Love it or hate it, whether we have a lot or a little of it, money plays an enormous part in our lives. One of the worst aspects of money is its tendency to accumulate in the hands of the few, and thus cause all sorts of misery for everyone else. This might seem odd, at first; after being disconnected from the gold standard, paper money is not, essentially, worth anything. Its value comes from our belief in it, and from our experience that we can trade it for products that do have value.
And there comes the catch. If people don't have money, then it becomes very difficult for them to access the goods and services they need, regardless of whether they might have something other than money that is valuable. Let's say you have a community that has various natural resources and plenty of able-bodied people willing to sell their time. How do you combine them without money? If the people who own the resources can't pay the people who could sell their labour, how does anything get done?
Similarly, you could have a community where people are going hungry and shops are full of food; the shopkeepers themselves are impoverished because they can't sell to the people who desperately need the food. The problem here may not be poverty per se, but rather lack of money, of the lubricant needed to allow the wheels of the local economy to turn.
Provincial money from Córdoba, Argentina
Not only does money tend to gravitate towards the rich, but it also tends to gravitate out of communities that need it. We bemoan the demise of local businesses, replaced by Big Box and chain stores; local jobs disappear, and places become "Clone Towns," losing that essential sense of place that makes different destinations individual. People in the community earn money and make purchases, but the money continues to flow out to distant home offices; as people grow more dependent on the chain stores, local resilience continues to decline. If a major employer leaves town, the whole place can be devastated.
As with most major problems, there is no simple solution...but a solution there certainly is, and it is gaining popularity around the world. There are many different forms of it, with different advantages and disadvantages. What the different forms of the solution have in common is that they solve the crises that occur due to a lack of money in a community, or to the major devaluation of a national currency, or to the isolation of some community members from those they could help and who could help them. It comes in the form of local money, alternative (complementary) currencies, time banking, and other such manifestations.
Some systems, such as the popular Local Exchange Trading Schemes (LETS), involve using a computer system to track how many hours of time people donate and receive. In Japan, for instance, young people can earn hours, then donate them to their parents in rural areas so their parents can spend it on receiving care that otherwise they would pay for in yen. Time banking can help get people to share their resources and access their needs locally; it also means that a desperate mother who needs a babysitter can book one even if she has no money, so long as she in turn contributes some time when she has it.
Other systems involve printing of money. The money can be designated in hours, with the value being the average wage rate in that area.
What is significant with both methods of using time as currency is that everyone's time is treated as being equal. That may be the most radical aspect of any alternative currency system: to say that an hour of work contributed by a doctor, engineer, or cleaner will all be valued at the same rate. Those who disagree need not sign up, but for the many who do, this democratizing element may be one of the most important motivators for participation.
The issue of the value of different people's time is worth a minor digression, with an acknowledgment to John Kenneth Galbraith for these ideas. We are told that certain professions require higher salaries to compensate for education costs, to entice people into them despite all the years of hard work required to train them, and to ensure that there are enough people in professions that relatively few people have the skills or endurance to enter.
But does that mean people only become doctors, engineers, or professors because of the pay? And how is it that the people who most enjoy their job are typically those with the highest salaries, while those who work only for the money are paid the least? Surely some people would pursue their profession even if the salary were about the same as for "non-skilled" work, due to love of the work, interest in it, desire to help others, access to other benefits such as respect and various other benefits, or fear of the effort involved in manual labour.
Money currency that is not designated in hours can be linked directly to national currency or to a basket of local commodities. Direct linking with national currency does nothing to alleviate the problem of the unfair distribution of wealth; a system whereby everyone could be given some currency to start with, to get the economy moving again, is one I find particularly intriguing. Imagine going into a low-income area with many resources and high unemployment, and seeing the local economy reactivated through introduction of a money system that bears no relation to the national currency. It has worked in the past in many countries to generate employment, when the problem is not lack of jobs, but lack of ability of would-be employers to pay their workers. If you pay some of your wages in local currency, that money will be reinvested in the local economy, because if you want to spend local money, you need to spend it in local shops, preferably on locally-sourced goods. Many such successful experiments did help get communities through tough times, including following World War II; in Europe, they typically were then closed down by central banks, who objected to the lack of interest attached to loans. (There is also the possibility of paying some portion of government salaries in local currency, and of allowing people to use it to pay their taxes.)
The fact that local currency systems do not typically involve interest on loans is significant for anyone concerned about sustainable communities. Repaying loans essentially puts pressure on businesses to have continual growth, in order to have the money to pay the interest on top of the original loan. No interest on loans and no growth could also mean more free time for people running businesses, to spend on all the things we value outside of earning money.
Another interesting aspect is the use by some systems of a "rusting" currency, or demurrage; in many places, the currency expires after about a month, at which point a stamp has to be purchased to attach to the note. The point is to prevent hoarding and ensure rapid circulation of the notes within the community; in this way, the local economy can more effectively be stimulated. There is not necessarily any conflict between the two goals of encouraging more local spending (as opposed to more spending period) and discouraging growth. In a flourishing local economy relying largely on local production, the two go hand in hand.
A mix of different systems could yield a diverse financial ecosystem that would help strengthen local production and local resilience. Peter North, author of Local Money (Transition Books, 2010) suggests that a LETS scheme or time banking could help spur local production and exchange for the things that are easy to produce at home or locally, including sharing food grown on common plots. Local or regional currency could help bring local businesses on board, encouraging local consumption and business-to-business exchange. Local currency loans, via a local bank or credit union, could help develop new local production. Special-purpose currencies could be used to finance local food production, Community Supported Agriculture, and generation of energy locally. Finally, local bonds could be used to update the housing stock to make it more energy efficient, or for neighbourhood improvements to facilitate travel by foot and bicycle. Put together, the possibilities are endless.
There are a lot of issues still to be worked out, and alternative currencies cannot alone stimulate a local economy if there is no local production, though the potential of using local currency to provide loans to create local production is one that is being planned by various projects in England. There is also the need to avoid counterfeiting, and the fact that most systems are built on trust, which can be a Catch22: you need trust to introduce a local currency that would generate the community that would in turn result in more trust. There are many practical decisions in terms of which system to use. It is also important to remember that alternative currencies are complementary to the national or regional currency, and not meant to replace it entirely; the goal is to stimulate the local economy, not close one's doors to trading with the outside.
But despite the difficulties and problems, local currencies and time banking have caught on throughout the world: they have helped Argentina through its worst fiscal crisis, stimulated local trade in communities in various parts of the world, and helped build pride in places such as much-maligned but ethnically diverse Brixton (UK). They are a key step towards building local economies utilizing more local production, and they provide a safer alternative to relying on national currencies which have repeatedly proven unreliable. As the various issues continue to be worked out, they offer one of our most significant hopes for the future, and something worth learning more about now.
A few websites to learn more about local currencies: