Dollars with Good Sense: Do It Yourself Cash

June 2009, Yes! Magazine

by Judith Schwartz

Visit Judith Schwartz's Blog at http://litadventuresinpod.blogspot.com/

Local currencies value time, build community, and keep business moving even when credit dries up.

Total dependence on one currency is like total dependence on one crop, or, for that matter, a single energy source: there’s always the risk that crop failure or a cutoff in supply will topple the whole system. This is the scenario we’re seeing now—credit has dried up and unemployment is soaring. In small pockets throughout the world, in rural areas and inner cities, and spots as far-flung as Bavaria and Thailand to Massachusetts and Michigan, people are responding by launching their own currencies. Such monetary renegades are not simply thumbing their noses at the dollar (or the yen, or the euro, or the baht…) They are making a carefully considered choice to promote the well-being of their communities.

“From the beginning we had two objectives—to promote the region and promote local charities,” says Christian Gelleri. In 2003, Gelleri and a group of his students at a Waldorf School developed the Chiemgauer currency in the Lake Chiemsee region of Bavaria, Germany. Since then, some 3 million Chiemgauer notes (equivalent in value to the euro) have been placed in circulation. The currency, accepted by 600 businesses in the region, typically is spent and spent again 18 times a year, three times more than the Euro. This means that the currency is encouraging trade and cooperation in the region, which keeps the shops and restaurants and artisans active. Think of this faster rate of use (what economists term “velocity”) as a kind of reinvestment in the community.

Local currencies can help a community counter some of the problems with conventional money. For example, bank-issued currency tends to flow toward the money centers for investment. If you shop at a chain store, the profit gets whisked out of town and into the corporate coffers and then, often, to the speculative market. A local currency stays in the community, encouraging local business and trade, adding value to local products and services, and supporting the local infrastructure.

Reliance on national currency means being at the mercy of the national credit situation. As we’ve recently seen, credit constriction can paralyze local economies. Despite the availability of goods and the need for business, when there’s no money, consumers don’t buy. Stores don’t sell. Start-ups can’t get a toe-hold. An alternative currency gives people another way to buy, sell, lend, and borrow. If the community creates its own currency, local business can go on even if the supply of national currency dries up.

At the most basic level, currency functions as a means of exchange (I give you a dollar and you give me an ice cream cone), a unit of value (a dollar, pound, etc.) and a store of value (you can hold onto a dollar as it maintains its worth). It’s also a source of information about relative value, and about what is needed to keep trade flowing, for instance, by adjusting the supply of money or the exchange rate so that those in other markets can afford your goods.

With local currency, a community can meet currency needs that the national tender isn’t fulfilling. If the idea seems fanciful, here are models up and running—some for many years.

BerkShares

Author and urban activist Jane Jacob’s work was one inspiration for the monetary experiment called BerkShares—considered the best-designed and most successful local currency in the United States, with more than $2.4 million-worth passing from bank to hand to till and around again since fall 2006. The attractive paper bills—one BerkShare is worth $1, but is sold into circulation for 95 cents—are accepted at more than 400 businesses in the Berkshire region of western Massachusetts.

Jacobs pointed out that national currencies cover such broad geographical areas that they provide no local feedback. The way our system is now, regions subsidize each other, and weaknesses are not corrected. Local currencies, however, have clear feedback loops so that trade and production imbalances can be addressed more quickly.

As Susan Witt, executive director of the E. F. Schumacher Society, explains, “Whenever a BerkShare must be returned to the bank [instead of recirculated], that means there is not a source or product available locally to fill that business’s needs.” For example, say a toy store finds itself stuck with the currency. This presents an opportunity for a local craftsperson to provide the store with wooden figures, games, or puzzles to be purchased with BerkShares.

Witt, co-founder of the BerkShares program, took to heart Jacobs’ belief that regional economies need their own currencies to grow and thrive. “Businesses are now trading with other local businesses, so that they’re sourcing their printing, accounting, and food products locally rather than out of the area,” says Witt. “People are getting off Amazon.com and back to the local bookstore and camera store. They like the personal exchanges and the ambiance, so they stay.”

The currency belongs to the community, Witt stresses. And its use has been a valuable exercise in community empowerment. “The use of BerkShares is educating people on the importance of supporting local businesses. With that comes a sense of empowerment—that people can make positive changes in the local economy. The fact of BerkShares raises questions like: Can we issue currency that is not backed by the U.S. dollar? It’s prompting people to think about other ways of thinking about money.”

On a recent visit to Great Barrington, Massachusetts, I purchased Berkshares at Lee Bank and spoke to Branch Manager Paula Miller, who expressed enthusiasm about the currency. “Customers love it. We’ve gotten to know other businesses better,” she said, adding that it’s always fun when clients recognize the work of local artists who designed the bills. “It makes it a little more real.”

Time Banking

Time Dollars, now used in settings as varied as small towns, retirement homes, schools, and prisons, respond to conventional currency’s limited capacity to measure worth. “Dollars don’t measure value very well,” says David Boyle, a Fellow at the New Economics Foundation in the United Kingdom. They are good, he says, at measuring “the instantaneous value of Microsoft or currencies on the international exchange. But not the value of, say, a local shop, or of me if I’m very old or young. I might have skills, but not those that are conventionally marketable.”

Time Dollars were developed in 1980 by law professor Edgar Cahn, who lamented that crucial work to improve people’s lives—such as child and elder care—is much needed but little valued. He saw that many who could do these tasks were idle and felt useless. To get people economically engaged, Cahn proposed a system where people earn credit according to the number of hours they work. These Time Dollars can then be “cashed in” for services, like yard work, tutoring, etc.

Not only does Time Banking promote social justice by connecting people, promoting reciprocity, and improving neighborhoods—it has also proved quite versatile: People have exchanged Time Dollars for wool spinning, “rune making,” and having a baby delivered by a midwife. And there’s always an ample supply since no community is going to run out of hours.

TimeBanks USA offers a start-up kit that includes instructions and software for starting a Time Bank anywhere. Rose-Marie Pelletier is working on launching a Time Bank in her town of Pownal, Vermont, an economically diverse rural community of 3,500. At a town meeting, Pelletier looked at the listings of delinquent taxes over recent years and saw that they had increased geometrically. She’s a math teacher, and the numbers spoke to her; she saw the extent to which people were hurting. “People want to help each other—when we know how to do it,” she says. “I see Time Banking as a way of building community, one hour at a time.”

Chiemgauer Regional Currency

Conventional currency excels at serving as a store of value—so much so that use of money for actual trade slows down, leaving some local economies stuck. Coin and paper currencies do not lose value like the products one buys with them can, which makes hoarding and speculation attractive, particularly with the enticement of interest. Argentine economist Silvio Gesell described this phenomenon in 1913 and said that money also should lose value: that it should “rust” or go moldy like other commodities, and suggested a penalty, or demurrage fee, for holding onto it. Nearly 75 years later, then-teenager Christian Gelleri read Gesell’s work and was fascinated. As a high school teacher, he saw the chance to test the model with a local currency. This is how it works: Each quarter, every Chiemgauer bill loses 2 percent of its value. In order to spend the money later, the consumer needs to put a special sticker on the paper currency.

In the beginning, Gelleri got complaints. Then people figured out how to make the model work for them. For instance, one cinema owner said that business went way up at the end of the quarter when people wanted to shed their currency. Increased cash flow at quarter’s end was helpful for accounting, he said. The 2 percent loss, he added, was insignificant compared to the advertising he’d have to buy to secure the same level of customer loyalty he has from accepting the Chiemgauer.

A consumer can exchange euros for Chiemgauers at 50 offices in the region.Three percent of the purchase price goes to a nonprofit the buyer chooses. So far, more than $100,000 euros have gone to charities such as school athletic programs and environmental groups. The “good cause” component reinforces people’s investment in the currency, and in their community.

Maybe we’re asking national currencies to do too many things. As Thomas H. Greco, Jr. points out in his new book, The End of Money and the Future of Civilization, some functions are inherently contradictory: If money is for trading, you want to use it; if money is to store value, you want to save it. Greco and others such as David Boyle say that people could be better served by separating out the functions of money—and using different currencies, depending on whether you are, say, meeting friends at a local café or saving for college.

Back on Main Street in Great Barrington, Matthew Rubiner, of Rubiner’s Cheesemonger & Grocers, says the issue of local currency has shifted quickly from the theoretical to the here and now. “When BerkShares started we talked about what would happen if the economy falls apart and we were really forced to look local.” The economic downturn, he says, has “brought the question into bolder relief.”

Judith D. Schwartz wrote this article as part of The New Economy, the Summer 2009 issue of YES! Magazine. Judith is an author/journalist in Bennington, Vermont now writing about alternative/complementary currencies and localization movements. www.judithdschwartz.com

Buying Local: How It Boosts the Economy

By Judith D. Schwartz, Time.com

Visit Judith Schwartz's Blog at http://litadventuresinpod.blogspot.com/

June 11, 2009

http://www.time.com/time/business/article/0,8599,1903632,00.html

"Buy Local"—you see the decal in the store window, the sign at the farmer's market, the bright, cheerful logos for Local First Arizona, Think Boise First, Our Milwaukee, and homegrown versions across the states. The apparent message is "let's-support-local-business", a kind of community boosterism. But buying close to home may be more than a feel-good, it's-worth-paying-more-for-local matter. A number of researchers and organizations are taking a closer look at how money flows, and what they're finding shows the profound economic impact of keeping money in town—and how the fate of many communities around the nation and the world increasingly depend on it.

At the most basic level, when you buy local more money stays in the community. The New Economics Foundation, an independent economic think tank based in London, compared what happens when people buy produce at a supermarket vs. a local farmer's market or community supported agriculture (CSA) program and found that twice the money stayed in the community when folks bought locally. "That means those purchases are twice as efficient in terms of keeping the local economy alive," says author and NEF researcher David Boyle. (See the top 10 food trends of 2008.)

