Local / independent currencies: introduction

“We should be moving toward local currencies not global or European currencies.” – David Korten

What are local / independent currencies?

Sometimes called alternative, complementary or community currencies, local / independent currencies are currency schemes that are created and run by communities to run alongside the national currency. Independent currencies can be used to purchase goods and services locally, but aren’t legal tender (i.e. they can’t be used to pay taxes).

History

In the early Middle Ages in the Holy Roman Empire, thin metal tokens called bracteates were made and distributed locally by princes and monasteries to serve as media of exchange. They had no intrinsic value, and were recalled regularly, often annually, with a small deduction – enough to dissuade people from holding on to them, and persuade them to spend them into the local economy instead.

original-brixton-pound-shop

The Brixton Pound’s original shop front.

As nation-states were formed, they introduced centralised monopolies on the issuing of the currency. During the English Civil War, the state lost control of the supply of money, and local traders stepped in to produce tokens for local goods and services. These local tokens were banned when the monarchy was restored.

In remote areas of the US in the 18th and 19th centuries, workers in logging or mining towns were often paid by their company in ‘scrip’ – vouchers that could be redeemed in the company store. Unfortunately, the companies raised prices in their stores to fleece their workers, who had no alternative sources for the necessities of life. This practice didn’t become illegal until the middle of the 20th century.

Interview with Stephen DeMeulenaere, Canadian complementary currency specialist and founder of the Complementary Currency Resource Center.

Independent currencies have often been set up in reaction to hardships caused by economic crashes or conflict. For example, several schemes were set up in German-speaking countries between the wars, during the Great Depression. The town of Wörgl in Austria was the venue for a famous experiment with a local scrip currency in the early 1930s. The town managed to buck international trends, increase employment, eradicate inflation and allow infrastructure projects and new businesses to bloom, and was so successful that 200 other municipalities lined up to copy it. The central bank panicked at its potential loss of monopoly, and ’emergency currencies’ like Wörgl’s were banned.

In the 1990s, the Banco Palmas was founded in Brazil, which influenced the development of independent currencies around the world. A fishing community was moved to an inland slum area to free up land for sea-front properties. They were forced to abandon fishing and set up new enterprises. Funds were difficult to obtain, so they created a community bank with their own currency to help local people start their own businesses. Their community flourished.

ewings-token

Tokens issued in Southwark by John Ewing (a local tobacconist) during the English Civil War.

After Argentina’s crash of 1998-2002, many local currency schemes appeared, holding value in local notes rather than the state currency (which didn’t hold its value at all). People saw that you can’t feed and shelter yourself with bits of paper – only what you can exchange for them.

Then in 2006 the BerkShares scheme was born in the Berkshires region of Massachusetts, which inspired more schemes, notably in the UK. Their beautiful notes, featuring local celebrities like Herman Melville, are made on the same presses as federal dollars, and are issued and redeemed by local banks (US banks have a lot more autonomy than UK banks), giving them a high level of confidence. Initially, $10 worth of BerkShares could be bought or sold back for $9, to persuade people to buy them and dissuade people from turning them back into dollars. and it was hoped that the increased velocity of local trade would make up for this initial loss of value. The fact that in time, the ratio had to be changed from 10:9 to 20:19 seems to indicate that this wasn’t the case.

How local currencies give value for money – TEDx talk, Brixton.

In 2007, the Transition Movement in Totnes, Devon, attempted to replicate BerkShares, but without the high-quality notes or friendly local banks, and with just one office for conversion back into sterling. They issued an amusing £21 note that could be purchased for £20. The Totnes Pound no longer exists, but it inspired other groups – Lewes in 2008, Brixton in 2009 (followed by electronic currency in 2011), and Bristol in 2012. Many of the notes were bought by tourists (especially the Brixton £10 note, featuring the face of local lad David Bowie), bringing sterling into the local economy. But really, the Brixton Pound was confined to a couple of streets.

