PRINTING MONEY, MAKING CHANGE:
The Future of Local Currencies
by Susan Witt
Published in Autumn 1998 issue of Orion Afield,
195 Main Street, Great Barrington, MA 01230, www.oriononline.org
On May 30, 1998, the New York Times Metro Section
carried a front page story about Thread City Bread, a local
currency issued in Willimantic, Connecticut. Within a few
days CNBC, ABC World News Tonight, Voice of America, Fox
News in Boston, Northeast Magazine, as well as several
regional papers, TV and radio stations had swooped into
Willimantic to interview selectpersons, bankers, and shop
owners about their homemade money.
Popular during the Great Depression of the 1930s when federal
dollars were in short supply, local currencies are experiencing
a revival in North America, but for new reasons. In the
1990s small towns and inner city neighborhoods are discovering
that local scrip helps to define regional trading areas,
educate consumers about local resources, and build community.
Willimantic joins the more than 65 different communities
in the United States and Canada where you can use colorful
bills with names like Dillo Hours and Barter Bucks for anything
from buying groceries to having your hair cut or your computer
repaired.
It started in 1989 when Frank Tortoriello, the owner of
a popular restaurant in the Southern Berkshire region of
Massachusetts, was rejected for a bank loan to finance a
move to a new location. In a small community word spreads
quickly. The Berkshires are also home to the E. F. Schumacher
Society. All of us in the office knew the Deli; we ate lunch
there and recognized that Frank had a committed clientele
who could afford to take a risk to keep the cherished luncheon
spot in business. We suggested that Frank issue Deli Dollars
as a self-financing technique. Customers could purchase
the notes during a month of sale and redeem them over a
year’s period after The Deli had moved to its new location.
Martha Shaw, a local artist, donated the design for the
notes which were dated and read “redeemable for meals
up to a value of ten dollars.” Frank sold ten-dollar
notes for eight dollars and in thirty days had raised $5,000.
Over the next year, Frank repaid the loan, in sandwiches
and soup, rather than hard to come by federal dollars. Berkshire
Farm Preserve Notes, Monterey General Store Notes, and Kintaro
Notes soon followed in what looked like a movement.
Paul Glover of Ithaca, New York, saw the media coverage
of the Berkshire notes and liked the idea of hand-to-hand
currency that let consumers support local business through
pre-purchase of products, but he wanted to broaden the concept.
Instead of each business issuing its own notes, why couldn’t
the community as a whole issue a local scrip? To learn how
this might be done, he spent a week doing research on the
history and theory of regional issue of scrip at the E.
F. Schumacher Library, and had long discussions with one
of its founders, Robert Swann, who has spent a lifetime
promoting local currencies.
Back in Ithaca, Paul talked to those who were running small
businesses out of their homes. As is typical in rural areas,
many people support themselves not with one $25,000-a-year
job, but with five $5,000-a-year cottage industries. They
bake pies, repair lawn mowers, do landscaping, paint houses,
bookkeep, tutor, and dog sit. Most of these businesses are
undercapitalized and underpublicized and would benefit from
more customers. Paul asked the owners if they would agree
to accept a local scrip for their goods and services. With
nothing to lose, people signed up. Everyone initially enrolled
was “issued” forty dollars worth of local scrip,
denominated in units of hourly labor. Each HOUR note was
valued at ten federal dollars, a fair hourly wage for the
region. Paul printed several denominations of HOUR notes
with pictures celebrating Ithaca’s natural wonders,
children, and famous persons. Heat-sensitive ink, high rag-content
paper, serial numbers, and embossing helped prevent counterfeiting.
HOURTown, the free newsprint paper listing all businesses
accepting Ithaca HOURS, focuses on successful trading stories
to draw in new participants.
Behind the scenes, Paul is always at work to keep HOURS
circulating successfully. He finds out which businesses
have too many HOURS in their till, then sits down with the
owners to recommend ways for them to expand their HOUR usage.
Paul knows which carpenter among the HOUR traders does the
finest carpentry work, knows if the farmer has a reputation
for delivering carefully washed lettuce, and knows if the
guy with the rototiller will get the job done before the
weekend.
Largely as a result of this persistent attention to detail,
$65,000 in Ithaca HOURS are in circulation today, representing
several million dollars in trade in local scrip. An informal
advisory board, the Municipal Reserve, keeps an eye on how
the scrip is circulating and whether and how more should
be issued. There are 370 area businesses—contractors,
farmers, restaurants, movie theaters, masseurs, the local
credit union—that now accept partial payment in Ithaca
HOURS. In fact, when bidding the contract for improvements
to their new offices, Bill Meyers, the president of Alternatives
Federal Credit Union, specified that the contractor must
take part payment in Ithaca HOURS. The message was loud
and clear: non-locals need not apply. Meyers explained that
the winning contractor then became, of necessity, a promoter
of Ithaca HOURS to subcontractors, further accelerating
trade in scrip and adding new businesses to the growing
list of participants. The use of local scrip gives a positive
advantage to small, locally-based businesses, which recirculate
the wealth they have generated back into the community.