Indeed, says Boyle, many local economies are languishing not because too little cash comes in, but as a result of what happens to that money. "Money is like blood. It needs to keep moving around to keep the economy going," he says, noting that when money is spent elsewhere—at big supermarkets, non-locally owned utilities and other services such as on-line retailers—"it flows out, like a wound." By shopping at the corner store instead of the big box, consumers keep their communities from becoming what the NEF calls "ghost towns" (areas devoid of neighborhood shops and services) or "clone towns", where Main Street now looks like every other Main Street with the same fast-food and retail chains.

According to Susan Witt, Executive Director of the E.F. Schumacher Society, "buy local" campaigns serve another function: alerting a community about gaps in the local market. For instance, if consumers keep turning to on-line or big-box stores for a particular product—say, socks—this signals an opportunity for someone local to make and sell socks. This is the way product innovations get made, says Witt. "The local producer adds creative elements that make either the product or materials used more appropriate to the place." For example, an area where sheep are raised might make lambs wool socks and other goods.

The point is not that communities should suddenly seek to be self-sufficient in all ways, but rather, says Boyle, "to shift the balance. Can you produce more locally? Of course you can if the raw materials are there, and the raw materials are often human beings."

And what about that higher cost of local goods? After all, big-box stores got to be big because their prices are low. Susan Witt says that the difference falls away once you consider the increase in local employment as well as the relationships that grow when people buy from people they know. (Plus, one could argue, lower transportation, and therefore environmental, costs, and you know what you're getting—which as we've recently seen with suspected contamination in toys and other products from China, can be a concern.)

There's also the matter of local/regional resilience. Says Witt: "While now we're largely a service-providing nation, we're still just a generation away from being a nation of producers. The question is: what economic framework will help us reclaim those skills and that potential." Say, for example, the exchange rates change or the price of oil rises (and it has started to creep up, if not at last summer's pace) so that foreign-made goods are no longer cheap to import. We could find ourselves doubly stuck because domestic manufacturing is no longer set up to make all these products. While no community functions in isolation, supporting local trade helps "recreate the diversity of small businesses that are flexible and can adjust" to changing needs and market conditions, says Witt. (Read "How to Know When the Economy Is Turning Up.")

Another argument for buying local is that it enhances the "velocity" of money, or circulation speed, in the area. The idea is that if currency circulates more quickly, the money passes through more hands—and more people have had the benefit of the money and what it has purchased for them. "If you're buying local and not at a chain or branch store, chances are that store is not making a huge profit," says David Morris, Vice President of the Institute for Local Self-Reliance, a nonprofit economic research and development organization based in Minneapolis and Washington, D.C. "That means more goes into input costs—supplies and upkeep, printing, advertising, paying employees—which puts that money right back in the community."

One way to really make sure money stays in the community is through creating a local currency. Christian Gelleri, a former Waldorf high school teacher in the Lake Chiem area in Germany, has launched a regional currency, the Chiemgauer, equivalent in value to the Euro. According to Gelleri, the Chiemgauer, accepted at more than 600 businesses in the region and with about $3,000,000 Euros worth in circulation, has three times the velocity of the Euro, circling through the economy an average of 18 times a year as opposed to 6. One reason for the fast turnaround is that the Chiemgauer is designed to encourage spending: there is a 2% demurrage fee for holding onto the bills beyond three months.

As an economic principle, velocity has been considered a constant. According to Gelleri, it was stable in the 1950s, '60s, and '70s but starting in the '80s velocity has decreased as more money has been diverted to the financial sector. This scenario may benefit financial centers, but money tends to drain away from other places. Gelleri says that both the Euro and the U.S. dollar have slowed way down. "In the last several months velocity has declined sharply because there's less GDP and more money," he says. "The money doesn't flow. More money is being printed, but it's not going into circulation."

As the nation limps through the recession, many towns and cities are hurting. "Buy-local" campaigns can help local economies withstand the downturn. Says Boyle: "For communities, this is a hopeful message in a recession because it's not about how much money you've got, but how much you can keep circulating without letting it leak out."

Economic Transition Moment

Dear Friends,

Our economy is in transition. A new economic system must respond to the realities of climate change, collapsing financial markets, disparities in wealth, and industries too big to manage sustainably.

Inspired by the writings of Fritz Schumacher, Jane Jacobs, Martin Buber, the Gandhian J.C. Kumarappa and other decentralist economic thinkers, the E. F. Schumacher Society has worked for three decades to develop the theory and application of place-based economic institutions that link people, land, and community.

These small examples of positive citizen action are now helping to inform a vibrant national and international dialogue about creating solutions to our common economic problems. The BerkShares local currency program alone is drawing over 43,000 hits per day to the Schumacher Society’s information rich websites.

A big thanks to our members who have supported the E. F. Schumacher Society in the past. Your new donations are most welcome to enable staff to respond to the opportunities of this transition moment with economic models carefully framed and shaped on the ground. Donations may be made on-line (http://www.smallisbeautiful.org/donation_form.html) or by mail to 140 Jug End Road, Great Barrington, MA 01230.

