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Making Change with Local Currencies
Communities seek out alternatives to the global economy by printing their own money, setting up trading systems
by DEREK REIBER | posted 12.12.02 |
This holiday season, times are tight. Tales of layoff notices and economic recession dominate the news. America's collective faith in business ethics is at an all-time low in the wake of Enron, Worldcom, and a slew of other corporate scandals. In politics, many citizens remain skeptical that the Bush Administration's economic policies will do much for the little guy, as tax cuts target the wealthy and big industry awaits payback for fat campaign contributions.
In these tough times, what can we do to restore our faith in economics? It might sound strange or illegal, but one answer is to print our own money. Yes, you heard me right -- print our very own money. A localized, community version of the old federal greenback, just the right antidote to what activist and author David Korten calls the "global suicide economy," which operates with little regard for the economic vitality and health of local communities.
Local currencies are about "reclaiming commerce as part of the community," said Stuart Cowan, conservation economy director at Ecotrust during the "Going Local: Keeping Dollars Close to Home" presentation during this fall's Sustainability Now! workshop series. "It's a different worldview from globalization. It's about economic relocalization, creating a more diverse and resilient local economy. Local ownership leads to local accountability."
Indeed, during a time when corporations slash their domestic workforce and relocate overseas at a whim, chain stores drain the economic vitality from small-town, mom-and-pop shops, and the federal dollar is no longer backed by Fort Knox's gold but rather by trillions of dollars in national debt, local currencies present a powerful alternative for communities to put their profits back into their own people, creating local jobs, empowering locally produced and purchased goods, services and agriculture.
"In the place of a suicide economy devoted to maximizing returns to money, we can create living economies devoted to meeting the basic needs of people," wrote Korten in the pages of Yes! Magazine. "In the place of a suicide economy in which the powerful reap the profits and the rest bear the cost, we can create a system of living economies in which decisions are made by those who will bear the consequences."
Reclaiming economics and shifting them back to a local level can even the balance for a region that, for example, is particularly resource-rich and export-heavy. Instead of relying on the export of commodities and importing much of those same commodities back into the region as one link in the global economy, a localized economy creates small niches that keep more commodities in the local loop, in turn producing local jobs. Of course, every region cannot produce enough of its own goods to be totally self-sufficient, reminded Cowan, but strengthening the local element strikes a healthier balance between the global and local.
"And a practical way to get back to this balance are local currencies," he said. "After all, commerce and community are interrelated terms. The marketplace and the city used to be one in the old days, because the community was the context for commerce."
So does that mean we can all just start printing our own money, head down to the store, and stock up? Unfortunately, it's much more complicated than that. But done correctly, it can be very successful -- just ask any of the hundreds of communities around the world that are reaping the benefits from printing and circulating their own currencies.
Perhaps the most well-known local currency are Ithaca "Hours," issued in the town of Ithaca, New York. Here's how the Hours got their start:
A decade ago, Paul Glover, a lifelong Ithaca resident, heard the story of Frank Tortoriello, owner of a popular restaurant in the Berkshires of Massachusetts, who was rejected for a bank loan. Members of the E.F. Schumacher Society, a nonprofit dedicated to human-scale communities (and named after the noted author of "Small Is Beautiful: Economics As If People Mattered"), frequented the restaurant and suggested Tortoriello issue his own monetary notes to customers. He sold the ten-dollar notes (good for $10 worth of meals at his restaurant) for eight U.S. dollars. Within a month he had raised $5,000, eventually repaying the contributing customers during the next year in food.
Glover loved the idea, but wanted to take it a step further, with the intention of issuing a local scrip for the entire community of Ithaca. So in 1991, with the small college town still suffering after the recession of the late 1980s, Glover and group of local businesses and residents printed up Ithaca Hours, imprinted with "In Ithaca We Trust" and different symbols depicting life in Ithaca on each of the eight denominations.
Each Hour is worth $10 U.S. dollars, equivalent to roughly the average hourly wage in the area. After an initial sign-up of about 200 participating businesses, now a collection of more than 500 businesses and thousands of people circulate and use the currency, exchanging them for a diverse range of goods and services. Participating merchants are listed in a monthly community newspaper dedicated to Ithaca Hours, keeping residents up to date on which grocery stores, movie theaters, restaurants, farmers markets, plumbers, electricians, carpenters, massage therapists, and any other service you could think of that accept Hours as payment.
"Local currencies," said Glover in E Magazine, "exist to expand participants' economic possibilities. Money was the missing link, preventing good things from happening. If we waited around for government or bankers to provide that money, we'd wait for a long time."
But wait, isn't this all illegal? Isn't printing your own money counterfeiting?
"It's legal to have alternate currency, as long as it's nonnegotiable with federal money," said Cowan. "You can't cash it out for normal cash."
The answer makes sense, but only after some quick rewiring of our brains, which are accustomed to putting value only in the familiar green dollar bills we use everyday. After all, currency is just a means to an end. It can be "issued en masse by a central authority or created ad hoc by two consenting parties in a mutual credit system; it may store value or merely mark transactions; it may be backed or valued with something tangible or merely by the issuing authority; and it may take any shape," according to a website called Transaction.net.
In fact, the nonnegotiable and noncompetitive qualities of local currencies are a big advantage because they keep the notes in circulation, continually passing hands throughout the community. The circulation rate for Ithaca Hours is $1 to 2 million per year, noted Cowan, with many of those transactions creating a new type of economic activity that wouldn't normally occur. With little more than 1,000 participants holding an average of five Hours per person, Ithaca Hours organizers have found it seems to be plenty of currency to cover the local market, because each participant understands the idea isn't about hoarding the notes.
"It becomes fun, because you know where your money comes from. You know you're not getting goods and services from large transnational corporations, but from your neighbors and friends," he said. "Because the Hours circulate so quickly, they generates a high amount of economic activity. It's become a very significant part of the local economy."
Ithaca's success has helped spawn many other local currencies, with Glover even producing a Starter Kit to give communities all the tools and advice they need to launch a new currency. Numerous communities in the Pacific Northwest use their own currency: Cascadia Hours in Portland, Ore.; Salt Spring Island Dollars in British Columbia; Lopez Hours on Lopez Island in the San Juans of Washington; and Sound Hours in Olympia, Wash. are just a few.
And the Ithaca model isn't the only way to localize economies.
Started during the 1980s in British Columbia, the LETS system differs in that it doesn't issue a physical currency, instead using a system of checks and balances in a big I.O.U program. LETS (Local Economic Trading Systems, or alternatively meant to embody the "Law of Two Feet," meaning "If you like it, you walk in. If you don't, then you walk away") requires members to keep strict accounting of their trades of goods and services, such as a neighbor washing your car or mowing your lawn for you, and in turn receiving a credit while you receive a debit in a centralized "bank."
"LETS are typically small, and members rotate the tasks of logging in transactions. It works on an open accounting system," Cowan noted. "The members mutually balance the system by trading transactions."
Cowan added that there are more than 1,000 LETS systems throughout the world, and they are extremely popular in some places, such as Australia, where some LETS memberships boast thousands of participants.
Of course, local currencies and LETS systems aren't the complete answer to our current economic woes. It's just not feasible for everyone to suddenly convert exclusively to local currencies. But when balanced on a regional scale with federal dollars, local economies can create tangible, real ways for communities to keep control over how they want to conduct business. Local currency embodies relationships and connections, creating a marketplace where people connect with each other face-to-face, instead of isolated and marginalized in an increasingly impersonal and inequitable global economy. As it turns out, in today's trying times, going local might just be the antidote we need.
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