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

* * * * * * * * * *
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.

* * * * * * * * * *
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