While the European community is creating one big currency, communities in Ireland, Scotland, and elsewhere in Europe are turning to local currencies as a means to regain control of their economic futures. If most people living in an area are poor, the conventional response is
to look for ways of getting more money into that community. Does the
area have attractive scenery or good sport fishing? OK, let's start a
tourism promotion campaign. It has forests and minerals? Good, here's a
list of companies we'll invite to come in to exploit them.
Unfortunately,
although almost everyone in the world is trying this “development”
strategy, it doesn't often work. For example, Westport, the town in
Ireland where I live, decided a few years ago that it would advertise
golfing holiday packages in Sweden, which is regarded as a rich and
therefore lucrative market. But as one golfing holiday is much like
another, pretty soon Westport found itself competing with Scottish and
Portuguese golf resorts. Everyone's prices came down, lowering the
return to the holiday providers and effectively raising the incomes of
the Swedes who could now buy the same vacations for less money. In
other words, the rich got richer and the (relatively) poor got poorer.
Essentially,
the golf holidays had become an international commodity, sold largely
on the basis of price. The price of commodities relative to the price
of other goods and services has been falling for many years. This fall
has particularly affected countries that produce agricultural products,
raw materials, and unsophisticated manufactured goods. It is the reason
why the gap between the rich and the poor parts of the world has
widened rather than narrowed as world trade barriers came down. During
the past three decades, the ratio of the income share of the richest 20
percent of the world's population to that of the poorest 20 percent has
more than doubled, rising from 30:1 to 78:1.
So, if the
conventional approach to poverty is unlikely to work, here's an
unconventional one: Instead of trying to bring money in from outside,
why not get people in the deprived areas to create their own money?
True, this self-produced money is useless for making purchases outside
the area where it is issued, but it would allow the people living there
to trade amongst themselves without having to earn external currency
first. This is a very important consideration, because in most poor
areas, the residents have labor and other resources they could use to
meet local needs, but they are unable to do so simply because they lack
the means of exchange. This was the situation during the Great
Depression in the 1930s when factories closed, even though people who
needed the goods they produced lived right outside their gates.
In
1997, a common desire to see how effective local currency systems could
be in alleviating pockets of poverty led four organizations to make a
joint application to the European Commission for funding to carry out
action research. One of them was Enterprise Connacht-Ulster, a
development organization set up by local people in a particularly poor
area of rural Ireland known as the Black Triangle on the borders of
counties Mayo and Roscommon.
Re-learning self-sufficiency
The
landscape in the Black Triangle is one of heather-covered hills, bogs,
and small fields surrounded by fences or stone walls. As late as 1970,
eggs were very much a currency in the area. Most farms ran free-range
hens, feeding them on oats they grew themselves, and exchanging the
eggs for clothes, hardware items, and foodstuffs that the farm could
not produce. Very little cash was required. The farms also grew
potatoes and raised pigs and cows. This near-self-sufficiency is now
gone. There is very little industry or tourism in the area, and farming
has suffered a massive decline in the last 50 years.
Unlike
their partners, the founders of Enterprise Connacht-Ulster (EC-U) had
no knowledge of how local currencies worked when they were asked to
join the project. This lack of knowledge has proven to be a major
advantage because they took nothing for granted, stripping away
unnecessary elements from currency systems operating elsewhere to
create one of the simplest-to-start, least expensive and therefore most
sustainable auxiliary currencies in the world.
It works like
this: By the time this article appears, several thousand one-Roma notes
will be in use. Roma, the name of the new currency's unit, is derived
from ROscommon and MAyo, the counties in which the new money will
circulate. A Roma is equal in value to an Irish pound. The notes will
reach people's pockets by being sponsored by local businesses and given
to voluntary organizations to spend. The businesses guarantee the notes
by promising to supply goods and services equal to their value.
If
a business decides to give, say, 1,000 Romas to a voluntary
organization, it orders them from EC-U, which overprints the quantity
of currency required with the name of the sponsoring business and its
logo or advertising slogan, plus the name of the good cause to which
the notes are being given. The company then presents the notes to the
voluntary organization, which spends them on buying the goods and
services it needs to continue its work.
Every firm that sponsors
notes agrees to honor those issued by other sponsors. When the system
is fully operational, it is expected that most businesses and
individuals in the area will accept the notes, regardless of whether
they are sponsors. They will accept the Roma because they will know
that they will be able to spend the notes easily and that, by taking
them, they are helping the voluntary organizations to which the notes
were originally given.
Firms that agree to support local
voluntary organizations by giving them Roma notes gain several
advantages. When a firm gives a cash donation, the amount involved
comes straight out of its profits for the year. A gift of Romas, on the
other hand, comes out of the profits to be made on future business that
the new money will help to generate. Moreover, the fact that a firm's
name appears on the note in association with a local good cause builds
goodwill. Finally, since the notes are treated as discount vouchers
when they are used to make a purchase, the amount of the gift is free
of sales tax.
As people become increasingly confident that they
can spend any Roma notes they receive, they will be prepared to accept
larger quantities of them, allowing EC-U to increase the quantity in
circulation and thus the level of support the system provides to local
organizations. Eventually, the EC-U founders hope to introduce checks
written in Romas, as this will enable trade on a much larger scale.
Only then will the EC-U currency system resemble that being set up by
Rural Forum in Scotland (see sidebar) and really break the link between
the amount of national currency coming into the Triangle and the amount
of local trading going on.