Several conferences over the next few months are addressing the economy in transition including the Annual E. F. Schumacher Lectures on October 17th in Stockbridge, Massachusetts with Bill McKibben, Benjamin Barber, and Alisa Gravitz and the Economics of Peace conference in October in Sonoma, California. You will find links below and at the events page of the E. F. Schumacher Society’s website.

Best wishes,
Susan Witt, Sarah Hearn, and Stefan Apse
E. F. Schumacher Society
smallisbeautiful.org
berkshares.org
youtube.com/efssociety
efssociety.blogspot.com
twitter.com/efssociety

Board of Directors: Jessica Brackman, Starling Childs, Merrian Fuller, Hildegarde Hannum, Eric Harris-Braun, Daniel Levinson, Constance Packard, Joseph Stanislaw, Nancy Jack Todd, and Charles Turner.
Board of Founders: Ian Baldwin, David Ehrenfeld, Satish Kumar, John McClaughry, and Kirkpatrick Sale.
Advisory Board: Tanya Berry, Wendell Berry, Lisa Byers, Olivia Dreier, Hazel Henderson, Wes Jackson, Amory Lovins, John McKnight, David Orr, Michael Shuman, Cathrine Sneed, Lewis Solomon, John Todd, Greg Watson, Barbara Wood, and Arthur Zajonc.

* * * * * * * * * *
June 25th and 26th Washington, DC, Convergence on Zero conference on tools for moving to zero emissions (www.convergenceonzero.org)

September 10th and 11th, Santa Fe, NM, Slow Money National Gathering (www.slowmoneyalliance.org)

October 17th, Stockbridge, MA, E. F. Schumacher Annual Lectures (www.smallisbeautiful.org)

October 18th-23rd, Sonoma, CA, Economics of Peace (www.praxispeace.org)

October 22nd-25th, New Bedford, MA, Bioneers by the Bay (www.marioninstitute.org)

October 24th, 350.org, International Day of Climate Action led by Bill McKibben (www.350.org)

Radical Rethinking of Our Economies

Dear Friends,

Stewart Wallis of London’s New Economics Foundation (www.neweconomics.org) says of Peter Victor that he is one of the few economists who is describing the practical steps needed to transition from our current economic system to one that is more sustainable. Wallis says we will need more economists like Victor to shape a new economy.

We are pleased to share Peter Victor recent essay “Bigger isn’t Better.”

Best wishes,
Susan Witt, Sarah Hearn, and Stefan Apse
E. F. Schumacher Society
140 Jug End Road
Great Barrington, MA 01230
www.smallisbeautiful.org

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Bigger isn’t Better

By Peter A. Victor
May 2009


There’s nothing like a good crisis to make us rethink old ideas. The depression of the 1930s led to the rejection of the prevailing idea that unemployment would right itself if only people would work for lower wages. Governments could do very little to help. These ideas were overthrown by experience and by the invention of modern macro economics by British economist, John Maynard Keynes. By the end of World War II, most Western governments had adopted Keynesian economic policies designed to ensure that total expenditures were sufficient to maintain full employment.

Keynesian economists soon discovered that full employment today meant a bigger economy tomorrow because some of the investment expenditures required to keep unemployment down: on infrastructure, buildings and equipment, also expanded the productive capacity of the economy. So does an expanding population and labour force. Initially, governments pursued economic growth to meet the more pressing concern of maintaining full employment, but this soon changed. In the 1950s, economic growth became the number one economic policy objective of governments and all others, such as productivity, innovation, free trade, competitiveness, immigration, even education, became a means to that end.

Until a year or so ago all seemed to be going reasonably well. Then came the breakdown in the financial sector followed quickly by a recession that through globalization, spread further and faster than swine flu. Now governments are congratulating themselves for acting together to stimulate spending to get the economies back on course, much as Keynes might have recommended. But times have changed since his day. World population has increased almost three times, world economic output has increased ten times and with this massive expansion of the human presence on earth, we are confronting limits to the availability of cheap energy, to fresh water, and to the capacity of the atmosphere to absorb increasing emissions of greenhouse gases. At the same time we are destroying the habitat of numerous species of flora and fauna and the security of our own food supplies is threatened.

It is time to rethink the old idea that the solution to all our problems lies in the incessant expansion of the economy. Rich countries like Canada should explore alternatives, especially if poorer countries are to benefit from economic growth for a while in a world increasingly constrained by biophysical limits. Some deny or simply ignore these limits and argue that economic growth in rich countries is necessary to stimulate growth in poorer ones. Others say that with ‘green’ growth we can expand economic output as we reduce the demands we place on nature through more efficient production, better designed products, fewer goods and more services, compact urban forms, and organic agriculture. While these measures may well help in a transition they are an unlikely prescription for the long term. What is required is a radical rethinking of our economies and their relation to the natural world.

