2013 01/03:How to Start a Community Currency

[논둑길맨발로]

How to Start a Community Currency

By Mira Luna

10.16.12, 8:21am Comments (2)

35   

Above is the Lewes Pound, a local currency in the town of Lewes, England. As Thomas Paine said, "We have it in our power to build the world anew."

“Banking institutions are more dangerous to our liberties than standing armies...The issuing power should be taken from the banks and restored to the people, to whom it properly belongs." - Thomas Jefferson

“Let me issue and control a nation’s money and I care not who writes the laws.” - Banker Mayer Amschel Rothschild

The centralized creation of money and credit has a profoundly negative effect on local economies, sovereignty, and cohesiveness. Bankers value profit at all costs, while locally-controlled institutions tend to hold other values - like community, justice and sustainability - more highly.

Communities can regain control of the flow of money and credit by issuing their own currency as a complement to conventional money, as electronic barter networks, debit cards, mobile phone payments, Timebanks, LETS, or old-fashioned cash.

By altering the flow of resources, community currencies take power away from multinationals and put it in the hands of more accountable local entities. While community currencies can't be too similar to or compete with national money, most countries allow it and some, like Venezuela and the E.U., support their development. Mediating underemployment and poverty are often prime motivators, or specific purposes like small-business incubation, caregiving for seniors, community gardens, or providing healthcare for the uninsured, according to CNN. 

The Brixton Pound

Starting a community currency is not for the faint of heart. It takes a dedicated team years of effort. Learning from others' experiences is essential. Here are some tips I gleaned from the experts and through my own experience.

Find a group of people with common ground that are easy to get along with. It's important to share goals and values with your core group, otherwise your project will be pulled in many directions. You may split into separate projects at some point; that's often better than trying to duke it out with people who want to do their own thing. Focus on quality volunteer recruitment. Don't get discouraged when people come and go.

Define your goals and prioritize them. Do you want to support local business or low income folks? Do you want encourage ridesharing or reward senior care? You may have many goals - currencies can have an effect on many problems - but be clear about your priorities and target audience as this will shape all of your decisions, including what kind of currency you use.

“A currency is never an end in itself, but has to be seen as a facilitator of flows within the system of a whole community and economy," said John Rogers, who teaches how to start currencies at Value for People in the U.K. "Its essential systemic role is to match underused assets and unmet needs.”

The community meetings I held attracted all kinds of personal agendas and wingnut plans that had no practical application. Your goals will be your compass.

Pick your tool appropriately and make it easy to use. Currencies are not one-size-fits-all. It is crucial that you pick the right tool, with the option to expand into multiple tools later. It should be as easy to use as the other kind of money. REAL Dollars of Lawrence, KS ended because businesses didn't have an easy way to spend them. Vermont Businesses for Social Responsiblity switched to open source software for their business to business exchange to customize their interface and make it as simple to use - a very smart investment. The books at the end of this article can help you decide what type of currency might work best.

Bernal Bucks sticker for stores that use its currency

Know your community. If your tool is online, but your community is mostly offline, it won't get used. Bernal Bucks of San Francisco chose a swipe debit card with loyalty points. A more rural area like Corvallis, Oregon is more of an off-line community, so a paper currency isn't too slow for this small town.

How does your community use money, what are its assets and what does it need? Design a plan based on the reality of your community, not just on your own ideals. Whether you are working with businesses, nonprofits or community members, survey them or conduct focus groups to test the new currency before you finish your design.

Do your homework and get a mentor. Choose a group that's done a project similar to yours. Look up case studies that have worked (there are many mirages of success). Community Currency Magazine is a good resource for case studies and interviews and the Complementary Currency Database can help you search for mentors in your area. Many people sail out on a currency expedition without a map. Learn from others mistakes. Your membership and partners will trust you more if you've done your homework.

