PEN-L message, Complementary Currencies

I would be most interested in hearing what other PEN-L’ers think about the feasibility of using complementary currencies today (that is, about the possibility of adopting them beyond local community-based experiences and within the context of a global economy tied primarily to the dollar). Below is brief descriptive excerpt from a paper on the topic by a colleague of mine. Thanks!

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Complementary Currencies

“The budding systems to challenge the hegemony of state-issued, debt-based money have been dubbed complementary currency systems, and at times have been referred to as community currency systems, or local currency systems. According to scholars Gill Seyfang and Ruth Pearson, such systems are “local initiatives which let people exchange goods and services without using conventional money.”^{^[1]} Stephen DeMeulenaere offers a definition which perhaps better captures the intentions of the currency transformation movement:

‘Complementary Currency Systems are appropriately-designed social and economic networks which encourage cooperation and reciprocation, self-reliance and mutual aid, local production for local needs, socio-economic solidarity and economic justice for the meeting of needs, cultural revitalization, socio-economic harmony and rural reconstruction. They use a medium of exchange that circulates together with the national currency to support the local economy in a way that is socially just.’^{^[2]}

Today, CCS takes many forms: mutual non-credit, fiat, mutual credit, and service credit-based. The mutual non-credit CCS is backed by a commodity, and is centrally-issued.^{^[3]} One example of a mutual non-credit CCS is a corporate scrip. This could take the form of frequent flyer miles, or, in one case, “deli dollars.” In 1989, a local deli in Great Barrington, MA found itself in a dilemma. It sought to move locations, but was refused loans by all every bank contacted. The owner decided to issue his own currency to sell to customers, in order to raise the money necessary. Each note sold for $9, and could buy $10 worth of food. What he found was the 500 were taken in a heartbeat, and he was able to gain sufficient capital to complete the move. This inspired offshoot efforts by farms and other local businesses throughout the Pioneer Valley, all of which resulted in thousands of dollars raised which wouldn’t have otherwise been available through the traditional bank lending system.^{^[4]}

Another example of mutual non-credit CCS is the publicly-issued variety. The case of Curitiba, Brazil illustrates the use of this system.^{^[5]} In 1973, most of Curitiba’s 500,000 residents lived in favelas, or shanty towns, and the city faced an enormous garbage collection problem. Garbage trucks often were not able to access these favelas, leading to an accumulation of trash which attracted rodents and subsequent diseases. Jaime Lerner, the mayor of the town, may have opted for a traditional welfare approach to the problem, but the prevalent poverty of his constituency led to a tax base that could not possible support such a strategy. Instead, Mayor Lerner tried a CCS solution.

He announced that public transportation tokens would be made available to anyone who could pre-sort and deposit their garbage and recyclables in bins outside the favelas. Additionally, the sorting of any organic waste that could be used as fertilizer would be payed by “chits,” which could be used to buy food. Without delay, kids living in slum conditions transformed into paid public servants, and Curitiba was transformed into a self-organized, self-cleaning, almost-organic system. The positive results were and continue to be vast. Trash-sorters suddenly gained access to transportation to the center of town, where jobs could be better acquired. The pre-sorted trash was sold to manufacturing companies that could recycle them into new products, and the additional income generated by the city was more than enough to pay for additional transport for the recycling. Cost savings have been achieved by fewer trucks and less gas required for normal pick-up, and disease reduction as well. Today, 95% of the slum population participates in the program, 70% of the city’s garbage is recycled and composted – saving 1200 trees per day – and local industries making use of the garbage have created employment for thousands of slum-dwellers.^{^[6]}

Fiat CCS are similar to the dominant currency systems of the world, in that they are not backed by anything except for the trust of their participants. The HOURS system, developed in 1991 by Paul Glover in Ithaca NY, uses the hour as the unit of account, which is valued at a set price of $10. Additionally, HOURS are negotiable, so that different work can take on different value depending on the transaction. Its membership is 1,500-2,000 people, and its trade volume is now 6,000 HOURS per month. The issuance of currency happens at association meetings, where decisions are also made on grant-making for community projects. An elected Board of Directors oversees the actual printing process. Each new member gets two newly-created HOURS, and can then receive two more every eight months. The success of this system is due to the participation of local businesses, the dedication of its founder (who is still onboard to publish a monthly newsletter of community initiatives), and the self-organizing simplicity of the system. There are forty of these systems known in the US, one in Mexico, six in Canada, and one in the United Kingdom.^{^[7]}

