The "Cambio local en el mundo en desarrollo" community currency
research project is studying the effects of the Tlaloc community currency in
Mexico City, and designing methods for simplifying the introduction of
these currencies in other localities and countries. We are also compiling
and distilling the large body of information on local currencies to be of
use to groups wishing to start these systems without dependence upon
technology. It is our intention to produce a high-quality report that will be of
practical use to people and organizations that wish to implement their
own community currency systems while pursuing their own community
and local economic development projects that fit their own particular
context.
Currently, any group wishing to start a community currency
system must distill usable information from a wide variety of sources.
Much of this information is intended for groups with access to
technology such as computers, telephones, photocopiers and fax
machines. While knowledge exists of how to operate such systems
without the need for any of this technology, in a context which is
appropriate to the situation as it is found, this information is currently
very difficult to access and put into practice. Our project seeks to
change that by compiling this information and making it available, and
presenting it in a way which gives the user freedom to tailor the design
to suit their situation and needs.
Generally speaking, when we hear about Community Economic
Development in developing countries, the terms "microcredit" and
"microfinance" most often come up in the discussion. The remarkable
success of these initiatives in many parts of the world, and of the
Grameen Bank in promoting microcredit has made it the cornerstone of
many successful CED projects.
The use of community currencies in pursuing CED/LED
strategies is much more recent. Currently, there are only a few known
examples in developing countries, but interest in initiating such
projects is great. However, these groups must wait for the
technological and information gap to be bridged to make this knowledge
accessible and implementation practicable.
Noting the complementary aspects, we think there are great
possibilities for a strong partnership between microcredit and
community currency system. While our current study will only focus
on community currency systems by themselves, it is our hope that
these systems will prove to be of great benefit to the microcredit
movement in the near future. Microcredit can only relieve financing
crises and not monetary crises; community currency systems can relieve
monetary crises while supporting microcredit initiatives.
Alternative currencies and trading systems are by no means new
concepts. Stretching back to the early days of human civilization,
community currencies are attracting increasing attention on the part of
practitioners and researchers across a full range of established
disciplines from economics to anthopology . In the literature of
community economic development (CED) practitioners, community
currencies are generally seen as providing alternative employment
strategies and "community mutual aid" amongst marginalized and
unemployed individuals and households, and a new strategy for
integrating the local economy.
Nonetheless, the Local Exchange and Trading System (LETS) and
other types of community currencies which exist in the more
technologically advanced economies of North America and Europe have
not, until very recently, been a part of the long history of the response
of localities in the underdeveloped/overexploited southern countries to
the pressures of the capitalist world-system.
Instead, other innovations in local money forms have often
proven more successful and are more well-known in non-Western and
southern countries, including revolving loan circles, reciprocal gift
exchange, the SINTRAL system, the microcredit movement, and other
mechanisms of mutual aid. While these have proven successful,
current developments in the global economy are effecting the monetary
aspects of developing countries more and more. Further, current
information on community currencies is intended for groups which
have easy access to information technology, and the time to sort
through material primarily available in English in order to develop
methods by which to apply such systems to their local situation.
In this light, we are proposing a study of the various forms that
LETS and related community currency systems can take depending on
the cultural context in which they are implemented so that
practitioners can decide for themselves which methods will fit best into
their context. We also wish to provide materials for implementing such
without the need for computers, telephones, fax machines,
photocopiers and the like. Our systems can be run using the simplest
of record-keeping materials.
The Local Exchange Trading System, first initiated in 1983 in
Canada, is the community currency system in broadest use in the world
today, with over 2000 systems in about 15 countries, primarily located
in the northern hemisphere with industrially-developed economies.
LETS is formally defined as a "system of accounts which allows its
users to issue and manage their own money within a community
currency system." This form of "credit-based tally" currency allows its
members to decide and issue themselves how much they need, interest
free, and is backed by the promise to return that value at a later date.
This community currency has the immediate benefits of keeping the
national currency local by encouraging joint circulation, and over time
increases the volume of money in circulation, and the rate of
circulation flow. It can also be used for financing projects, fundraising
in "hard" currency, and increasing local business.
Community currency systems attempt to balance the influence of
an "efficiency-based" global monetary system with an "equity-based"
community one. An interest-free currency is introduced as a medium of
exchange. The value of these currencies is determined by members of
the community. Variously, the value has been tied to the national
currency (LETS "Green Dollars"); equated to an hour of labour (Ithaca
HOURS); or allowed to determine itself through member's exchanges
(New Berries in Newbury LETS, U.K.).
Unlike barter trade, which requires a direct exchange, local
currencies commit the individual who receives a good or service to
supplying goods or services to the community at a future date.