Define your governance and organization structure. Like any project you need good governance. John Rogers harps on this point: “Some people tell me off for going on about the importance of governance in getting community currencies to fly. They say a well-designed CC ‘should run itself’. That’s a nice theory, but I don’t know any CC that has stood the test of time without some form of governance at work, i.e. someone making decisions.”

People will expect responsible and transparent governance for a resource as valuable as a currency - that trust determines its value. Encourage diverse community participation and representation in your governance, especially from your members. If you want to operate as a volunteer or worker cooperative, see my article on worker coops. Bay Area Community Exchange is a hybrid of a member and a worker coop, though many currencies are either run as traditional nonprofits or business bartering exchanges.

Your decision to be a business or nonprofit will be determined by your goals, and currency type. Only entities that have charitable or educational aims can be nonprofits. That's not to say your business can't operate like a nonprofit, but you won't be eligible for grants and donations, though you may be able to get small investments, like Sonoma Go Local did from its community and business members.

Sonoma Go Local - "It Pays to Buy Local"

Define your geographic area. It may be helpful to incubate your currency in a smaller community, like Bernal Bucks did in a small neighborhood of San Francisco. However, a wider geographic area may provide the diversity of services and goods that makes a currency useful. Too wide an area though, like the Southwest, may be meaningless and not effective in building trust and solidarity. Ideally, it would be an area diverse enough to provide most of the necessities of life, and small enough to allow direct exchange, community-building and accountability. Regional currencies, like the Cheimgauer in Germany and Berkshares in Massachusetts have done well partly for this reason. If you don't grow food in your community, you may want to expand your reach to farming areas. If you haven't lived in your area for long, ask for advice from long time locals who may have sense of the resources and their flows.

Outreach through events. Hosting events to promote your currency and attending other groups' events raises consciousness, develops alliances, recruits members/users and volunteers, and builds community. Think about your target user audience and meet them where they are at. Swapmeets and skillshares are useful demos of the currency that give a more concrete feel. Offer to speak, host a booth, or organize trading at relevant conferences, festivals, markets and other events to promote your currency to potential members that are allied in values.

Bay Area Community Exchange organized a large sustainable living festival with over 40 workshops and 300 attendees using member skills and hours. The event increased trading and registrations by a factor of 10 or more for the month before the event and a couple weeks after. A similar boost happened around its Timebank Holiday Fair. Corvallis Hours, a bastion of homesteading, hosts an annual Harvest Festival where members have a market for “selling” their homemade goods for Hours.

Develop partnerships and take them seriously. Find allied organizations to help recruit members/users, develop programmatic partnerships and raise your status in the community. An ally may serve also as a fiscal sponsor to bear the burden of organizational tasks while you focus on organizing. Choosing partnerships should depend both on your goals (e.g. pick an environmental organization to support gardening or a social justice organization to reach low income groups) and their ability to provide support, such as event space, outreach, trainings or programmatic development. A good way to begin a partnership is to do a presentation to their staff and then ask them if there is one small thing they'd like to achieve by using the currency, like a website upgrade, and help them do that. Partnerships work best as a two-way street.

An Ithaca Hour

Ithaca Hours gained credibility and usefulness by partnering with local public transit for bus passes. Berkshares partnered with local banks for savings accounts and currency distribution. Hour Exchange Portland and other successful timebanks have worked with local healthcare organizations to accept credits from low-income members – a highly valued service that increases the value of the currency.

Keep the circulation flowing. Bernard Leitaer, who is often considered the godfather of community currencies and helped design the Euro, says “...this is where a lot of community currencies have failed. They have neglected to close complete circulation patterns, and as a result...it tends to pool in particular parts of the system.” To keep the energy flowing, identify unmet needs and underutilized resources in your community, especially those not served by the conventional system. Be a match-maker. If seniors need companionship and your pet shelter needs socialization for its animals, or you have unemployed people without job skills and a nonprofit or business startup that needs volunteers, you may have a match.

