Sustainable Wallingford

learning to live on one planet with grace and joy

I attended the May 22-24, 2009 Transition Town Conference in London.
This is what I learned about money (I also brought back a couple of Lewes Town Pounds -- if you want to see them let me know):

Even prior to the economic breakdowns we are now experiencing, economists who study globalization found that only about 20 percent of the money you and I spend in our friendly local chain store stays local while the other 80 percent quickly zips back into the global market vortex of manufacturers, distributors, transporters, and, of course, investors. Spending your money in a locally-owned business has the inverse effect, with 80 percent of money you shell out bouncing around for a while in local wages and suppliers. Local currency systems keep money circulating locally even longer. That’s a good thing for building local skills, products, and resilience into floundering communities. Keeping things local also has a profound effect on lowering the amount of embedded energy and carbon in the things we buy.

The global economic breakdowns make thinking about local economic systems an attractive alternative. At the 3rd Transition Town Conference in London on May 22-24, 2009, I learned about Time Banks, LETS (Local Exchange Trading Systems), and local currencies – three economic models currently being implemented in Transition Towns.

The alternative economic models used in Transition Towns were described by Peter North who teaches geography at Liverpool University and authored the Transition Guide to Money (Green Books 2009), Josh Ryan-Collins, an author and researcher at the New Economics Foundation, and Oliver Dudok van Heel, a tutor in Sustainable Business at Cambridge who helped to launch the Lewes Town Pound.

Throughout human history people have found that being “cash poor” doesn’t mean economies stop. People always have skills and goods that other people value. The question is finding the best models to effect fair exchanges.

LETS and Time Banks are voluntary opt-in systems that are rapidly gaining in popularity. Several software packages exist to keep track of member hours and taxable income for LETS and Time Banks (it is hard to get away from the government even in alternative economic systems).

Time Banks value people’s hours equally. An hour of legal advice is paid at the same rate as an hour of massage or an hour of childcare. (I’ll take the massage please.) Lawyers tend to be less than enthusiastic about Time Banks. Transition Town Norwich has been one of the more advanced Time Banks with local people keeping track of their time earnings in Norwich Lokes.

LETS value goods and services more like traditional commercial markets. Professional skills are usually pegged to real world costs, and unlike Time Banks, LETS tries to involve local businesses as partners. LETS tend to be good at managing service exchange but less effective in involving local businesses. On the other hand, local businesses have been strong partners in alternative currency systems such as the Totnes and Lewes Town Pounds.

Most local currency now being issued is pegged to the currency of the dominant culture with a discount. I can now buy $100 worth of BerkShares in Massachusetts for $95 US or 100 Totnes Pounds for £90 pounds sterling.

In an ideal local currency system, all of the local businesses in the community agree to accept the local form of payment, and in turn pay their employees and local suppliers in local currency. In an ideal local currency system, the small business owner also uses her local currency to pay other merchants – to buy clothes or go out to dinner or pay to repair her bicycle. And of course she’ll give me my change in local notes too.

So far, local currency systems are still working out some bugs. Local currency developers in the small UK Transition Towns of Totnes and Lewes have spent untold hours convincing local merchants to use this new form of cash. Small business owners just don’t want one more thing to keep track of in their till and are worried that their customers, suppliers, and employees won’t accept non-standard banknotes. Introducing a new currency takes a lot of hand-holding as merchants adjust to a new concept.

Consumers are an easier sell. In order to convince people to buy into almost every local currency system, money is sold at a five to 10 percent discount. In the small town of Lewes (pop. 16,000) thousands of pounds are in circulation. In the Berkshires, millions of dollars.

The Lewes Town Pound has been such a success that it is being issued for a second time on July 3, 2009 in denominations of L£1, L£5, L£10 and L£21 notes. (The L£21 notes will highlight the fact that five percent of the currency goes into a Live Lewes Fund for local development projects.) The new Lewes notes will be sold in several places (not banks) including the Lewes Town Hall and farmer’s market. Scores of merchants have signed up to accept Lewes Town Pounds and many of them offer discounts to customers who use the new local currency.

A survey of Lewes pound users found more than half of them consciously increased their local spending.
It turns out local currency systems incur their greatest cost not in distribution, publicity, and record-keeping (many of these jobs are voluntary) but in printing costs for producing individually-numbered securely marked bills on high quality paper. Nations print bills in such huge numbers that printing costs are negligible. Lewes Town Pound developers have turned the individually numbered bills to their advantage however, using bills as raffle tickets for merchants participating in the system.

At this time, many local currencies have value for collectors. Totnes Pound notes sell on e-bay for up to 20 times their face value. Of course novelty value will disappear once more systems develop and more bills are printed. Then the real value of local currency for local economies will find its real worth, community by community.

Money is nothing more or less than a social construct, an agreement between groups of people that the little pieces of paper we wave around have value. What happens when we challenge and deconstruct this model? How do we buy things? Economists and social thinkers have been playing with this idea for a long time. Some notable examples of money going “off the grid” in the historic past include Robert Owen’s Labour Exchange System of the 1830s, the development of Credit Unions in the 1930s, and Argentina’s development of credit notes during its hyperinflation in the 1990s.

Revitalizing local economies makes sense from many perspectives. Money stays local as people develop products and skills to satisfy local markets. Keeping it local also decreases the carbon footprint of goods and services – that’s why many of us are thinking about 100 mile diets and taking “stay-cations” and buying local products of all sorts.

The challenge with local economies is figuring out effective ways to make fair exchanges, and efficient ways to keep records by developing Time Banks, LETS, and alternative currencies.

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