Although no 21st century Keynes has emerged to prepare the intellectual ground for such a change in thinking, we do have a body of knowledge built up over many decades and now thriving under the name of ‘ecological economics’. Ecological economists understand economies to be subsystems of the earth ecosystem, sustained by a flow of materials and energy from and back to the larger system in which they are embedded. It is understandable that when these flows were small relative to the earth they could be ignored, as they have been in much of mainstream economics. Economists are not alone in treating the economy as a self-contained, free standing system largely independent of its environmental setting. It is a widely held view that environmental protection is just one among multiple competing interests to be traded off against the economy. And anyway, this mainstream perspective teaches that if resource and environmental constraints are encountered, scarcities will be signalled by increases in prices that will induce a variety of beneficial changes in behaviour and technology. Should this system of scarcity, price, response fail then economists can estimate ‘shadow’ prices which can be imposed directly through taxes or used indirectly through policies based on cost-benefit analysis to fix the problem.

To ecological economists, this is an inadequate response to the myriad problems of resource depletion, environmental contamination and habitat destruction confronting humanity in the 21st century. They question the pursuit of endless economic growth and contemplate a very different kind of future.

In my own work, I have examined whether and under what conditions a country like Canada could have full employment, no poverty, much reduced greenhouse gas emissions, and maintain fiscal balance, without relying on economic growth. Using a comparatively simple model of the Canadian economy I have explored scenarios in which these objectives are met. The ingredients for success include a shorter work year to reduce unemployment yet retain the advantages of technological progress, a carbon price to discourage greenhouse gas emissions, and more generous anti-poverty programs.

In such an economy, success would not be judged by the rate of economic growth but by more meaningful measures of personal and community well-being. We would adjust to strict limits on our use of materials, energy, land and waste, guided by prices that provide more accurate information about real rather than contrived scarcities. We would enjoy more services and fewer but more durable and repairable products, and we would value use over status when deciding what to buy. Rampant consumerism would be history, advertising would be more informative and less persuasive, and new technologies would be better screened to avoid problems to be fixed later, if at all. Infrastructure, buildings and equipment would be more efficient in their use of energy and we would think and act more locally and less globally. With more free time at our disposal we would educate ourselves and our children for life not just work.

Is all this simply wishful thinking of a sort that flourishes in troubled times? I think not. The undercurrent of discontent with modern life is rich with ideas for a better future, one that is not dependent on economic growth. For example, in March of this year the UK’s Sustainable Development Commission delivered its report ‘Prosperity without Growth?’ to the British Government endorsing and amplifying many of the ideas expressed here. The Centre for the Advancement of a Steady State Economy based in the USA has obtained over 3000 signatures on its position statement designed to help change the goal of the economy from growth to sustainability. At the local level, Transition Towns has spread in less than four years from the UK to many countries including Canada, to raise awareness of sustainable living and to build local resilience in response to the combined threats of peak oil and climate change. Even mainstream economists are moving with the tide. Nobel Laureate economist Robert Solow said last year: “It is possible that the US and Europe will find that…either continued growth will be too destructive to the environment and they are too dependent on scarce natural resources, or that they would rather use increasing productivity in the form of leisure.” Let’s add Canada to the list and go from there.


Economist Peter A. Victor is Professor in Environmental Studies at York University and author of Managing without Growth. Slower by Design, not Disaster, Edward Elgar Publishing, 2008. “Bigger isn’t Better” first appeared in the Ottawa Citizen (www.ottawacitizen.com).

Towns print money to help local merchants

By Matthew Cardinale, Inter Press Services

http://www.berkshares.org/press/09May30.htm

Jun 19, 2009

ATLANTA, (IPS/GIN) - In the face of an economic system in full crisis mode, a handful of communities across the U.S. and the globe have begun experimenting with alternative forms of local currency as a pathway to sustainability.
Local currencies existing today in the U.S. include the Humboldt Community Currency in Eureka, California; Berkshares in the Massachusetts Berkshire region; Bay Bucks in Traverse City, Michigan; Ithaca Hours in Ithaca, New York; Cascadia Hours, Corvalis Hours, and RiverHours in Oregon; Equal Dollars in Philadelphia, Pennsylvania; and Madison Hours in Madison, Wisconsin, according to the E. F. Schumacher Society, which runs Berkshares.

