Six months after we published People Money, Triarchy Press asked me to write a shorter general introduction to the topic of local currencies. Six drafts later, the final result was “Local Money – What Difference Does It Make?” 63 pages long, A5 size, so you can read it in an hour or so.
Here is a summary of the pamphlet in case you can’t afford to buy it or have even less time to read it.
Bristol Pound launched in September 2012. What’s the point of having a local currency?
Local money is not a new idea – it has been in use for most of history.
The purpose of the pamphlet is to explain how local currencies work and how local money benefits you, your business and your region. You will discover the practical difference between local and national currency. Finally, I will give you some tips for action.
CHAPTER 1 Local Money in Action
A simple invented story about how local money works.
We see a local business owner get a dual loan in national and local currency from her Community Bank. The local currency loan is interest-free. She part pays an employee in Local Pounds who uses it to pay part of her rent. The landlord pays maintenance people with it and also makes local currency donations to the local amateur football club. The club also earns Local Pounds by hiring out its facilities and equipment. Local businesses can pay part of their rates to the local authority, which uses local currency to pay for maintenance work. Local citizens can pay for local authority services like bus rides in Local Pounds.
The Community Bank also issues Time Credits for community volunteer work. These credits are used to support community projects and can be exchanged at Food Banks etc.
All of the elements in this story are happening for real in a local currency system somewhere in the world.
CHAPTER 2 National Money – what it can and cannot do
National money allows us to meet the complex needs of a modern nation. We can use it build roads, hospitals and schools, to start and run businesses, to trade with each other, to pay or earn wages, to pay taxes, and to clear debts. This versatility is its greatest strength.
But there is a problem. Most modern money (usually estimated at 97%) is created by privately owned banks as loans. Banks do not create money for the public good, they do it to make a profit by charging interest. We all pay the price for our need for money to stay alive, buy essentials, travel, do business. And the banks make a profit on our need.
Interest-bearing loans create personal and business debts and can create debt slavery. The whole nation is also a kind of debt slave. The National Debt began in 1694 with the formation of the Bank of England and grew after every major war. There are no signs of it ever being ‘paid off’ although politicians like to make lot of noise about that.
The need for banks to earn interest and the rest of us to pay it to get access to money is one of the main drivers for growth in the economy. Malignant growth often leads to destruction of the environment in the search for profit.
The whole economic system has been skewed in favour of gambling in the global money markets in the last decades. This is the source of constant crashes and recessions.
National money cannot:
– promise us a stable unit of exchange
– protect us from abuses of power
– guarantee a sufficient medium of exchange when we need it
– prevent inequalities
– ensure a level playing field between the regions.
CHAPTER 3 Can we reform money?
There are various proposals for reforming money.
The Positive Money Campaign in the UK and the American Monetary Institute in the USA both campaign to take away the power of privately owned banks to create money and give back to government its ‘seignorage’ over the issue of the medium of exchange. Governments should be empowered by law to create debt-free, interest-free money. This may be a partial solution to running national services like education and health but it can never be a solution for lack of money at the local level. Local communities would still be dependent on a government committee for how much money was allocated to their region.
Virtual currencies like Bitcoin have made great waves by promising to bypass both banks and governments and provide an international medium of exchange. Supporters claim it is a radical ‘game changer’ that will transfrom finance. Critics say it is wide open to manipulation and speculation and really does not solve the problems created by scarce, privately-issued national money.
Local money also has arguments both for and against it. The Telegraph and Guardian newspapers both covered the launch of the Bristol Pound in September 2012. I analysed the reader comments at the end of both articles, both for and against the idea, and listed them in the pamphlet. Later I give some answers to those who are against the idea.
CHAPTER 4 Local Money – what it can and cannot do
We can create enough local money to handle the trades we wish to do. Local money supports values other than profit: local diversity, mutual help, treating people as assets, valuing all types of work, creating strong social networks, protecting the environment.
Local currencies deliberately create two kinds of boundaries: geographical and ethical.
Geographical boundaries ensure that money cannot leak out of the region. It remains to circulate and do more economic good for the region. Ethical boundaries aim to tip the local economic balance in favour of local businesses by excluding or discouraging participation by multi-national chains in the local currency.
Local currencies effectively monetise underused capacity in businesses like restaurants with empty seats or retailers with unsold stock. The local currency enables businesses to get economic benefit from their spare capacity instead of giving or throwing it away.
Local currencies cannot:
– pay legal debts
– pay national taxes
– earn interest
– be traded on international currency markets.
National currencies are really the new kid on the block. They first emerged in the 19th century with the first waves of globalisation. Various forms of local currency have been around for thousands of years. There has been a revival of interest in this ancient form of exchange in recent decades.
Local currencies can be issued by various groups:
– privately owned business (eg business barter networks)
– collectively owned body (eg cooperative, community interest company etc.)
– local partnership of citizens, businesses, voluntary organisations and local government.
Local currencies can be issued in two main ways:
– managing body guarantees or backs the currency (with national currency, guarantee of future purchasing power, rewards, energy, precious metals)
– managing body provides a mutual credit accounting system that records all exchanges.
This is followed by short profiles of: Brixton Pound, London; Blaengarw Time Centre, Wales; WIR Bank, Switzerland; Banco Palmas, Brazil; Equal Dollars, USA.
CHAPTER 5 Talking to the naysayers
In this chapter I provide short answers to the following points made against the idea of local currencies on the Guardian and Telegraph websites (see above):
– They are just a gimmick or middle-class fad
– They are useless to local businesses with supply chains outside the area
– Local shops should concentrate on giving better service if they want to survive
– If you want money to be spent in your area, you should produce something
– They are useless to people on low incomes
– People can just use national currency to support local businesses, why bother?
– They are an attack on free trade
– They could create unfair competition, local monopolies and corruption
– You cannot pay national taxes or settle legal debts with them so they are of limited appeal
– They could not have developed the Apple computer or sent a man to the moon.
CHAPTER 6 What can I do?
Why isn’t there a local currency in every town and region if they are so good?
In reality it takes a lot of work to create a viable local currency, you have to get a lot of things right. There is no one-size-fits-all model of local currency. Each one is created around its unique local operating conditions.
The best way you can support a local currency is to use it if one already exists. You can also be a critical friend. Go to meetings and ask questions about the goals and design of the currency and how it could be improved.
You can also ‘learn the lingo’ of local economics. When I started a local currency system twenty years ago I knew nothing about money or economics, I was just fascinated by the idea of ‘creating our own money’ and started to experiment. It is worth educating yourself about the basics and then getting stuck in to practice.
Other generations faced big challenges: the Industrial Revolution; abolishing slavery; defeating fascism; establishing civil rights for all. The generations now alive must solve the ‘money problem’. We must reclaim money from the speculators and restore it to its role as a medium for trade that serves us all.
We got a very nice endorsement from Ben Brangwyn of the Transition Network who wrote:
“Must-read pamphlet. I found it clear, concise, assertive, inspiring and timely. Miraculously, John Rogers has distilled everything you need to know on this subject into this very easily digested little tome. Seriously impressive. I recommend it to Transition Initiatives.”
More reviews here.