If firms accept the system, voluntary
organizations should get more, and bigger, donations. The system should
also be good for the ordinary people of the area because they will be
able to open accounts and, by going into debt from time to time, create
money for themselves in a form that will be readily acceptable to local
businesses. Moreover, those local firms that accept Romas will gain a
major advantage over competitors from outside the Triangle who won't be
allowed to open accounts and who will therefore have to insist on 100
percent payment in pounds or Euros, which will always be harder to
earn. Trading should therefore become more localized.
“Irish
pounds are hard to earn and easy to spend,” EC-U is telling business
people at presentations. “Romas are easy to earn but a little harder to
spend. So you need to earn both types of money to do really well.”
The politics of printing money
One
important aspect of local currencies is that they are democratizing
money creation. This is important because in the past, currencies
produced by one group for use by another have been instruments of
exploitation and control. For example, whenever Britain, France, or one
of the other colonial powers took over a territory during the “scramble
for Africa” towards the end of the last century, one of their first
actions was to introduce a tax on every household that had to be paid
in a currency that the conquerors had developed for the purpose. The
only way the Africans could get the money to pay the tax was to work
for their new rulers or supply them with crops. In other words, the tax
destroyed local self-reliance, exactly as it was intended to do.
Today,
even though the dollars or pounds which we pass around via checks and
credit cards only exist as account entries created by a few taps on a
bank's computer keyboard, very little has changed. Over 95 percent of
the money supply in an industrialized country is created by banks
lending it into existence. These banks are usually owned outside our
areas, with the result that we have to supply goods and services to
outsiders even to earn the account entries we need to trade among
ourselves. Our districts' self-reliance has been destroyed just as
effectively as it was in Africa, and whatever local economy we've been
able to keep going is always at the mercy of events elsewhere, as the
current world economic crisis is making all too clear.
If
we want to eradicate areas of poverty and build communities that are
less exposed to cut-throat international competition, people will need
to meet more of their needs from the resources of their areas. Local
currencies have a vital role to play in making that possible, and the
experiments being carried out in Scotland and Ireland could have
important implications for all our futures.
Richard Douthwaiteis a consultant to the four EC funded currency projects. His book, Short Circuit: Strengthening Local Economies for Security in an Unstable World,
which describes many local currency systems, is distributed in the
North America by Chelsea Green Publishing Co, PO Box 428, Gates-Briggs
Bldg. #205, White River Junction, VT 05001; 800/639-4099; Fax:
800/295-6444; Web: www.chelseagreen.com.
Scotland's New Money
Like
many remote communities, those of rural Scotland “leak” their currency
to urban areas. Instead of circulating in these rural regions creating
jobs and exchanges of goods and services, money tends to flow quickly
to the major business centers.
At the beginning of this year,
a new currency system began operating throughout Scotland. Its purpose
is to support rural communities by providing organizations with
additional means for trading goods and services with each other.
The
Scottish Organizational Currency System (SOCSystem) is unique for a
number of reasons. It is national in scope; the currency has been
designed for adoption by rural communities throughout Scotland. Traders
within the system include a mix of local governments, rural businesses,
voluntary organizations, community groups, schools, and agricultural
groups. Many are suffering from financial cuts. The SOCSystem gives
them access to a diversity of goods and services by facilitating
cooperation among them.
The system will offer opportunities for
small businesses to trade in their excess capacity, for voluntary or
charitable organizations to exchange such valuable services as
accounting and administration, and for larger organizations – such as
local governments – to make use of underused resources such as property
or computers or printing equipment. These organizations can exchange
all sorts of skills and resources with each other, thus widening their
capacity and knowledge base.
How does it work?
Each
member sends in a list of their “wants” and their “offers” to be
compiled into a directory. The first directory will be circulated at
the beginning of 1999. The currency is called SOCs, and one SOC is the
equivalent of £1 Sterling. It costs 20 SOCs to join.
All SOCs
credits are created by trading. Members negotiate a price for a service
or goods and make payment using a SOCSystem check. They can negotiate
part payment in cash, for example 30 percent SOCs/70 percent cash.
Everyone's
account starts at zero, and members can spend straightaway. SOCs are
interest-free, so there is no point in hoarding currency. In fact, at
any one time, a number of accounts have to be in deficit if the system
is to work.
So far, 60 members have joined – 45 percent
businesses, 45 percent voluntary organizations/community groups, 10
percent government agencies, agricultural and enterprise groups.
Amongst those in the first directory are a LETSystem (Local Exchange
Trading System), a whole-food cooperative, an architectural practice, a
firm of solicitors, a ski shop, holiday accommodation, and even a
dowser.
The system, which was designed to support voluntary
organizations, does not serve individuals, who can participate in the
flourishing LETSystems. (LETSystems are designed to facilitate
individual exchanges much as the SOCSystem operates between
organizations. See YES! Spring 1997.)
Some alternative currency
systems are regarded as second-rate to the national currency. We hope
in Scotland that members will see the SOCSystem as part social
movement, part currency, and will choose to use SOCs as their preferred
currency.
– Ian Griffith, Ruth Anderson, Ruth Whitfield
Rural
Forum Scotland, Highland House 46 St Catherine's Road, Perth PH1 5RY,
UK tel: 01738 634565 fax: 01738 638699, E-mail: rural@ruralforum.org.uk
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