One of the biggest mistakes is assuming the currency will do everything itself. One or more exchange coordinators are vital, particularly in the beginning. Visiting Nurse Service of New York’s Timebank has a bilingual or trilingual coordinator for each targeted community. Regular communication through email, newsletter and your website reminds members what's offered and needed, and the importance of mutual aid. Otherwise, members forget and default to using money. Many currencies publish quarterly newsletters with directories of offerings.

Toronto Dollars being sold for use at the local market - photo by Jeff Buster

Working on circulation means creating ways to both earn and spend currency. Equal Dollars of Philadelphia developed a food market, clothing store and bike shop. They partnered with local nonprofits so members could earn hours by volunteering, paid their staff partly in Equal Dollars, and made micro-loans in Equal Dollars. MORE Timebank in St. Louis created a community college, where people could spend hours by taking classes, and earn hours by teaching. Another way to increase circulation is to target entities with high demand goods like beer (Detroit Cheers currency) or services, but make sure they don't over-commit themselves. One popular health food store ended up frustrated with loads of hours that they couldn't spend and quit. Set up limits to make it more sustainable, like using vouchers during slow business hours only or on over-stocked goods.

Use your currency to fund your currency. Hey, the government does it, why can't we? As long as members agree it's a good use of resources, don't be shy about using your currency to pay staff, reward volunteers, put on events, or do marketing. Ithaca Hours uses its currency as a reward for attending organizing meetings and swapmeets. Bay Area Community Exchange supports its volunteers by giving hours for outreach events, trainings and tech projects related to its key functions. This is controversial amongst community currency theorists, because the other side of the coin is corruption and inflation. The Red de Trueque, a currency used by a third of Argentina's residents during its economic crisis, collapsed because of fraud and mismanagement due to a lack of transparency and accountability.

Currencies are notoriously hard to fund. Relying on external donations, as did Berkshares, can make the short-term sustainability of your project slightly more likely, but the long-term more precarious. Using your currency to fund your project is also good practice in learning how to use it. Membership or transaction fees are also a good practice. However, it's helpful to lower the barrier to entry as much as possible in the first year or two so you have more members offering diverse skills and goods to increase your currency's value (fees may slow that process). Think about the option to pay member dues with volunteer work to support your currency project. A sparse directory with few members is not likely to encourage trading, as the now defunct Berkeley BREAD discovered. One of its most active members realized the currency she was earning with her counseling services, would not be useful for anything she needed and she quit being a provider. Alternatively, if you have lots of useful stuff in your store, people will flock to it.

Don't give up but be willing to change directions midstream. Currencies take at least a few years to establish. In the meantime, you'll have fun, make friends and get some of your needs met. The Ithaca Hour project was the result of diehard tenacity and a small Americorps stipend that kept founder Paul Glover going for 3 years in the incubation stage. Some made it by adapting their strategy as they went along, like finding out the type of currency or organizing strategy was not appropriate for the community context or goals and  changing directions. New Earth Exchange in Santa Cruz went through several incarnations over the last several years to find the right one instead of being stuck on their first idea. Now they are pioneers integrating an online business bartering exchange with a paper currency called Sand Dollars.

Have fun! It's a lot of work. Have fun doing it and you are sure to grow.

Online Resources:

• Community Currency - from Good Idea to Sustainable System by John Rogers

• Community Currency Guide by Hallsmith and Leitaer

• Community Currency Magazine

• Complementary Currency Database

Books:

• People Money: The Promise of Regional Currencies by Kennedy, Lietaer, & Rogers

• Local Money: How to Make it Happen in Your Community by Peter North

• Creating Wealth: Growing Local Economies with Local Currencies by Hallsmith and Lietaer

Consultants:

• John Rogers http://www.valueforpeople.co.uk/

• Paul Glover http://www.paulglover.org/currencybook.html

• Mira Luna mira (at) sfbace.org

Tags: alternative currency, community currency, currency, economic, economy, gift economy, local currency, timebank

 http://www.shareable.net/blog/how-to-start-a-community-currency

Post navigation

← Previous

Hierarchy and money in a global hall of mirrors

Posted on September 15, 2012 by Tiny Energies

by Mary Logan

Many authors have written about alternative forms of money, so I don’t need to canvas the topic. But I’m still thinking about the digitization of money and its role in our current monetary predicaments.  I recently watched a movie about time as an alternative currency, and I also attended a local lecture on time-banking. These thoughts converge for this post about traditional and alternative forms of money as an illustration of the hierarchy of money. Our economic information systems evolve with increasing complexity to match the complexity of our economies.

Digitized money systems at the top of the hierarchy

BIS Pyramid Global Liquidity circa 2007–Traditional economists’ view of money hierarchy

When I google “hierarchy of money” I get some mainstream Federal Reserve publications from traditional economic thinkers that are tightly focused on traditional fiat currencies alone, without mention of qualitative forms of money such as barter, or commodity monies made of metals or other trade goods. We are conditioned to think of fiat systems in isolation from more traditional means of exchange. One goal of this post is to propose a hierarchy that combines both.

In inflationary times, the value of the underlying commodity exceeds the representative value of the money, as is the case now for the copper in pennies and the value of gold in bullion in the figure below. As fiat currencies lose value, governments debase bills and coins through various methods including silver shaving, coin clipping, and substitution of metals.

Brown & Odum, 1997

1911 Poster from “The Industrial Worker”

Digitized and electronic money systems represent the top of a hierarchy of systems of information that has developed over time to buy, sell, enable trade or exchange value. In the US, our government backed the fiat currency with gold until Roosevelt partially debased the dollar in 1934, and Nixon removed the dollar from the gold standard entirely in 1971. The Bureau of International Settlements divides money into a hierarchy of four categories; power money (bills and coins), broad money (checking accounts and digital forms of money), securitized assets, and derivatives. While fiat currencies allow flexibility, control, and more complexity in the system of trade, over time governments debase fiat currencies, so they tend to follow a trajectory from commodity-based money to representative fiat money to failure through defaults or hyperinflation.

Modern fiat currencies only value human economic contributions of goods. Contributions of nature are not valued, as Mother Nature deals in currencies of energy and material flows instead. “Whereas the contribution of environmental resources to the economy is not measured by circulating money, money circulating in the markets increases with the emergy and transformity of the products once they are above a threshold for economic use and processing within the economy” (Odum, 2000, p. 11). At each step of hierarchy

Bezemer & Hudson, 2012 

and increasing complexity in the human economy, value is added and prices increase. At the highest level of hierarchy in financial districts around the world, abstract pieces of paper are far removed from the real world economy that they represent, circulated in city centers in increasingly abstract derivations of value. In the US in particular, the system appears to be diverging into a real economy and a separate, urban iron triangle between finance, real estate, and the government that circulates paper assets within itself to try to sustain its structure as it loses emergy and starts to fail, in a receding hall of mirrors. As is typical, the diagram above by economists lacks energetic inputs so it fails to incorporate the big picture by ignoring the power in the system. But the diagram captures the circular nature of the paper-pushing and transfer of debt now occurring between the government and large, powerful corporations. In the linked paper, the authors also label credit as the engine of growth, when the engine of growth is driven by energy, not money. If you take away the money, most of the economy will reboot and regain function. But if you take away the energy, the economy comes to a screeching halt. Money as the primary driver is a common fallacy among economists, since they fail to consider the importance and limits of energy inputs. This is where the idea that “you can’t push on a string” came from. Loose monetary policy can pull when there are resources to pull from, but it can’t push.

