Noted for Trust

Financial Times of London - Fiona Leney - In the pretty Sussex town of Lewes, 10 miles inland from the southern
English coast, an interesting experiment is taking place.

At first glance, Lewes seems to be a picture-postcard of the past, with
hilly streets and quirky shops, a cobbled humpbacked bridge, a Victorian
brewery and a population prone to parading around in historical costumes as
a celebration of centuries-old villains and martyrs. But behind the scenes
the hometown of 18th-century reformer Thomas Paine is living up to his
tradition of social radicalism.

Two years ago Lewes joined a growing international movement of “transition
towns” in countries as diverse as the US, Japan, Australia and Italy where
residents believe that the best way to preserve the values of their
communities and combat climate change is to favour local produce and
business over the standardised offerings of the global economy. And, last
September, it went one step further by introducing its own currency.

This is a less eccentric move than it seems. Precedents for alternative
currency schemes in the modern world began to crop up as far back as the
1930s when two businessmen, Werner Zimmermann and Paul Enz, set up the
Wirtschaftsring-Genossenschaft (WIR) scheme in Switzerland to provide credit
to local small- and medium-sized businesses in the midst of the Great
Depression. No notes were ever issued but the system remains active today
and serves as inspiration.

In the US there are now at least 12 local currency schemes, created not to
overcome financial hardship – though that might prove a side benefit in the
current economic climate – but to emphasise traditional small-town American
values and those linked with the contemporary transition town movement, with
neighbours supporting one another against a hostile outside world.

The largest is the Berkshares programme, launched three years ago in the
rural Berkshires region of southern Massachusetts. Issued in denominations
of one to 50, at a 5 per cent discount to the dollar, and administered by a
not-for-profit company, the money is now widely accepted, even for large
purchases and wage payments, with nearly $2m worth circulating among
businesses and private individuals. According to Susan Witt, who sits on the
board that oversees the scheme, it has also become a powerful social force.
“It reformed the way many Berkshires business owners and residents think
about their local economy and helped educate the community on why shopping
locally matters,” she says. “Our youth prefer to spend their free time on
Main Street rather than at the mall. They experience and contribute to the
vibrancy of our downtown.”

In the UK the small, south-west English town of Totnes, known for its
market, green credentials and arty, bohemian vibe, preceded Lewes with the
launch of its own pound in 2007. But the latter town is more than twice the
size of the former and an important regional economic centre. Its proximity
to London also thrusts the idea of an alternative economy under the
capital’s nose and Brixton, a neighbourhood in the south of the city
inhabited by a mix of young professionals and low-income families, has just
announced plans to introduce its own scheme in September.

Walking into any of the diverse independent stores lining Lewes’ high
street, one immediately senses the fierce loyalty residents have to their
traders. May’s General Store, resplendent in cream woodwork and hand-painted
maroon signage, is one of the shops authorised to issue Lewes pounds at an
exchange rate of one to one sterling. Inside there is barely room to move
among an eclectic mix of well-groomed mothers, young hippy types,
middle-aged businessmen and pensioners browsing shelves laden with
everything from whole-foods to ethnic textiles, clothing to fine bone china.
It’s the sort of shop that seems to have disappeared from other UK towns and
its owner, Sue May, presides over proceedings with a brisk, school-marmish
authority, dispensing home-baked bread pudding to regulars while giving the
low-down on Lewes’ alternative currency project.

“The pound is a way of keeping money in the local economy and carbon
footprints down by encouraging shoppers to spend in their own
neighbourhood,” she says. “It gives people the choice of doing something
positive to support their community.”

But the benefits go even further since it has also boosted Lewes’ stock
among anyone looking to live in a place with a clear identity and a strong
community spirit. (It helps that Lewes is also only a 55-minute rail journey
from London and a 20-minute drive from the beach.)

