
5. A self-sufficient bioregion, finally, would be healthier and able to enjoy a more productive economy on the one hand while escaping the massive expenditures of medical treatment on the other. Not only could it be free of the chronic disease, diabetes, diverticulitis, tooth caries—that are known to increase in perfect synchronization with the GNP, but it can spare itself the applied toxicity we now take for granted. Locally grown and marketed foods, for example, do not need to be sprayed with chemicals to make them appealing or increase their shelf-life, nor to be stored with insecticides and rodenticides, nor to be processed and packaged with polymers and plastics. Besides, being fresher, they will simply be more nutritious.
COMMUNITY CURRENCIES
It is too late to try to reform our economic system—depression and collapse are most likely inevitable. Such is the result of an economy or any other human institution that has growth, greed, and exploitation at its center. This makes difficult the question of how we are to ‘fix’ our economic system. There are many proposals of how to reform our economic system to become more sustainable and to respect the rights and dignity of people. True-cost economics, natural capitalism, and other various propositions have been made to create a sustainable and just economic system through reform. Reform of our economic system, however, has proven all but impossible. And there is also an important question when proposing economic reform as an answer to “fix” our economic system: If an economic collapse is indeed likely, is it worth spending our time trying to reform the economic system? If reform is indeed a worthy path, what are the most significant and effective changes that we could make? Are there any methods that we could both reform the system while also protecting our communities from the collapse of the US dollar? Fortunately the answer to this last question is “yes.”
Community currencies can be used both to revolutionize the current unsustainable and exploitative economy into a more sustainable and justice economy while also protecting our communities. Perhaps a list of the benefits of community currencies would be useful.
1. Using community currencies creates a “bias toward local sustainability.”
2. Two, community currencies discourage greed and hoarding.
3. Community currencies can survive the collapse of globalization and the destabilization of national currencies. In fact, they can actually thrive in a climate of economic depression as was demonstrated in the Great Depression.
4. They strengthen local communities by promoting self-reliance and solidarity.
For these reasons, we should seriously consider how community and complimentary currencies can play a central role within the community relocalization movement.
COMMUNITY CURRENCIES IN THE GREAT DEPRESSION
Despite our unfamiliarity with community currencies, the concept is not a new one. Community currencies have played a vital role throughout the history of money; the most significant recent usage was during the Great Depression. Communities that had community currencies, by and large, faired much better than those who did not. The various currencies used during the Great Depression gave power and strength to local economies, keeping communities running and workers employed, despite the fact that the national currency had lost all significant value.
DIFFERENT CURRENCIES FOR DIFFERENT COMMUNITIES
There are several different ways of setting up and using community currencies. There are also different levels at which these currencies can be used. Here we will examine the different types of community currencies that are being used today. We will also examine currencies that have been used in the past, as they too can illustrate which type of systems are most pertinent and useful to the relocalization movement.
An important advantage of community currencies is their ability to be diverse and flexible. No one currency or money system is right for every community—different currency systems can be used according to geography, population needs etc. Different strategies, different communities, different folks. Likely, many communities will develop new and innovative systems that have yet to be even considered. Currently, new currency models are being developed by leading thinkers of the community money systems.
Growth of complementary currencies across the world
from Bernard Lietaer’s “The Future of Money.” *note that
U.S. complementary currencies have
been in a slight decline since the mid-to-late 90s.
THE DEMURRAGE CHARGE
One important function that can be built into a currency is a demurrage charge, which essentially is a negative interest rate on money that discourages hoarding while encouraging sustainable practices. It is also euphemistically called a “sustainability fee” for this reason. Under this system a small negative interest rate would be charged for hanging onto a currency so that the money holder is encouraged to quickly invest or use the money. In effect what a demurrage/sustainability charge does is separate the means of exchange (the objects we use as money to exchange goods) from the store of value (the objects we use to store value), making community and complementary currencies good as a means of exchange but practically worthless as a store of value. This motivates participants to spend money quickly and wisely. Lietaer describes the demurrage/sustainability charge as follows:
Under the proposed system, the incentive works in the opposite way [of the positive interest system]: income in the future would become more valuable than income today, thereby automatically prioritizing the long-term implications of today’s actions. Once the basic necessities of life are covered, the logical uses of money in this new context would include investing in ways that will reduce expenses in the future (pay back mortgages, improve home insulation, improve energy efficiencies, start one’s own food gardens) and investing in anything that will keep, or increase in, value (land improvements, trees and forests, and anything else that grows over time). To prepare a nest egg for your grandchildren’s college, one logical step is to plant a small forest or have a “savings account” that invests in such activities…people would tend to build houses intended to last forever—and spontaneously invest in further insulation and other improvements whenever they have extra cash. It is important to recognize that there would be no need to provide tax incentives or otherwise ‘educate’ people to do all these things. We just reprogrammed the ‘invisible hand’ of financial self-interest to provoke these actions. Today, many people try to convince others to act in an ecologically responsible way, but it is in the financial interest to do the opposite. With the proposed system, economic self-interest pulls automatically in the direction of ecologically sound actions. Only by such realignment of economic and moral motivations can we expect truly massive changes in behavior patterns.
