Right Livelihood

Social enterprise

Legal and Financial Issues

Making Money Our Servant Rather Than Our Master
What Money Is and How We Can Make It Work for Us	Experiments With Locally-based Investment and Currency Systems

“If people living in an area cannot trade among themselves without using money issued by outsiders, their local economy will always be at the mercy of events elsewhere. The first step for any community aiming to become more self-reliant is therefore to establish its own currency system”
- Richard Douthwaite

Experiments With Locally-based Investment and Currency Systems

As already explained, locally-based currency systems have been the norm through most of human history, reflecting the dominance of local economic activity over trade for much of our history.

In the modern era, where national and supranational currencies have tended to be dominant, local monetary systems have tended to proliferate at moments of crisis in the global economy. During the Great Depression, for example, many new local currencies were created. As a result of economic crises, after all, the Earth is no less bountiful, man-made technologies no less powerful and people no less skilful and creative. The only change in such situations is often that the medium of transaction – money – is in much shorter supply. In response, many communities have simply created their own.

One of the currencies created during the 1920s, the WIR Wirtschaftsring in Switzerland – a parallel currency that acts as a mutual credit system for strengthening the viability of 20% of the small and medium sized businesses, which in turn create over 80% of all jobs – is still in existence. Others, most notably the Wõrgl in Austria, were so successful in revitalising local economies that they came to be seen as a threat to the national banking and money systems and were closed down by the authorities after the financial crisis had passed.

Today, we are seeing a new wave of experimentation with community money systems. Worldwide, it has been estimated that more than 2,600 complementary currency systems are in operation.

There are two main reasons for this new wave of complementary currencies. The first is growing instability in the international monetary system which is provoking serious financial crises, such as that which crippled the Argentine economy in the 1990s. In the wake of such crises, new money systems arise spontaneously as the national currency becomes increasingly scarce or worthless.

Second, there is a growing recognition of the need to protect and nurture local economies and of the role of national money systems in undermining them. This has led a growing number of activists, and even in some cases local authorities, to explore ways that communities can gain a greater degree of control over their financial resources, becoming less dependent on decisions taken by the rich and powerful in cities far away.

Our interest here is not limited specifically to community currencies. We are looking more generally at the various models and mechanisms that have emerged in recent years by which communities have succeeded in mobilising financial resources and in keeping them within the local economy rather than seeing them leak out into the wider global economy. Consequently, the models described here cover investment, savings and loans as well as currencies.

Two words of qualification are in order. First, very few people today conduct all or even most their economic transactions using community currencies. Even those participating in systems that have achieved a high degree of success tend to conduct no more than around 20 per cent or so of their transactions in the community currency. In this sense they are less ‘alternative currencies’ (as they are sometimes mistakenly named) than ‘complementary currencies’.

Second, the ‘communities’ that complementary currencies are created to serve are not always defined by place. That is, some are created to strengthen communities of interest or those active in specific sectors, as will be illustrated by several of the examples described in this Module.

Community currency notes
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Setting the dollar – clamshell exchange rate
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Wörgl banknote - Click on image to enlarge