The Bristol Pound had more success, and soon they could be used to pay business rates, train fares and for electricity, but again, the use of the pounds in shops didn’t spread far beyond the city centre and waterfront. In reality, most businesses found it an inconvenience – extra admin for notes that were accepted in a few places, rather than notes that are accepted everywhere. These problems were recognised, and the project was transformed into a city-wide electronic payments system – Bristol Pay – jettisoning the notes, but retaining the social objectives.

Berkshares local currency has a business of the month – winners include this compost business.

UK local currencies haven’t survived, but while all this was happening, new systems were being set up across Europe. Some may still be running, but they’re not setting the continent alight. The problem is that although local currencies don’t need conventional money when it comes to trading, they do require conventional money to purchase them in the first place. For that reason, they’ve been labelled ‘proxy pounds’, because they’re convertible, and ultimate control remains with banks.

There are many new monetary initiatives springing up around the world. Tom Greco discusses what works and what doesn’t.

Bracteate from 12th-century Germany.

What are the benefits of local / independent currencies?

Most money in any community these days is spent in corporate outlets: supermarkets, coffee shops, banks, petrol stations etc. A large percentage of this money leaves the community immediately, to pay dividends to shareholders, as well as head offices, advertising campaigns and global distribution networks (these are sometimes called ‘extractive’ companies, as they extract money from individuals and communities). Local currencies do the opposite – they stay in local communities, and are spent over and over again, strengthening the local economy (via the local multiplier effect).

But the benefits are more than economic. Yes, they encourage people to find and support local businesses, but they also strengthen communities through personal interaction as well as trade. There’s a personal touch with local businesses that isn’t possible with a corporate branch, where not only do the staff not have time to chat, but they’re not generally knowledgeable about or particularly interested in the company.

At its height in 2001, the Argentinian Red de Trueque (barter network), using ‘Creditos’ rather than conventional money, was the biggest community currency movement in the world. There’s a revival starting to happen.

A community based on small, local businesses has a unique flavour, rather than the typical, bland High Street full of corporate outlets, resulting in a nation of ‘clone towns‘. Furthermore, small shops create far more (and far more interesting) jobs than superstores; plus supply chains are shortened, reducing emissions and environmental damage.

There are also educational aspects to alternative currencies – about what money actually is, how it travels through and out of communities, and who controls it. Like crypto, they’ve got people used to the idea that the exchange medium doesn’t have to be the official national currency; and their failure has hopefully helped focus attention on alternative approaches, separate from the banks altogether.

brixton-pound-cash-machine

The world’s first local currency cash machine – Brixton Market, South London.

What can I do?

Join a scheme

Local currencies based on paper notes might be going out of fashion, but there are plenty of new ideas for bringing the exchange medium back into community ownership, including blockchain-based ideas: Tempo, a national scheme similar to timebanking; Bristol Pay, as mentioned above; CounterCoin in Stoke-on-Trent; and in Hay-on-Wye, they set up a scheme invoving vouchers that can only be used locally – in effect, a local currency (apart from the fact that traditionally, vouchers are redeemable with one company, but local currencies can be used at any participating business).

Different schemes work better in some areas than others, depending on local circumstances.

There are listings of schemes in the UK, Europe, the US and globally.

local-currencies

A selection of local currency notes from various countries.

Start a scheme

Do some research first if you want to get a team together to start a community currency. The most difficult part of setting up any kind of new monetary scheme, according to the people who’ve done it, is to get your community prepared to support it. The actual printing / electronic / regulatory tasks are not that difficult. It’s all about building community and markets. It seems to be easier in smaller towns, probably due to greater community cohesion, and the advice is to start small and then try to draw more people in. To improve your chances of success, you could get in touch with an existing scheme and offer to volunteer. You’ll learn a lot from the inside.

Perhaps the most promising developments around local monetary and exchange networks are in the mutual credit world – based on accounts with numbers, not paper notes or anything that needs to be bought or redeemed with conventional, bank-issued money.

Thanks to Graham Woodruff of the Bristol Pound for information.

 


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Graham Woodruff founded the Independent Money Alliance in 2014 to help launch independent currencies. He is the CTO at Bristol Pound, the UK’s only city wide currency and is responsible for their innovative electronic currency. He also co-founded the Bristol Drawing School and is a fellow of the RSA.


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