The Ithaca Hours Hometown Money Starter Kit has inspired
groups around the country, each working to develop courrencies
that are right for their particular communities. For Paul
Glover and other visionaries of the movement, local scrip
is much more than a device for revitalizing the local economy.
It provides a direct way to respond to the alienation we
experience in an expanding global economy, and restore the
possibility of regional economies based on social and ecological
principles.
In a simple barter economy production methods are highly
visible. The value of the carrots we offer in trade is directly
related to our memories of hoeing in the garden, of building
the compost pile, and of waiting for the rain after planting.
And though our picture of the cordwood for which we are
bartering is not as detailed, still we probably have seen
our neighbor as he split and stacked the wood from the ash
tree. Barter transactions link us inextricably to a particular
place and time.
Money, for all its obvious advantages, introduces an element
of abstractness into the economic process. This was less
so in the past, when real goods were used as currency, or
to back currency or denominate units of currency. Value
was still understood in terms of the amount of labor applied
to natural resources. When the Tibetan herdsman traded a
brick of tea (once used as currency in Tibet) for his lamb,
he had a picture of tea brewing in a bucket over a fire
in a yurt, and could imagine the days it took to cultivate
the tea plant on its mountainside plantation and the hours
of bending to gather the tiny new tea leaves. He could compare
in his mind the value of a generalized brick of tea to that
of the actual lamb in his arms.
Most of today’s national currencies are no longer
commodity-based. They are at best pegged to each other,
or tied in a vague way to the general productivity of the
country of origin. At the end of the twentieth century money
has become altogether abstracted from our daily experience.
We talk of earning 6% interest, but have no picture of “what
our money is doing tonight”— whether it is working
to build wheelbarrows in Brazil, grow corn on chemically
fertilized land in Iowa, or make shoes in a crowded factory
in Thailand.
One of the crucial tasks of the new century will be to
so shape our economic system that environmental and social
safeguards are built into its design. Advocacy for better
working conditions and nonpolluting methods of production
will certainly play a part in this reshaping, but theoretical
knowledge by itself will not necessarily stimulate a change
in our consumer habits. Rather, we need to be able to picture
the manufacturing processes so clearly that we are compelled
to demand secure conditions for the workers, and to restore
the waters poisoned by toxic waste.
By intentionally narrowing our choices of consumer goods
to those locally made, local currencies allow us to know
more fully the story of items purchased, stories that include
the human beings that made them and the minerals, rivers,
plants and animals that gave of their substance to form
them. Such stories, formed from real life experience, work
in the imagination to foster responsible consumer choices
and re-establish a commitment to the community. In this
sense, local currencies become a tool not only for economic
development but for cultural renewal.
This multilayered nature of local currencies has captivated
and energized an informal network of practitioners, who
regularly communicate via e-mail and articles and who attend
conferences where they share successes, problems, and new
ideas. The 1996 and 1997 Decentralist Conferences sponsored
by the E.F. Schumacher Society at Williams College drew
a strong showing of activists from around North America.
Pioneers of the movement were there to give workshops—people
like Paul Glover, Diana McCourt and Jane Wilson, founders
of WomanShare in New York City, Tim Mitchell and Gurunam
Kaur Khalso of the Valley Trade Connection. George Washington
University law professor Lewis Solomon, provided legal expertise
(to the frequently asked question, are these currencies
legal, the answer is, yes), and Australian businessman Shann
Turnbull explained how local currencies can be used to finance
appropriately scaled businesses in developing countries.
Informal discussions lasted late into the night, as participants
struggled over such practical questions as how to determine
the optimum amount of scrip in circulation.
In February of 1998 Jim Masters of the Center for Community
Futures held a conference in San Francisco that introduced
social service organizations to the possibilities of integrating
local currencies into their programs. Jim, who has been
working with government-funded social service agencies since
the Johnson administration, felt intuitively that local
currencies are a powerful and creative tool for building
sustainable communities, especially in a time of collapsing
public budgets. The conference brought representatives of
social service groups from Chicago to Honolulu together
with local currency activists and experts in non-scrip programs
of local exchange. Edgar Cahn spoke of how Time Dollars,
which are issued by non-profit organizations to those providing
volunteer services, could be utilized to foster a climate
of neighbor helping neighbor. Canadian Michael Linton explained
the Local Economic Trading System (LETS), which has no hand-to-hand
scrip but rather uses a centralized computer to keep track
of service exchanges.
The social service providers were especially attracted
to the job-creating potential of HOUR systems. However as
managers of large organizations, they know what it entails
to sustain a successful program. They wondered how a local
currency system could support professional management to
oversee long-term operations. A significant part of discussion
time at all three conferences was devoted to this question,
and to the related one, how to involve more main stream
businesses in trading in a regional scrip? The future direction
of the local currency movement will be shaped by developments
in these areas.
The small home-business owners who first enroll in the
HOUR programs may be the folks most in need of a revitalized
local economy, but they lack the income margin to pay the
management costs for such a system. The co-ordination for
most HOUR programs has for the most part been carried out
by volunteers. As a result while they are often showered
with media attention, the majority of local currency systems
do not have the staff and financial capability to meet their
full potential.
