Economics : David Boyle
THE NEW ALCHEMISTS
The local currency revolution means new kinds of money which are kinder to the planet.
THE WORLD FINANCIAL markets are delicate mechanisms, but they have the destructive power of a meteorite.
As I write, they are staggering around with their heads in their hands — and who knows where they will be by the time this article is read? But it seems a good moment to ask the crucial question about money: where does it come from?
There are many answers of course. Some comes from the government in coins
and notes. Most comes from the banks, who conjure it into existence in
the form of mortgages and loans. Some comes from us, but set in rigid
interest-bearing rules: every time our credit card slices through the
till, we cause money to exist.
Credit card companies in the USA now market their products by sending
$5,000 cheques through the post by mailshot. If you want the money, you
can cash the cheque and the card and statement follow through the post.
"Like feeding lettuce to hungry rabbits," according to one American
commentator.
No wonder the average American family manages to amass savings of just
$2,300 after fifty years work. But who created that $5,000? Us or them?
Of course, if banks or governments are going to create more money, they need us to believe in it first. Like Tinkerbell, money needs the belief of those who use it to be able to burn bright. The kind of market collapse we have seen in Russia is actually the collapse of belief.
UNFORTUNATELY, most of us still think that money is the financial equivalent of the stork. We woke up one morning, and there it was — we just had to figure out a way of earning it. The financial world knows better than that, and so — it seems — do the supermarkets and airlines which have been issuing their own.
Tesco, Safeway and Sainsbury’s all issue points to encourage regular customers. A whole range of businesses deal in air miles, which you can spend on an ever-burgeoning array of goods and services, and which then disappear when you’ve spent them.
Northwest Airlines even sell blocks of air miles to charities, which split them up and trade them on at a profit. At one stage they were paying for their worldwide public relations contract in air miles.
None of these innovations helps us to improve either the shortage of money, the collapse of local communities or the damage done by worldwide human greed. But they do open up the possibility of experiments with new kinds of money which are kinder to the planet.
As we know, Local Exchange Trading Systems (lets) in the UK are one such experiment. lets money is available to anyone with time and skills, is not dependent on the increasingly bizarre fluctuations of the market, and does not damage the planet by charging ruinous interest.
Similar ideas are suddenly popping up all over the world. There are now regional scrip systems like Australs in Argentina, Socs in Scotland or Tlalocs in Mexico. There are computerized community barter systems like green dollars in Australia and New Zealand, banco del tempo in Italy and sel systems in France.
But in America, as befits the great money innovators of the past two centuries, the field is even broader, which is why I wanted to track down some of the new alchemists there who are succeeding in turning the base metal of ordinary life into gold.
Time dollars, for example, are a way of providing non-medical services
to older people, keeping them healthy and living at home and helping to
offset the cuts in public spending. They are now operating in 200 US and
Japanese cities, and are being hailed as the elusive key to rebuilding
"social capital".
They were actually developed in the UK, at the London School of Economics
in the early 1980s, the brainchild of the American civil rights lawyer
Edgar Cahn, who envisaged a non-market kind of money which recognizes
the contribution people make to the places they live.
Time dollars record, store and find new ways of rewarding the human transactions
where neighbours help neighbours — like giving lifts to older people,
taking them to the doctor or tutoring local children. One hour is worth
an hour, whether you are a rich lawyer or an elderly widow making supportive
phone calls to neighbours.
"Market economics values what is scarce — not the real work
of society, which is caring, loving, being a citizen, a neighbour and
a human being," said Cahn. "That work will, I hope, never be
so scarce that the market value goes high. So we have to find a way of
rewarding contributions to it."
THEN THERE ARE "hours", the innovative printed currency which
has revolutionized the local economy of Ithaca, in upstate New York. If
time dollars are about building social capital by encouraging public good,
hours are a way of building local economies by exchanging private good.
Like so many other small cities, Ithaca’s local retail businesses
were threatened by large nationwide chains that took money away from local
business and sent profits out of the area. The result was that local incomes
were falling, economic self-determination — such as there was —
was crumbling, and the city was increasingly dependent on expensive, packaged
imports to the area, usually brought in from great distances by multinational
traders.
The self-styled community economist Paul Glover believed that a local
currency, because it could only be spent within a twenty-mile radius of
Ithaca, could at least stem the flood.
"Hours is money with a boundary around it, so it stays in our community,"
Glover told the television interviewers. "It doesn’t come to
town, shake a few hands and then wander out across the globe. It reinforces
trading locally."
Hours notes have the slogan "In Ithaca We Trust", a kind of
parody of the dollar, but it sums up the idea behind it. They are accepted
as being worth $10. By 1996 when I went there, about 5,700 ($57,000) hours
were in circulation around Ithaca, and organizers believed they had been
used to create about $1.5 million in trade among local business since
1991.
The idea has caught the imagination of the decentralist movement in the
usa and imitators now range from Valley Dollars in Massachusetts to K’au
Hours in Hawaii. A similar idea has been launched in Portsmouth in 1998
with the help of Portsmouth City Council, but remains in its early stages.
Time dollars and hours join a range of other local-currency experiments
developed by other new alchemists around the USA. Like Womanshare in New
York — aimed at achieving a kind of psychological sustainability
for its members in New York’s West Side.
Or like the pioneering work being carried out by the E. F. Schumacher
Society in the USA, ranging from farm notes to deli dollars — helping
the local deli to move to bigger premises after they had been turned down
for a loan by the local banks.
THESE EXPERIMENTS are hard to start and difficult to sustain, but they
could help people provide themselves with the money they need — when
it normally seeps away to the big cities and massive world capital flows.
Taken together, they could mean an economic breakthrough for tackling
poverty and social collapse — and on the cusp of a major recession,
it could be an urgent one.
Five centuries ago, the old alchemists like the mysterious Paracelsus
— wandering round Europe in a coloured coat which he never washed
— were the inspiration behind a protestant revolution against the
old order of authority and control.
They toppled the old certainties of medicine and politics with their dreams
of a "chemical revolution" which would restore the wasteland,
attacking monopolies and putting power and medical knowledge in the hands
of ordinary people. The new alchemists are doing the same with money.
They are the vanguard of a money revolution which allows us all to do
what only governments, bankers and credit card operators have been able
to do so far — create money.
So if we don’t like the moral imperatives behind the unreliable kind
of money which dominates our lives now, we can perhaps work together to
create new kinds of money of our own — new kinds of exchange with
different values embedded in them.
This doesn’t mean that local money should be expected to do everything
that dollars and pounds can do. But there are many areas where dollars
and pounds are simply not effective: they do not build communities, they
do not respond to needs, they do not build families, they do not tackle
poverty. diy money — conjured into existence alchemically by local
self-belief — does; and if it provides the means of living that people
need, it could represent the future. •
David Boyle is the author of Funny Money: In Search of Alternative Cash, (HarperCollins). He works for the New Economics Foundation, London.
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