The lower hierarchical levels of money systems consist of historic forms of exchange such as simple barter and gift economies. Most of these are not depicted in hierarchies, and are not considered by economists. Non-monetary societies relied primarily on gift and debt, with barter reserved for more distant trade with strangers or even with enemies (Graeber, 2011). In gift economies, the altruism and selflessness of sharing fostered community by strengthening the bonds of relationships in setting with limited available resources. Gift economies such as potlatches were actually banned by US and Canadian governments at the prompting of missionaries in the mid 1800s through mid 1900s as opposing “civilized values” and perhaps not in keeping with Americans’ virtuous, expansionist “manifest destiny.” The culture of a gift economy has goals in direct opposition to the culture of a growth economy, with cooperation as the goal and not acquisition. Gift economies may promote karma, but they don’t grow the GDP, as Eisenstein points out. These alternative money systems are mostly ignored by economists, but local communities are resurrecting alternative systems as we descend.

Alternative money systems at the lower end of the hierarchy

“In Time” movie, how do we value assets?

The dystopian movie In Time (probably based on a 1965 Ellison short story) is a metaphor for alternative money systems. In the movie, money is represented by living-time, which is displayed on a clock on people’s forearms. Living time can be traded and used as payment for goods and services. Wealthy people are nearly immortal, and poor people die young. Time zones sequester people into hierarchical zones of relative wealth, and Timekeepers police the system and protect the status quo of wealth inequities and the wealth hierarchy. The wealthy control the system by manipulating the dispersal and rules for time, while the poor are obliged to work in factories to repay debts. At the end of the movie, the heroes rob time from the rich and liberate it to the poor, disrupting the hierarchy of wealth. People stop working in the factories, as the initiative to continue the system has disappeared. The message of this movie is that the hierarchy of inequity is part of what perpetuates our system. Breaking down that hierarchy could be an important step in reversing capitalism’s goal of growth and inherent inequities. While hierarchy is a natural energetic ordering of systems, and a new system will need some sort of hierarchy, deconstruction of the old way comes first. Smaller communities with local moneys will need a simpler system geared towards a flatter, smaller network with different goals of efficiency of energy use and cooperation. Traditional valuations of labor and resources are skewed towards growth and expanding complexity, creating a hollowing out effect of nature. A functional currency in descent must properly value nature within the metric.

Money is borrowed into existence when banks make a loan to someone without having backing for it, so it is useful during periods of growth. Modern banks are allowed to loan out more money than they hold in deposits. Restrictions have been removed over time, to the extent that laws for banks require only negligible reserve ratios held for accounts. Systemic debt leverages the economy by funneling money and resources to the upper levels of the hierarchy, sucking the vital juices out of the middle class. Tom Abel describes it well. “All those information forms are still maximizing power, sucking in the last remaining big resources, maybe within my ‘enclaves of capitalism’.“ As we extend our debt to the future by expanding debt-based money, we create an increasingly inequitable and unsustainable economic information system. Our politicians and bankers expand on simple credit or debt with securitization of homes and cars in attempts to extend the growth party without a material basis in expanding resource inputs. In the US, we have maintained resource imports through petrodollar supremacy and financial securitization, creating a global debt empire. In the depicted hierarchies of money below, the central banks have increasing control as the hierarchy builds upwards.

A non-traditional hierarchy of money

In the hierarchy, the upper red zones reflect super-circulation of money in the iron triangle. Complexity builds at each level to match the underlying complexity of the economy:

• Expanding size of the money system
• Increasing digitization but decreasing energy transfer, and more dependency on the internet, computerization, and electricity
• Increasing energy transformity, emergy and complexity
• Increasing derivation and abstractness, and thus moral hazard
• Increasing centralized control (IMF, World Bank, central banks, BIS)
• Increasing circulation in wealthy urban centers, thus potentially impoverishing rural zones and less developed countries
• Increasingly composed of debt rather than representative currency
• Increased circulation and convergence on centers of complexity
• Increasing vulnerability to manipulation
• Increasing distance from underlying natural resources
• More illusory value
• Values of less altruism and more self-interest with accumulation as the goal

Since we are borrowing from a future that is not there, at some point the global system will fail, and many of the advanced upper forms of money and credit will default and disappear, along with some of the corporations connected to them in the financial and insurance industries. Systems based on debt demand future growth and expansion.

