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

“Ithaca Hours is money with a boundary around it, so it stays in our community. It doesn’t come to town, shake a few hands and then wander out across the globe. It reinforces trading locally. They are untravellers’ cheques because you have to use them here – you cannot take them away” – Paul Glover

Scrip

Scrip is the term given to describe paper money systems. These are created in various ways by communities to be used in much the same manner as the national currency, with the important distinction that the money must remain within the community – usually but not always geographically defined – that it is serving.

In the case of locally-based currencies, this means that the money will remain circulating within the local economy. This contributes significantly greater purchasing power than if the national currency had been spent at, say, a supermarket, where typically around 90% of expenditures immediately leave the local economy to pay suppliers from outside the locality.

Some scrip systems are simply printed and spent into existence. In the case of the celebrated Ithaca Hours system, created in 1991, notes are issued as i) grants to those who pay for a listing in the Hours directory offering goods and services; ii) loans to participants; iii) small grants to community organizations; and iv) to help cover basic system expenses, such as printing new currency and office supplies. Thereafter, the currency simply circulates among participating businesses within the local economy. Over 1,500 individuals and 400 businesses currently use the currency.

In other systems, the currency is bought from the community organization that creates it with the national currency, generally at parity – with one unit of the community currency equaling one unit of the national currency. This has the advantage of assuring would-be participating businesses that if they accumulate any surplus that they are unable to spend (as has happened with some LETS systems), they can be reimbursed in national currency.

Example

To see how this system works and the tangible benefits that can accrue, let us look at the community currency used in the Findhorn ecovillage in Scotland, the Eko. Currently, there are 15,000 Ekos in circulation, each Eko having been bought with £1. All of the community members and businesses within the ecovillage together with two pubs and a café in the neighbouring village accept Ekos.

These generate multiple benefits for the community. First, and most important, since this is a local currency accepted only by local people and businesses, the purchasing power represented by the Eko notes must stay within the local economy. In the first year of the system, it is estimated that the Ekos generated a turnover of business of approximately £150,000 – an average of ten full spending cycles for each note. This is in sharp contrast to expenditures in the national currency, most of which typically leaves the local economy on each spending cycle.

Second, the £15,000 received in payment for the Ekos is used to provide secure, low-interest loans for community businesses – as investment in the community’s renewable energy facilities, in affordable housing construction and so on. This generates up to £1,000 per year in savings on interest payments to banks.

Third, there is also a saving of around £1,000 a year in bank charges, since community businesses now tend to pay each other in Ekos rather than by cheque. Fourth, there is generally a significant gap between the number of notes issued and the number reclaimed at the end of each issue period. This has delivered small additional dividends in the case of the Eko, which is now on its third issue.

Kennedy (2007) refers to 22 regional complementary currencies currently active in Germany, a number of which use demurrage (in the form of taxes or other payments to reduce the value of the currencies over time) to encourage them to circulate.

Benefits of keeping money circulating locally

Ithaca Hours notes
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Ekos at Findhorn
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Benefits of the Findhorn Ekos
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