These currencies all represent an effort to respond to the pressures of globalization, like the advent of massive chain stores competing with local merchants.
People in Great Barrington, Mass., can go to one of five participating local banks to trade 95 cents for one Berkshare, at a five percent discount to the dollar. They can then spend Berkshares at over 400 participating local stores as a direct replacement for dollars, thus saving 5 cents with every Berkshare they spend.
Even though store owners lose the 5 cents whenever they trade Berkshares back for dollars at a bank—which they have to do to buy something that can't be produced locally—they are still typically happy with the loyal, local customers they keep instead of losing them to chains like Wal-Mart, Starbucks, and Barnes & Noble.
“Local currencies are part of what educate people about the importance of their small, independent businesses,” Susan Witt, founder of Berkshares, told IPS. “It's bringing people off the internet back to Main Street, for the face-to-face exchanges. Once they're there, they like it.”
A local currency can help create a more sustainable economy in several ways, leaders in the local currency movement say.
First, since using a community currency forces people to buy locally, fewer goods have to be imported.
“By having economic transactions so focused locally, that's definitely, for one thing, reducing use of fossil fuel. If it's a local farmer's market ... food (is) produced 30 miles away instead of 3,000 miles away,” said Steve Burke, executive director of Ithaca Hours.
Trade theorists might object that it is less efficient, or less productive, for diverse goods to be produced in many communities than it is for each community to specialize in producing one product for export, even factoring in transportation costs.
A second way in which community currencies support environmental sustainability is that they can lead to reduced consumption, Ms. Witt argued. She believes people purchase more and more “stuff,” not because they need it, but to fill a void that community currency can satisfy.
“You know the full story about the goods you purchase. You know how they were produced. You know the carpenter who made the table. You know who her children are. You realize buying the table is supporting that family,” Ms. Witt said.
The products bought with local currency “link you to your neighborhood, your place, the people of your place. They're not just stuff ... they enrich your life the way that stuff would not. So you need less.”
A third way in which community currency can lead to sustainable economy is communities can print the currency they need to issue interest-free, or non-profit loans. Allowing credit to be issued interest-free eliminates the need to service growing debts. High-interest debt owed by individuals, businesses, and governments to private banks is one of the main factors pushing economies to constantly grow at an exponential rate. As these entities struggle to service the interest on their debts with a total money supply that was mostly created through issuance of credit, more and more new debt must be created in order for the system to be stable.
Thus, because high-interest debt pushes the economy to constantly grow, it also pushes industrialization into new markets, new products, and new technologies, which often lead to deforestation, air pollution, and the like.
By communities printing and issuing their own currency, in part through productive non-profit loans, the economy can function without the constant growth that is imperiling the environment.
There are at least two different models for how to organize and operate a local currency that local communities are using. One is used by Berkshares; the other was pioneered by the Ithaca Hour.
Founded in 1991, the Ithaca Hour is the oldest local currency to exist in the U.S. since local currencies disappeared in the 1900s. Numerous local currencies have since based their model on the Ithaca Hour.
Businesses become members in Ithaca Hours by purchasing a listing in the Ithaca Hours directory, and they receive two “hours” every year as part of their membership fee. Employees at these businesses then can accept hours instead of dollars for some of their wages. People can accept hours instead of dollars for services, like mowing a lawn, that they provide.
This, in addition to low-cost loans, is the primary way Ithaca Hours enter Ithaca's economy.
“There's a pretty fundamental difference between our model and the Berkshares model,” Mr. Burke said. “They sell them. With ours, you can't buy them; you can only earn them.”
They are called hours “to make a statement,” Mr. Burke said. The founders “wanted to emphasize the relationship between time and money.”
(This story is part of a series on sustainable development by IPS and the International Federation of Environmental Journalists for Communicators for Sustainable Development. See more at www.complusalliance.org.)

Civic Unreasonableness

Dear Friends,

In its September/October 2008 article about James Gustave Speth, Orion Magazine (www.orionmagazine.org) comments, "If America can be said to have a distinguished elder statesman of environmental policy, Speth is it." His career includes leadership of the Natural Resources Defense Council, the World Resources Institute, the United Nations Development Programme, and the Yale School of Forestry.

It is this very life-long commitment to the environment that has turned Gus Speth into an eloquent spokesperson for a "new economy." In the essay below he argues for the urgent transformation of old and failing economic systems if we hope to achieve a sustainable and equitable future.

We are pleased to share the essay with you.

Best wishes,
Susan Witt, Sarah Hearn, and Stefan Apse
E. F. Schumacher Society

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PREAMBLE: NEW ECONOMY, SUSTAINING ECONOMY
by James Gustave Speth
May 28, 2009

The economic crisis has stimulated much soul searching and, more generally, searching for something better. Along with the environmental crisis, it has exposed the severe shortcomings of business as usual and the current order.

A great imperative Americans now face is to build a new economy – a sustaining economy. Sustaining people, communities and nature must henceforth be seen as the core goals of economic activity, not hoped for by-products of market success, growth for its own sake, and modest regulation.

We are told to seek a strong economy. We know now that we should seek first a strong society, a strong nature, and a strong democracy. Today's economy offers little help in these regards. We must move beyond it. We need to reinvent the economy, not merely restore it.

Political action must embrace a profound commitment to social justice and a powerful assault on economic privilege. It must embrace a sustained challenge to consumerism and commercialism and the lifestyles they offer, a healthy skepticism of growthmania and a redefinition of what society should be striving to grow, a challenge to corporate dominance and a redefinition of the corporation and its goals, and a commitment to deep change in both the functioning and the reach of the market.

Economic growth may be the world's secular religion, but for much of the of the world it is a god that is failing – underperforming for most of the world's people and, for those of us in affluent societies, creating more problems than it is solving. The never-ending drive to grow the overall U.S. economy undermines families, jobs, communities, the environment, a sense of place and continuity, even mental health. It fuels a ruthless search for energy and other resources, and it rests on a manufactured consumerism that is not meeting the deepest human needs.