Interestingly, most community currency systems are not using a demurrage/sustainability charge, despite these apparent benefits. Lietaer believes this could be a significant missed opportunity. He writes that, under a system of complementary currencies with a built in demurrage/sustainability charge, “decisions would be highly decentralized, given that any recipient of the currency would become actively involved in spreading the currency and thereby activating the job creation process.” Further, he writes,
“The majority of the present systems simply use a ‘zero interest’ concept. In contrast, the majority of local currencies implemented in the 1930s explicitly built in the demurrage idea, typically through the process of requiring periodic application of stamps. Stamps are a primitive way of achieving the desired objective; today, with smart cards or electronic accounting for local exchange (LETS) systems, demurrage could be achieved much more effectively and conveniently by simply programming a small charge on outstanding balances. This small step would have several substantial benefits: Every participant in the local currency system will become a motivated promoter. One of the features that many organizers of LETS system have noticed is that over time the originators tend to remain the dominant force promoting the system to new users. Some systems simply die when their original promoter is no longer available for this. Paul Glover, the founder of the Ithaca money system, mentioned that he spends a good deal of his time convincing new participants to accept the money. This is typical, because the other members have no major incentive to actively promote new participants: they can just keep the currency until they have some use for it. In contrast, in Worgl or Swanenkirchen in 1930, each participant was personally motivated to convince his butcher, baker, or cousin to accept the money. One of the reasons that local currencies have multiplied in number today but have not spread as widely as in the 1930s is this structural difference in motivation for member participants. More jobs will be created. Community currencies now tend to create no more jobs in the community than normal currencies. This was not the case in Worgl, for instance, where we noticed that every shilling of Worgl money created fourteen times more jobs than a normal national Shilling.”
According to these arguments by Lietaer, a demurrage/sustainability charge is an important structural design consideration that can encourage sustainability and promote the community currency system while discouraging hoarding and short-sighted economic practices. Work needs to be done to more fully research and experiment with the concept within community currency systems in order to determine how they can be most effectively designed and implemented.
At OPOA, we propose the following observations that might be helpful to folks starting currencies within their communities:
1) The currency should be simple, straightforward, and easy to use.
-not requiring membership
-not requiring full-time employees to facilitate
2) There should be a personal incentive to use and promote the currency as much as possible.
-a demurrage fee would accomplish this
3) The currency should be measured by the hour.
-use of the hour as the unit of account
4) It should include a demurrage charge to thwart hoarding and promote sustainability
-this “sustainability fee” could be used to fund local organizations, particularly
those oriented toward community relocalization
5) It should be able to survive a collapse of the dollar
-not linked or dependent on national currencies
-not dependent on computers or other advanced technologies (though computers and other technologies could be used, the community currency system should not be dependent upon them in case of a severe breakdown in energy and technological infrastructures)
-it may be wise to use several important local commodities to back the community currency
7) The currency should use mutual credit where the exchange is decided by the two parties involved.
8) The currency, above all else, should encourage personal responsibility, Peoplecare, and Earthcare.
9) The currency could be somehow connected to local agriculture and farmers’ markets.
Beyond the design of the currency there are other important considerations that must be accounted for: timing and leadership. Lietaer writes that, “There are three key ingredients in the successful implementation of a complementary currency system: good timing, quality of local leadership and a valid design…Perhaps the most important factor to start a local currency is local leadership. Someone, or some group, is needed with the combination of vision, entrepreneurial capability and charisma. Vision to see that another way is possible, and to adapt whatever model is used to local circumstances. Entrepreneurial capability to decide to do something about the situation, and be effective at it. And finally, charisma to convince your community to follow you. If one of these three leadership characteristics is missing, it ends up as either ‘just talk’ or a failed project, of which there are man. However, when these three capabilities are gathered in one team, they can generate the credibility that is crucial for a successful complementary currency system…money ultimately is about trust, and thus about the trustworthiness of the people who will be promoting the system.” (We examine ways that the relocalization movement could build leadership in Chapter…..)
DIFFICULTIES OF COMMUNITY CURRENCIES
Steven DeMeulenaere says the main reasons why community currencies aren’t are successful in the U.S. as they could be is that a) people are too timid, isolated/alienated, or lacking a sense of community, b) people’s basic needs are already met within the regular economy, c) mobile population.
Perhaps ironically, these constraints that limit the possibilities of community currencies are going to disappear more and more as the crises begin to emerge: a) either we learn to live in community or we will perish, b) people’s needs won’t be met by the regular economy, c) people ain’t gonna be so mobile in the near future.
DeMeulenaere writes that, “If the conventional economy already provides full employment and a high standard of living, then there may not be a need for people to participate in parallel currency systems…In times of economic downturn, research shows that [parallel currency] systems boom, displaying a counter-cyclical tendency. As people’s need to trade increases, so does participation in the parallel system.”