In mutual credit CCS, all users are also currency issuers. Generally, these systems have been adopted by either business associations or communities. In enterprise-based mutual credit CCS, firms trade with each other using credit, usually with the assistance of an intermediary for-profit agency which serves as a clearinghouse of all transactions and records.^{^[8]} The function of these systems is to allow firms to trade excess or unproductive assets and thus raise efficiency and profit. The benefits of membership, which comes with an entrance fee and continuance fee, are new business relations, the reduction of unit costs, the conservation of usable cash for more vital expenditures, and the reduction of unproductive assets – also known as “waste.” This industry is only two decades old in North America, though 180 commercial barter companies in 13 countries (including Argentina, Colombia, Turkey, and South Africa) now belong to a group called the International Reciprocal Trade Association. Trade volume in North America alone is estimated to be $7.5 billion, and is growing at an 8% annual average rate. 300,000 US businesses reportedly used commercial barter services in 1998. The macroeconomic impact of this industry is an increase in stability during recessions, when more productive capacity goes unused and thus the trade of excess assets is allowed to increase.

Mutual credit CCS focused around communities are known as Local Employment Trading Systems (LETS),^{^[9]} and were invented in 1983 by Michael Linton in British Columbia, Canada. These systems are zero-interest, members-only, cooperatively run organizations that usually serve individuals as opposed to businesses. Most accounts are kept on computer, and maximum negative balances are enforced in order to prevent abuses by participants. Nearly 1500 such systems exist worldwide, including 400 in the UK, 300 in France, and 250 in Australia.

The final type of CCS is the service credit system, which uses “time dollars” as a unit of currency. Invented by a US lawyer named Edgar Cahn, the service credit system awards one time dollar for every hour of social service given by the system’s participants. Accounts are registerred in local computerized “Time Banks.” Service credit CCS has integrated educational institutions at the high school and university level, religious institutions, and public social agencies. Over 100 systems in 38 states are known to exist in the US, although no such systems have been discovered elsewhere in the world.

NOTES

^{^[1]} Pearson, Ruth; Seyfang, Gill. “Time for Change: International Experience in Community Currencies.” Development. 2001. http://www.appropriate-economics.org/materials/past_post_future_development_-_Seyfang_&_Pearson.pdf.

² Homepage, Appropriate-Economics.org. http://www.appropriate-economics.org/

³ Lietaer, Bernard A. “Community Currencies: A New Tool for the 21^st Century.” http://www.transaction.net/money/cc/cc01.html, p.9.

⁴ Lietaer, Bernard A. “Community Currencies: A New Tool for the 21^st Century.” http://www.transaction.net/money/cc/cc01.html, p.10.

⁵ Moers, Peter. Community Currency Systems: A Co-operative Option for the Developing World? 1998. http://www.appropriate-economics.org/materials/CCS_-_A_Cooperative_Option_for_the_Developing_World.pdf, p.11.

⁶ Moers, Peter. Community Currency Systems: A Co-operative Option for the Developing World? 1998. http://www.appropriate-economics.org/materials/CCS_-_A_Cooperative_Option_for_the_Developing_World.pdf, p.12-3.

⁷ Moers, Peter. Community Currency Systems: A Co-operative Option for the Developing World? 1998. http://www.appropriate-economics.org/materials/CCS_-_A_Cooperative_Option_for_the_Developing_World.pdf, p.13.

⁸ Moers, Peter. Community Currency Systems: A Co-operative Option for the Developing World? 1998. http://www.appropriate-economics.org/materials/CCS_-_A_Cooperative_Option_for_the_Developing_World.pdf, p.14.

⁹ Moers, Peter. Community Currency Systems: A Co-operative Option for the Developing World? 1998. http://www.appropriate-economics.org/materials/CCS_-_A_Cooperative_Option_for_the_Developing_World.pdf, p.1.

¹⁰ Moers, Peter. Community Currency Systems: A Co-operative Option for the Developing World? 1998. http://www.appropriate-economics.org/materials/CCS_-_A_Cooperative_Option_for_the_Developing_World.pdf, p.18.

¹¹ Moers, Peter. Community Currency Systems: A Co-operative Option for the Developing World? 1998. http://www.appropriate-economics.org/materials/CCS_-_A_Cooperative_Option_for_the_Developing_World.pdf, p.23.

Jayson Funke

Graduate School of Geography

Clark University

950 Main Street

Worcester, MA 01610

"The great reigns are only the enlarged projections of little thieves." - Saint Augustine