Some local currency systems issue a small percentage of
the total amount of scrip in circulation to make a token
payment to administrators— Ithaca HOURS keeps a tight
cap at five percent. But as a general policy, issuing for
administrative purposes can jeopardize the soundness of
the issue. Administration is more appropriately paid from
fees for service.
Other local currency groups are organizing as programs
of existing organizations using the administrative structure
already in place. In Calgary, Alberta, for example, the
Bow Chinook Barter Exchange formed out of a committee of
the Arusha Centre and has received substantial organizational
funding from the Calgary United Way, which views the program
as a means for creating jobs. Still other groups are looking
to affiliate with established local economic-development
organizations.
Several large social service agencies are embracing local
currencies as in-house projects, as changes in federal welfare
laws are forcing them to find employment for their clients.
Unwilling to take single mothers from their homes and place
them in low-paying fast food service jobs, the agencies
use local currencies to develop opportunities for home businesses,
keeping the neighborhoods healthy and mothers at home when
their children return from school. In Philadelphia, Resources
for Human Development, a non-profit organization contracted
to distribute state and federal government assistance funds,
has invested significant time and resources to issue Equal
Dollars. In North Carolina Suzanne Kinder coordinates the
DEPC Dollar program of the Down East Partnership for Children.
Clients are paid for work at a number of non-profit organizations
in DEPC Dollars which can be spent for donated food, clothing,
toys, and other items in the DEPC store.
While these agencies have been effective in operating a
limited local currency system, they are constrained by federal
tax code to serving only their low income clientele. If
they wish to continue to support the newly-formed small
businesses created through their efforts, they will soon
need to evolve their local currency programs to include
the banking community, Main Street businesses, and professional
service providers.
Ultimately it will take a coalition of non-profit groups
and for-profit businesses, working together, to form the
kind of regionally-based, democratically-structured organization
needed to provide long-term management of a local currency
program. In such a model administration costs would be paid
from membership fees. Broad usage of scrip would assure
that wealth is recirculated in the community where it is
generated, supporting a diverse group of regional producers.
Several groups are already laying the groundwork for these
developments.
In the Southern Berkshire region of Massachusetts, we are
lucky to have a healthy local banking community with a strong
record of community reinvestment and partnership. Of the
six banks operating in the region, five remain locally owned.
It was a Berkshire banker who came forward with a proposal
to involve a broad segment of the established business community
in the issue of a local scrip. The program would be based
on a simple ten-percent discount note. Consumers would come
to their favorite bank and purchase one hundred “BerkShares”
for ninety federal dollars. As long as the BerkShares remain
in circulation they would be traded at full dollar value,
encouraging merchants to search for locally produced goods
for their shops and thus opening new local markets for small
home-based businesses. Bank involvement would make it easier
for many businesses to begin trade in local scrip. At the
end of the day merchants would simply deposit excess scrip
at ninety cents on the dollar.
The increased volume of business brought about by a fully
operational local scrip program would more than offset the
ten-percent discount. With a significant base of participants,
the system could charge businesses a yearly fee for service
and so raise sufficient funds to pay for professional management.
Home based businesses might join in the local currency program
at a different fee schedule. The system could be run by
a committee of the non-profit Chamber of Commerce with representation
from various sectors of the Berkshire community.
In Toronto author Joy Kogawa and merchant Susan Braun are
spearheading a similar initiative that would combine the
bank-issued ten-percent discount note with the HOUR model.
The project has already won significant merchant support
in the thriving St. Lawrence neighborhood.
The BerkShare and Toronto projects are just two examples
of program innovation building on the compelling Ithaca
model. In the future local currencies could be issued solely
through the making of productive loans. Productive loans
are loans resulting in new goods circulating in the economy
in excess of the value of the loan itself, such as loans
to a farmer for seeds in the spring generating a bountiful
crop of fall vegetables. The interest rate could be zero
percent, encouraging the development of small local manufacturing
enterprises or renewable energy generating plants that currently
are not economically competitive. Eventually a non-profit
issuer could untie the local scrip from the federal dollar,
establishing a local backing such as cordwood, or a basket
of commodities—corn, soy beans, and wheat for instance—as
was done in the experiment in Exeter, New Hampshire, in
the seventies. In such a scenario, currency would retain
a constant local value related to a natural resource and
make visible once again the connection between the health
of a local economy and the health of the land.
Such ideas, while not new, might have seemed utopian until
a few years ago, when the HOURS programs and other alternative
currencies began to gather momentum. Today when local currency
activists get together, there is no mistaking the positive
dynamic at work. The movement has all the energy, idealism,
and mobility of young adulthood—still experimenting
to find the right form, not afraid to take risks, able to
alter direction as needed, and determined to change the
economic system to reflect their deeply held social and
environmental values.
Susan Witt is Executive Director of the E. F. Schumacher
Society, 140 Jug End Road, Great Barrington, MA 01230, 413-528-1737,
www.smallisbeautiful.org