This is a good thing. The more our economy declines, the power community currencies will gain. In effect, we don’t need to create perfect local currency systems that are widely used by the entire community prior to the impacts of an economic decline. We need only to establish small but effective community currency systems that wisely position themselves to be ready to flourish and grow as the US dollar wilts and crashes. Not longer will the “greens activist” types have to work tirelessly to promote community currencies as the right thing to do, as adopting community currencies might be the only thing to do. The difficulties of environmental conditions, demographics, and leadership will likely be overcome by overwhelming demand to trade with the only currency that is of any value within the community.
Examples of paper currency for Ithaca Hours,
a successful complementary currency currently being used in Ithaca, NY:
LOCAL CURRENCIES WITHIN THE RELOCALIZATION MOVEMENT
Local, Community, Complimentary, and alternative currencies could (and I think should) be at the heart of a relocalization movement. In addition to protecting and buffering communities from the destabilizing effects of a completely unsound US dollar, they could be used to fund and facilitate the day-to-day activities of local organizations within relocalization movement while simultaneously building networks and empowering local communities.
Unemployment is likely to be a huge issue in a post-peak oil world. Non-profit, non-governmental organizations promoting sustainability and relocalization activities (such as those discussed in Chapter…) could be given funding via a demurrage charge on currencies. They could use this funding to hire and pay citizens—particularly the young, the elderly, and other folks within the community who may have difficulty finding work—to engage in community building and relocalization activities. Imagine a group of senior citizens—elders—teaching and helping a group of small children planting fruit and nut trees and berry bushes around town. Not only would they be creating a beautiful and edible landscape, they would also be teaching, learning, and growing together in a rich and interactive process.
This is somewhat of an intuitive feeling I have, but I think there is an important link between local and sustainable agriculture and local currencies. We should examine how we might be able to link and strengthen the two simultaneously. Steven DeMeulenaere writes that, “the availability of essential goods such as agricultural produce is important in reaching ‘critical mass’, the point at which the range of goods and services attracts people for that reason, without having to engage in extensive promotional efforts. Since labour is a significant component of almost all agricultural production, significant potential exists by using parallel currencies to integrate rural and urban economies and improve distribution methods.”
First, the problem of unemployment could be used as an opportunity to create a win-win situation for every one involved. It will be possible to give work and education to the unemployed by filling the gap that the breakdown of modern industrial agriculture will leave. As industrial agriculture breaks down, we will have to turn to more labor-intensive means of producing our food, which incidentally will be much more sustainable as well as satisfying. This will create an enormous opportunity to give good, honest work to people in need in exchange for good, honest pay. If employees were paid in community currencies that were based on the hour as the unit of measure with a value of say 10 dollars an hour, this would ensure that workers would not be ruthlessly exploited as they are in our current wage-slavery system. This would also promote the spread of the currency as a means of exchange as the World demonstrated during the 1930s.
Community Centers and Bioregional Colleges (as discussed in Chapters X and X respectively) could honor payments in community currencies by giving reductions in prices for using community currencies. I also wonder if and how a community currency could be backed by locally grown agricultural products.
The first and best place to initiate community currencies, I think, might be at local farmers’ markets. Perhaps shoppers at farmers’ markets could be issued a certain amount of community currency after spending a certain amount of money at the market. A community could, for instance, give ten dollars of community currency out for every hundred dollars spent. In turn, the growers would be pleased to accept payment in the form of the community currency because they would know that it’s use directly supports the local grower.
Further, all groups, organizations, and businesses working around and aware of the relocalization movement would have a very real cause to join and participate in promoting and using community currencies. Bioregional colleges, as outlined in this book, could be funded in part through community and local currencies. Because we have lost the knowledge and skills of self-reliance and earthcare, education on these topics is likely to be in high demand. People will come from outside of the community to learn the techniques of growing a bioregional garden, how to care for and train draft horses, and learn how to apply the principles of permaculture to their land. A multi-regional currency could facilitate these transactions, while community members could use the local community currency to pay for the courses at a significant discount. If we were to initiate the non-profit relocalization organizations described above, a good part of the currencies being transacted to pay for workshops and courses would be coming from community members working to relocalize, strengthen, and beautify their communities. Thus we would be creating positive feedback loops in which everyone benefits and the community is made better.
Regarding the multiple potential benefits of complimentary and community currencies, DeMeulenaere writes that, “as has been suggested, funds can be generated by fulfilling some large task while launching the new money at the same time.” Indeed, we should consider the potential using local currencies at the very beginning to build the relocalization movement. It may be possible for relocalization groups to create their own currencies to fund this movement, thus bypassing the all-pervading difficulty of under-funded but much needed movement and organizations.
RESOURCES:
Lietaer, Bernard. The Future of Money: Creating New Wealth, Work and a Wiser World. Arrow Books, 2001.
“Was Civilization a Mistake” 1997, published in Against Civilization: Readings and Reflections, edited by John Zerzan, Feral House, 1995.
Berry, Wendell. “Conserving Communities.” Published in The Case Against the Global Economy: And for a Turn Toward the Local, edited by Jerry Mander and Edward Goldsmith, Sierra Club books, 1996.
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