The Rise of Alternative Currencies
OZY - The financial crisis has brought Spain to its knees. The economy is all anyone wants to talk about, cities are papered with “For Sale” signs and the staggering increase in unemployment — 26 percent overall and nearly twice that for young people — is pushing Spaniards to think financially outside the box.
Several schemes have been set up to try and minimize the effects of the crisis on people’s purchasing power. The most popular so far is Time Banks.
In 2008 only a handful existed; today there are more than 300 operating across the country.
The concept is simple and works particularly well in big cities where the fast-paced lifestyle makes time a precious commodity. In Barcelona alone, there are 16 banks allowing users to exchange hours of work for everything from tuition to hairdressing services.
"There are products that we can’t make here, and for those we need a global currency. But for things produced locally there can very well be a local currency."
But the most controversial initiative has been the creation of “alternative” or “social” currencies. With names such as Eco or Puma, their specific mechanics vary but they mostly work as an exchange system: If you have goods or services to offer to the community, you gain credit that you can then use to buy whatever else is available through the network.
So far, these initiatives are bringing communities together and helping many fight despair. In one case, a social worker in Zaragoza, Spain, lost her job and began exchanging homemade marmalade for Pumas and had such success she turned it into a catering business.
Villanova i la Geltrú is one of the 70 Spanish towns successfully using an alternative local currency: the Turuta. Ton Dalmau, from ECOL3VNG, the association that created it, explains: “There are products that we can’t make here, like a cars or a computers, and for those we need a global currency.
But there are others that, until fairly recently, were produced locally like food and clothes … and there can very well be a local currency for those.”
Farmers and small shop owners have been the first to welcome the system as a way to incentivize local trade. “It’s just like a small Euro. But unlike the Euro, this currency stays here and generates value in the community instead of escaping out into the speculative market,” says Ton.
According to Forbes, local currency is not illegal and it circulates faster and helps foster local economies. But concerns have been raised arguing that such initiatives might, in fact, reduce the efficiency of the economy, encourage tax evasion and even facilitate counterfeiting.
Yet those fears have not stopped social currencies from taking root around the world. In the small town of Volos, Greece, the TEM was introduced last year and quickly went from being a grassroots initiative to a network with more than 800 members.
"Unlike the Euro, this currency stays here and generates value in the community instead of escaping out into the speculative market."
In the U.K., the mayor of Bristol made waves when he asked to be paid his entire salary in Bristol pounds, the city’s ambitious alternative currency and the first to have electronic accounts managed by a regulated financial institution: the Bristol Credit Union.
But the Bristol pound is not the first to get institutional support. In Toulouse, France, the Sol-Violette has been encouraged not only by the city council but also by local banks that facilitate its exchange for euros.
For those wondering what happens when the initial excitement wears off, the Chiemgauer in Germany might hold the answer. This social currency began as a school project more than 10 years ago and today has more than 2,000 consumers. It is estimated to generate the equivalent of 4 million Euros a year. Its secret might be that the Chiemgauer is only valid for three months — though it can be renewed by buying a stamp that costs 2 percent of the note’s value — so customers are incentivized to use it.
Another example of long-lasting success is the RES. Aimed at medium and small companies, this currency has been working in Belgium for 15 years. It was inspired by the Wir of Switzerland, created in 1934 as a complement to the Swiss franc and currently used by 60,000 companies.
The Berkshires in western Massachusetts is another surprisingly successful example. Its currency, the BerkShares, was launched in September 2006 as ”a tool for community empowerment” and 4.3 million of them have circulated to date. More than 400 businesses accept it and 13 local bank branches serve as exchange stations.
Only time will tell whether social currencies are the key to rehabilitating the financial system or just a temporary craze. What we know for sure is that they’ve taken hold in communities in dozens of countries — proving once more that necessity is the mother of invention. And this creative offspring knows how to keep the cupboard full and the bills paid.