Editorial 9.7, July 2007, by Deirdre Helfferich

Republic Rubles
July 13, 2007

I was talking with our mayor the other day, discussing what sorts of things Ester might require to help make it a sustainable republic, and I mentioned local currencies. “What’s that?” she asked. I was a little surprised, because Hannah seemed to me to be exactly the sort of person who’d be interested in such an idea. So I explained. A local or community currency is just what it sounds like: local money, good at participating businesses in a particular area. Instead of the national currency (United States dollars, for example), the currency is backed only locally; the unit of exchange may be time, such as an hour of work, or some other unit of exchange, represented by paper notes in various denominations, just like the US greenback. Many towns around the country have local currencies: Ithaca HOURS, for example, or Berkeley Bread. Because the money is only good locally, the currency keeps the economic value that it represents within the local region, thus strengthening that area’s economy. It also helps local businesses compete against national ones.

Here’s what the E.F. Schumacher Society (www.smallisbeautiful.org) says about them:

Widely used in the United States in the early 1900s, local currencies are a legal, but underutilized tool for citizens to support local economies. Local currencies function on a regional scale the same way that national currencies have functioned on a national scale—building the regional economy by creating a protective “membrane” that is defined by the currency itself. Local businesses that accept the currency are distinguished from chain stores that do not, building greater affinity between citizens of the region and their local merchants. Individuals choosing to use the currency make a conscious commitment to buy locally first, taking personal responsibility for the health and wellbeing of their community, laying the foundation of a truly vibrant, thriving local economy.

Hannah was intrigued, so I went home and dug out my one copy of Orion Afield, which happens to be an issue focused on local currencies, and lent it to her. Coincidentally, about a week later, National Public Radio aired a segment on community currencies. (I missed the show, but you can hear it at their website, www.npr.org.)

The Wikipedia entry on local currency describes these benefits:

1. Local currencies circulate more rapidly than a national one, producing greater benefit per unit and greater overall economic activity.

2. Local currencies enable a community to more fully utilize existing resources (such as unemployed people).

3. Local currencies encourage the purchase of locally produced and available goods and services, preventing the drain of capital out of the community.

Ideally, the local currency can be exchanged for a given amount of the national currency (at participating businesses, of course). This helps keep the local currency stable. For example, the Ithaca HOUR is equivalent to one hour of basic labor, or $10.00 US. Ten dollars is a living wage in Ithaca, New York, and so was chosen as the basic equivalent value for an hour of labor. (Note that this isn’t the same thing as the minimum wage.) The Ithaca currency system is one of the oldest, most successful, and largest in the world, with 600 members and aproximately $100,000 in Ithaca HOURS in circulation (representing millions of dollars’ worth of transactions).

Many community currencies have a slight loss, or “negative interest” in their exchange rate: for example BerkShares (of Great Barrington, Massachussetts: www.berkshares.org), which can be spent at an equivalent value of $1 US with participating businesses or individuals, but exchanged for only 90 cents on the dollar. This provides “a financial incentive for both individuals to get and spend them in the first place and for someone [who has them] to spend them again rather than return them for federal currency.” Some participants in community currency groups work on a split payment system, where a percentage of a purchase may be made using the local currency, and the rest using federal money.

If there’s one problem Alaska has, it’s a giant whirlpool of a drain sucking money Outside. This same pattern can be seen in the villages vis-á-vis the larger towns in the state. Local money is a good thing for a depressed or dependent economy, and it might be something we could try here. After setting up a parent nonprofit organization and rounding up some initial participants, a given amount of currency would be issued to get the ball rolling. The scrip could be widely regional (Interior Hours, say, or North Star Notes), or tied tightly to Ester itself (Ester Ingots), or perhaps a little broader (Dome Dollars). To prevent counterfeiting, local currencies are printed on fine papers, frequently with local artwork and bright colors to make them stand out, and with a motto emphasizing the spirit of the community in which they are valid.

My favorite of these mottoes appears on many different local currencies across the country: “In Each Other We Trust.”

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