As elsewhere, property prices have declined in recent months but less than
in many similar towns and local agents report that business is picking up at
these new, lower levels, reflecting the fact that demand still outstrips
supply for the right sort of property. Topping the desirability list are
elegant, brick-built Georgian family houses high on the top of the high
street overlooking the river Ouse and the brewery, which can command prices
of more than £2m. In new developments, such as The Nurseries, on the
outskirts of town, eco-friendly townhouses designed for young families
meanwhile sell for around £450,000.

"We get families moving here from London and Brighton who very much want to
live in a strong, vibrant community. They want not only nice properties but
a feel-good factor,” says Angela Ramsey, who manages the Oakley estate
agency, another independent business in town. “There are a lot of
professional people who move out here with sophisticated tastes but who are
looking for a return to core values. And once people move here they tend not
to leave again.”

Oliver Dudok van Heel, a volunteer with Transition Town Lewes and one of the
architects of the Lewes pound programme, argues that the currency’s effect
on individual emotional well-being has been even more important than its
economic and environmental one. A sense of taking personal responsibility
for the health of a community is deeply satisfying, he explains. And “a
relationship develops between resident and trader that is absent in a
supermarket; people talk to each other about their lives and we’ve seen the
level of trust grow enormously within the community.”

The scheme, which has put about 25,000 Lewes pounds into circulation, is
scheduled to run until August, at which point the town authority, which has
been holding all the sterling that residents have exchanged, would convert
it back. But it’s been such a success that there are now plans to extend it
indefinitely and to issue notes of larger denominations, answering early
criticism that a system based on £1 notes could never be a serious business
tool.

Other teething problems have also been overcome. The first 3,000 notes,
handsomely printed with pictures of Paine, were snapped up within days of
issue but many were hoarded by collectors or speculators who sold them on
Ebay for up to £35 each. Eventually more notes were issued to solve the
liquidity problem – although van Heel is quick to point out that there was
no inflationary effect. “As you have to exchange one pound sterling for
every Lewes pound, there’s no overall increase in the number of notes in
circulation. That’s why we chose to back our currency with ‘fiat’ money,
that is, the legal currency of the realm,” he says.

Sherman Robinson, a consultant to the scheme and an economics professor at
nearby Sussex University, notes that it was never designed to grow into a
fully functioning financial system. The point, he says, is to create a
symbol and raise public awareness. “Legal tender is made acceptable by law
[but] the Lewes pound is not, so each act of acceptance by a customer or
business is an act of trust, of buying into the deal,” he explains. “People
in the transition town group lay much emphasis on self-sufficiency, with a
sense of returning to past values.”

Abigail Petit, owner of Gossypium in Lewes, agrees. She produces and sells
funky clothes and home furnishings made in fair-trade cotton from an Indian
co-operative yet designed by the daughter of a local textile manufacturer.
In fact, Petit is convinced that such attitudes – and a commitment to
seemingly crazy ideas like an alternative currency – are what make small
towns like Lewes and their businesses successful. “A brand like ours could
never have started – and thrived – anywhere else,” she says. “We are all
interconnected here [and] people are very loyal.”

And, according to May, that extends to everyone in town, not just its
soya-latte-drinking, peasant-blouse-wearing, upper-middle-class residents.
“We’ve got a shop on each [low-income] housing estate which takes Lewes
pounds and people are using them,” she says. “The other thing about
recreating the personal trust between trader and client is that shopkeepers
are willing to give credit – not something you’d ever see in a chain store.”

I make way for Ella Jones, a regular at May’s who’s in to pick up a
favourite lime chutney she used to get from the supermarket nearby. She came
to Lewes from Australia to visit her sister but has since decided to stay.
“The town just prioritises strands that I think are vital to quality of
life,” she says. “I’ve always cared about issues like the environment but
the economics always seemed detached. Using an alternative currency brings
it home that we can make a difference to where we live by our own economic
clout. It’s giving people power to influence their immediate environment.”