How many Berkshares can you get for 2 Ithaca Hours? If I were to trade you 5 US dollars for 3 Totnes pounds, would I be ripping you off? Well, it really depends on where you are in the world…and whether you’re willing to trade your federally backed legal tender for some local currency.
In 1932, the Austrian townfolk of Wörgl, like much of the world, had a problem: they were trying to complete a handful of community projects—repaving the roads, streetlighting, extending water distribution, and planting trees along the streets—and keep a population of 4,500 citizens employed in the middle of the Great Depression. And they just didn’t have the money. Their solution? To print their own. Thus was born the Wörgl Freigeld, a locally minted stamped note designed to circulate rapidly and spur the local economy. Lo and behold, “[a]t the time of the project, Wörgl was the only Austrian town to achieve full employment.” Take that, Koblenz!
In an illuminating and exhaustive article, TheOilDrum.com attempts to answer the question on the minds of locavores everywhere: “Are local currencies a way to escape the liquidity trap?” Here’s an excerpt:
Local Currencies Today
Local currencies are still alive in central Europe today, with something like 65 regional currencies competing with the Euro, according to Ambrose Evans-Pritchard.
The most frequently cited example is the Chiemgauer – a local currency (also called schwundgeld, scrip or specie) accepted by 550 restaurants, bakeries, hairdressers, co-operative banks and a network of supermarkets in the Bavarian region of Chiemgau (though petrol stations remain a glaring exception, other than some biofuel outlets). Notes are used like legal tender and can even be accessed by debit card.
The Chiemgauer was issued in January 2003 at a rate of 1:1 against the euro, and is designed to lose 2pc of its value every quarter. Usage is reportedly expanding by 70pc a year, though monthly turnover was a meagre €135,000 when Evans-Pritchard wrote his article.
Evans-Pritchard says the Chiemgauer is one of 16 regional currencies that have emerged across Germany, Austria and northern Italy since the launch of the euro five years ago, with another 49 regions in the pipeline. They are mostly issued by activists, farmers, eco-enthusiasts, anti-globalists, and citizen committees.
The actual turnover of these currencies remains miniscule, so the Eurozone authorities are relaxed about competition for the time being. The Bundesbank is keeping an eye on them however, publishing a report titled “Regional Currencies in Germany, Local Competition for the Euro?”.
Local currencies aren’t restricted to the Germanic world – there are some examples alive and well in the Anglosphere as well, including Ithaca HOURS, Berkshares (which have gathered some mainstream media attention) and the Totnes Pound. Dutch organisation STRO is also implementing pilot projects in Brazil, Central-America, Asia and the Netherlands.
John Robb thinks local currencies are a useful tool for building resilient communities, but notes that they remain “a lifestyle choice” at present. Robb believes that the Wörgl experience in the 1930’s indicate that scrip “adoption, velocity and robustness” could be accelerated by:
* Allowing community members to use it to pay all or part of their tax liabilities to local governments. This instantly establishes a market for the currency. Also, pay local government employees a portion of their wages in scrip.
* Deflating [devaluing] the value of the scrip (optimally, one percent per month) to promote immediate use rather than hoarding.
* To the extent possible, connecting scrip to local production rather than retail. Locally produced food (farmer’s markets), energy (via local microgrids), products (personal fabs), and labor/services. Further, work with local banks to establish checking accounts for scrip and to enable conversions hard currencies (at a slight discount).
Local Currencies And The Environment
Another reason for interest in local currencies has sprung from ecological concerns, outlined by Bernard Lietaer as follows:
The most recent reason for interest in stamp scrip and similar alternative monetary systems in the West or in Japan [Otani 1981; Henderson, 1981; Kennedy, 1988 ; Suhr,1989] results from environmental concerns.
“The higher the money-rate of interest, the higher is the pressure on entrepreneurs to avoid internal costs, that is, to externalize into the environment as much as the cost as is possible. Thus under neutral money, when interest goes to zero, this additional burden on resources will cease” [Suhr, 1988, page 112].
When it pays more to cut a tree, sell the wood and let the proceeds earn interest than simply let the tree grow, it is predictable that “economic pressures” will be felt to cut more trees than is optimal from an ecological viewpoint. Stamp Scrip would reverse that process. It is interesting to notice that this point was also demonstrated in practice: indeed during the experiment with stamp scrip in Austria during the Depression of the 1930’s, the incentive for not hoarding was such that people preferred to invest in replanting trees.
As ecological concerns are gradually creeping to the top of political agendas worldwide, this aspect alone justifies the experimentation suggested in this note.
These three objectives: spontaneous creation of employment, inflation control, and ecologically conscious growth are the three results that eonomists can predict from the introduction of stamp scrip.
However, even more persuasive than any theoretical discussion is compelling evidence from case histories: such systems have indeed been used in the past in a variety of cultures, sometimes for centuries, and have always had a significant positive impact.
Read the whole article here, or, to read an “eye-popping” explanation of the fundamental nature of money, check out Thomas Greco’s Money: Understanding and Creating Alternatives to Legal Tender.