Deconstructing hierarchy en route to simpler money?

Local money systems also help to deconstruct corporate/global power imbalances by giving the consumer power to direct their money to small, local businesses. Local money initiatives are beginning to spring up. Hopefully some of these local moneys will be based on emergy or other energetically-based accounting systems that value the real contributions of nature. Emdollars (emergy/money ratio) use an emergy standard to put currency on nature’s terms. “. . . Ultimately we need to put the economy on the same basis as the work of the environment (that is, externalize the internalities)“ (Odum & Odum, 1999, p. 22).

We recently attended a lecture on the benefits of a time-bank as a local alternative money system in Anchorage. The description of the process at the Anchorage time bank follows. “Drawing on your time, energy, skills, and interests, you give what you can and you get what you request. For every hour you give helping another member or the community, you earn one time dollar for yourself. You then spend your time dollar as you like on services offered by other members.” Thus, a doctor’s hour of time is no different from a farmer’s. Time banks could be constructed with differing values for people’s’ time, but in this case the exchange of time is equal for all. The equality of hours between users is part of what makes time-banks tax-exempt in the US. This equalization of our traditional labor hierarchy also serves to deconstruct our digital currencies, since there is no hierarchy in a monetary system based on equal exchange of labor that is measured in units of time. In the discussion that followed the presentation on time-banks, some people with higher salaries were resistant to the idea that their time would not be as highly valued as they were accustomed to. Lawyers in particular are used to the idea of billable time with high returns. Instead, “from each according to his ability, to each according to his needs.” No wonder the US government banned potlatches during westward expansion. The Anchorage time bank takes advantage of the networking effects of a digital platform, but timebanks are probably even more effective at community building in smaller, simpler face-to-face community settings such as “talking circles.” 

Time banks deconstruct our current money hierarchy in a number of ways that could help citizens during economic hard times. Odum suggests policies useful during transition to sustain the climax of civilization that converge with the communal goals of a time bank:

• Maximize empower through high-diversity, efficient cooperation
• Change industries concerned with new construction to maintenance
• Reduce borrowing to that concerned with replacement (not growth)
• Hold money supply constant
• Don’t expect much unearned income from interest and dividends
• Provide public works programs for the unemployed
• Provide part-time jobs for the retired as long as health permits
• Place a ceiling on individual income
• Share information without profit
• Develop a national campaign to respect people by their service, not income (Odum, 2007, p. 388)

Timebanks deconstruct the values promoted by current monetary systems, so they could create fallow ground(휴경지) for new monetary systems to emerge based on other values than pursuit of wealth. I am fairly busy already, so I am concerned about obligating extra time to this time bank. Since my husband and I have a lot of skills, we will probably give more than we receive. But isn’t that the point of an altruistic system? Resilience in the interim demands obligations to both the old system and the new as we build a new sense of community. And change also requires a leap of faith and a commitment. I’ll keep you posted on how it works out.

This entry was posted in PWD Policies and tagged alternative money, deconstructing hierarchy, derivatives, gift economy, hierarchy of money, In Time, potlatches, Time-bank, transition policies, urban iron triangle by Tiny Energies. Bookmark the permalink.

About Tiny Energies

I am Alaskan, with a Florida connection. I teach as an adjunct in Nursing and Honors at University of Alaska Anchorage. I learned most of what I know about complex systems from the Odum brothers—HT Odum was my father. Our website and blog evolved out of discussions at the last Emergy conference regarding the Odum book, A Prosperous Way Down. They said, “We need a blog.” And then they turned and looked at me.

View all posts by Tiny Energies →

 http://prosperouswaydown.com/hierarchy-and-alternative-money/?utm_source=rss&utm_medium=rss&utm_campaign=hierarchy-and-alternative-money