All accounts start at zero, and each exchange moves the account
balance either plus or minus. A minus is not an overdraft, or even a
debt, but the way the currency is created: it is spent into existence.
Assuming member A gives member B ten sacks of rice in exchange for
ten units of currency, member B acknowledges this by transferring 10
units from her account to member A's account. The record of this
exchange is brought to a central office. A's account is now plus 10,
while Bs account is minus 10, and the money used has been created in
the agreement between the two to exchange.
Later on, member C asks B to repair his motorcycle. They agree
that the labour required for the job is worth 30 units. Thirty units is
transferred from member Cs to member Bs account. Member Bs
account is now plus 20 [(-10 from the purchase of rice) + 30], while
member C has a balance of minus 30--a commitment to future
exchange in the community.
It is possible for part of the exchange to be made in the
conventional currency. For example, in order to repair Cs motorcycle,
member B may need to buy parts from a supplier who lives outside the
community and therefore can not accept the community currency.
Member B and member C could agree on what proportion of the repair
job would be paid in local currency and what would be paid in
conventional cash. The community currency network does not concern
itself with the cash portion of its member's transactions, but such a
system clearly encourages the national currency to stay local.
As an interest-free currency, the possibility of using the currency
as a store of value is eliminated. Any community member with a need
can have it fulfilled, irrespective of their account balance--there is no
requirement for a central body or wealthy individuals to issue credit.
Currency scarcity is eliminated, but only in so far as there are goods or
services available for exchange. Community currency systems can not
create resources where there were none before. They may, however,
mobilise resources that members did not know they had and allow
those members who face conventional money scarcity to trade the
future value of their labour for current needs.
The introduction of a community currency offers numerous potential
benefits to the community:
-Support for locally produced goods and services is encouraged.
As community currency only has value in the community in which it is
generated, it stays circulating to create more wealth for members.
National and multinational corporations are unlikely to accept local
currency in payment, due to the impossibility of repatriating profits.
This reduces community economic drain and encourages local import
substitution, which, in turn supports community employment.
-Traditionally undervalued activities gain greater significance.
Community members themselves decide the value of such things as
childcare, artisanal skills or community organizing. In particular, this
gives them the opportunity to reassess the value of womens work,
either undervalued or unvalued in the larger market economy.
-Environmentally destructive activities are discouraged. Without
interest, there is no incentive to cut down a tree today in order to begin
accumulating interest from its sale. Indeed, in some systems where a
negative interest rate is used, future units of local currency are worth
more than those exchanged today. This encourages activities which
will facilitate future exchanges, such as planting trees.
-Small enterprise development is given a boost. Rather than
relying solely on a high-interest commercial loan, entrepreneurs are
able to procure at least part of the goods and services they need for
startup simply by making a commitment to supplying the fruits of their
labour to the community sometime in the future.
-Social relationships are strengthened. While local currency
systems have not been proven to have any inherent power to overcome
social inequities, it is generally agreed that they do yield tangible social
benefits. An intricate social network is reinforced/created as a by-
product of members meeting to value and exchange each others goods
and services. In an indirect way, it may be exactly these social benefits
which determine economic success over the long run.
The proposed research aims to study the extent to which the
introduction of a LETS-type community currency system is helpful to a
particular community and its ability to ameliorate the difficulties faced
by workers, women, the poor and the unemployed who are, through this
system, able to meaningfully participate in exchange for the meeting of
their needs.
We are interested in determining the degree of participation by
citizens within the community, social and technological barriers to
diffusion and use, and what the experience of administrating the
system teaches about community needs and the limits/possibilities of a
locally-developed and implemented community currency system in
meeting them.
While community empowerment through alternative credit and
exchange systems alone does not provide localities with a panacea for
all economic, social and environmental problems, it may help to
provide the tools for increasing independence from foreign assistance
and increasing self-reliance among individuals and communities among
its many benefits.
Under the project coordination of Stephen DeMeulenaere of
Victoria, Canada, and a core group of researchers including Mr. Luis
Lopezllera of the Promocion del Desarrollo Popular A.C., Thomas Greco
of Tucson, Arizona (Community Information Resource Centre) and
Maeve Lydon and Sandy Ockenden of VIDEA (Victoria International
Development Education Association) as our Canadian Partner, we will
be conducting this study with the support of a broad group of
community currency advocates, researchers and academics including
Dr. Makoto Murayama, Professor of International Relations at the
University of Tokyo and Dr. Bernard Liaetaer, Research Fellow at the
Center for Sustainable Resources of the University of California at
Berkeley, among other supporting academics.