Before it is too late, America should begin to move to post-growth society where working life, the natural environment, our communities, and the public sector are no longer sacrificed for the sake of mere GDP growth; where the illusory promises of ever-more growth no longer provide an excuse for neglecting to deal generously with compelling social needs; and where a truly democratic politics is no longer hostage to the primacy of powerful corporate interests.

Needed Policy Initiatives

America's open-ended commitment to aggregate economic growth is consuming environmental and social capital, both now severely diminished. At the same time, it is abundantly clear that American society and many others do need growth along many dimensions that increase human welfare, now and in the future: growth in good jobs and in the incomes of the poor; growth in availability of health care and the efficiency of its delivery; growth in education and training; growth in security against the risks of illness, job displacement, old age and disability; growth in investment in public infrastructure for urban and inter-urban transport, water, waste management and environmental amenity; growth in the deployment of climate-friendly and other green technologies, as rapidly as possible; growth in the replacement of America's obsolete energy system; growth in the restoration of both ecosystems and local communities; growth in non-military government spending at the expense of military; and growth in international assistance for sustainable, people-centered development for the half of humanity that live in poverty, to mention some prominent needs. Even in a post-growth society many things need to grow.

We need targeted policies that directly address these objectives and America's compelling social needs – policies, for example, that strengthen families and communities and address the breakdown of social connectedness; that guarantee good, well-paying jobs (including green-collar ones); that provide for universal healthcare and alleviate the devastating effects of mental illness; that provide a good education for all; and that ensure care and companionship for the chronically ill and incapacitated.

Of particular importance are government policies that will temper growth while improving social and environmental well-being, such as: shorter workweeks and longer vacations; greater labor protections, job security and benefits; restrictions on advertising; a new design for the twenty-first-century corporation, one that embraces rechartering and stakeholder primacy rather than shareholder primacy; strong social and environmental provisions in trade agreements; rigorous environmental, health and consumer protection, including full incorporation of environmental and social costs in prices; greater economic and social equality, with genuinely progressive taxation of the rich and greater income support for the poor; heavy spending on public services; and initiatives to address population growth at home and abroad.

If the market is going to work for the betterment of society, environmental and social costs should be incorporated into prices. Honest prices will ensure that people take into account the environmental and social impacts of their purchases, whether they're environmentally conscious or just minding their pocketbooks. High prices are a problem not because they are high but because people don't have the money to pay them and alternatives (e.g., truly fuel-efficient vehicles) are not readily available. Honest prices would be higher prices for many things, but that does not mean Exxon should pocket the difference or that equity issues should remain unaddressed.

Responsibly high energy prices, driven for example by a declining cap on carbon dioxide emissions, will help protect the earth's climate, increase demand for efficient vehicles and public transportation, spur new renewable energy industries, decrease the supply vulnerabilities and international entanglements of imported oil, strengthen local communities and encourage localization rather than globalization. But honest energy prices must be accompanied by measures that make them affordable by those on whom they would otherwise impose a serious hardship.

Conventional wisdom on the clash of economy and environment is that we can have it both ways, thanks to new technology. We do indeed need a revolution in the technologies of energy, transportation, construction, agriculture and more. This ecological modernization can be driven by quantitative restrictions that ensure extractions from the environment do not exceed regenerative capacities and discharges to the environment do not exceed assimilative capacities. But the rate of technological change required to deal with environmental challenges in the face of rapid economic growth is extremely high and rarely achieved. If pollution from an industrial facility is cut in half but growth spawns another similar plant, there is no net gain. Housing, appliances and transportation can become more energy-efficient, but the improvements will be overwhelmed if there are more cars, larger houses and new appliances--and there are. There's a limit to how fast and far new technology can take us; technological change alone is not enough.

Economic Crisis and Beyond

Americans are struggling with the combined impacts of crumbling financial assets, tighter credit and layoffs. These problems are associated with a slowdown in GDP growth, but the failure of growth is not truly their cause, and they will not necessarily be cured by more growth. We have had jobless growth before. As is now appreciated, the current economic crisis is the result of government failing to intervene appropriately in the marketplace--in financial markets, in housing markets, in labor markets and elsewhere. We are today on the receiving end of misguided policies, including massive deregulation, that have led to deep structural maladies. Major corrections are needed.

The economic crisis should also teach us to live more simply and focus more locally. It is time to move beyond our consumerism and hyperventilating lifestyles. There has been too little focus on consumption and the mounting environmental and social costs of American "affluenza," extravagance and wastefulness. Being less focused on getting and spending (initially, in part, because there will be less to spend) can help society rediscover that the truly important things in life are not at the mall nor, indeed, for sale anywhere.

Psychological studies show that materialism is toxic to happiness and that more income and more possessions do not lead to a lasting sense of well-being or satisfaction with life. What makes people happy are warm personal relationships and giving rather than getting, things that are possible at a human scale. The good news is that more and more people sense that there's a great misdirection of life's energy. In a survey 83 percent of Americans say society is not focused on the right priorities, 81 percent say America is too focused on shopping and spending, 88 percent say American society is too materialistic, 84 percent want to spend more time with family and friends. These numbers, even if half right, suggest there's a powerful base on which to build. More and more people are saying: Confront consumption. Practice sufficiency. Create social environments where overconsumption is viewed as silly, wasteful, ostentatious. Create commercial-free zones. Buy local. Eat slow food. Downshift. Public policy should support these directions, and it should devise new measures to track improvements in social welfare, a purpose for which GDP is a miserable failure.

Building a Unified Progressive Movement

What circumstances might make deep change plausible? A mounting sense of imminent crisis, occurring at a time of wise leadership, accompanied by the articulation of a new American narrative or story and the appearance across the landscape of new and appropriate models, all these would help. Most of all, we need a new politics and new social movement powerful enough to drive change.

We live and work in a system of political economy that cares profoundly about profits and growth. It cares about society and the natural world in which it operates mainly to the extent it is required to do so. It is up to us as citizens to inject values of fairness, solidarity and sustainability into this system, and government is the primary vehicle we have for accomplishing this. But mainly we fail because our politics are too enfeebled and government is more and more in the hands of powerful corporations and great wealth. Our best hope for real change is a fusion of those concerned about environment, social justice, and political democracy into one progressive force. We are all communities of shared fate. We will rise or fall together.
Environmentalists and social progressives must join to address the crisis of inequality unraveling our social fabric and undermining democracy. It is a crisis of soaring executive pay, huge incomes and increasingly concentrated wealth for a small minority while poverty approaches a thirty-year high, wages stagnate despite rising productivity, social mobility and opportunity decline, the number of people without health insurance soars, job insecurity increases, safety nets shrink and Americans have the longest working day of all the rich countries.

Progressives of all stripes must also join in seeking to reform politics and strengthen democracy. America's gaping social and economic inequality poses a grave threat to democracy. We have seen the emergence of a vicious circle: income disparities shift political access and influence to wealthy constituencies and large businesses, which further imperils the potential of the democratic process to act to correct the economic disparities. Corporations have been the principal economic actors for a long time; now they are the principal political actors as well. Neither environment nor society fares well under corporatocracy. We need to embrace public financing of elections, lobbying regulation, nonpartisan Congressional redistricting and other reforms as a core of our agenda.

For the most part, we have worked within our current system of political economy, but working within the system will in the end not succeed when what is needed is transformative change in the system itself. George Bernard Shaw famously said that all progress depends on not being reasonable. It's time for a large amount of civic unreasonableness.

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James Gustave Speth is author of "The Bridge at the Edge of the World: Capitalism, the Environment, and Crossing from Crisis to Sustainability" (Yale Press, 2009 paperback edition) available through your local independent bookseller.

WIR/Cooperative Credit and Exchange

Erick B. Hansch was a colleague of Robert Swann and Ralph Borsodi at the International Independence Institute. One of the projects of the Institute was the launch of a currency called "The Constant" in Exeter, New Hampshire in 1972. Borsodi, an economist, was in his 90's at the time and decided to issue the currency as a one year experiment to prove it could be done, rather than just writing another book on the subject.

The Constants were issued by a bank in Exeter and were valued according to a weighted basket of commodities. The intent was to demonstrate how to issue a currency that would not deflate but which instead held "constant" buying potential.

The Institute was also the vehicle for launching the community land trust movement in this country. Erick Hansch was one of the authors with Bob Swann and Ted Webster of "The Community Land Trust: a Guide to a New System of Land Tenure in America" published in 1972, the complete text of which is available online:

http://www.smallisbeautiful.org/clts/clt_book.html

In 1974 the Institute hosted E. F. Schumacher's historic trip to this country. Swann and Schumacher formed a close alliance as a result.

Erick Hansch, Ralph Borsodi, and Fritz Schumacher all died within a month of each other in 1977. Bob Swann continued working with the ideas of his friends and mentors and in 1980 founded the E. F. Schumacher Society in Great Barrington, Massachusetts which has been a leader in the study and application of local currencies and community land trusts. The Schumacher Society's current work with BerkShares local currency (http://www.berkshares.org) has grown from this long tradition of economic scholarship and innovative practice.

Erick Hansch had a gift for languages. In addition to English he spoke Chinese, German, and Spanish. In anticipation of the launch of the Constant, he traveled to Basel, Switzerland to study the WIR currency program (http://www.wir.ch) that has been in circulation in parallel to the Swiss Franc since the 1930s. His unfinished typed report is in the archives of the E. F. Schumacher Library. Thanks to the good work of volunteers, it has been entered into electronic format and is available in full at the Society's website:

http://www.smallisbeautiful.org/local_currencies/wir.hansch.html

Best wishes,
Susan Witt, Sarah Hearn, and Stefan Apse
E. F. Schumacher Society