This article by Helen Dew was first published in the May/June 2007 issue of Organic New Zealand

Increasing attention is being paid to the role of the money system in the sustainability debate. 

Author Michael Ruppert, a leader in post-petroleum living strategies, points to the futility of efforts to ‘save the planet’ without first addressing the money system:

“Until we change the way money works, solutions to Peak Oil, food shortages, collapse and sustainability remain unreachable from a national or cultural level because it is simply more profitable to let people die and accelerate collapse through excessive consumption than it is to behave like a species that wishes to survive.” 

Economic lifeblood 

Currency is the lifeblood of an economic system.  Most people think that there’s only one type of money, because that’s all they’ve ever known.  Cheques and credit cards etc. represent special-purpose forms of cash, but money is money, they think, regardless of the form it takes.  Few realise that there are, potentially at least, many different forms of money, and each type can affect the economy, human society and the natural environment in a different way.

Bernard Lietaer, research fellow at the centre for Sustainable Resources, California, and author of Money and Sustainability, says ‘We create our exchange systems and then they create the world we live in.’

Richard Douthwaite, author of The Ecology of Money, says ‘If we wish to live more ecologically, it would make sense to adopt monetary systems that make it easier to do so.’ 

Essentially, community currencies connect unused or underutilised resources with unmet needs, enabling exchanges to take place despite a shortage of money.

A wide variety of currency models are currently in use throughout the world, including mutual credit systems and vouchers.

Members form trading circles, list their offerings and needs, and offer and accept payment for goods and services either wholly or partly in the local currency. 

Local currencies are the ultimate in loyalty programmes. Unlike profits derived from trading with national currencies, the wealth generated by trading with exchange systems created by and for local communities stays within the district.

Since community currencies supplement the national currency, they are welcomed by the community, particularly in times of economic stress. Historically, community currencies have been economic and social lifesavers.

The principal advantages of community currencies are: 

• Protection against global economic instability
• Stemming ‘leakage’ of community wealth to outsiders/offshore
• Support for local small/medium businesses
• Business opportunities in import substitution
• Less fuel needed for imported product
• Increased employment opportunities
• Less conventional money required for desirable projects
• Enhanced sense of community
• Branding opportunity for the district
• Tourist attraction, especially for early adopters

Naturally, if we decide to change how money works we first need to understand how the current money system is designed, how the use of it manages to leave a trail of destruction in its wake and what other options are possible.

Deirdre Kent, in Healthy Money, Healthy Planet, brings to light some surprising facts about the history and workings of money.  Almost all of our money supply is created by private banks as interest-bearing debt. The Reserve Bank has confirmed that only about two percent of the money supply in use in New Zealand is created interest-free.

The problem with this is that money is always in short supply.  When banks provide loans they create the principal only.  Borrowers must find extra money to repay the interest either by increasing their production, competing with others facing the same problem or by further borrowing. Therefore:

• The never-ending need to increase production causes intolerable demand to be made on natural resources.
• The competition for an inadequate supply of money is a bit like musical chairs; someone misses out; bankruptcy is inevitable for some of the losers. 
• Further borrowing compounds borrowers' problems, consigning them to long-term and often inescapable debt. 

Given the above options imposed by the present money system, it is little wonder that, regionally, nationally and globally, we are now faced with escalating environmental damage, economic strain and social dislocation.

In the search for effective means of meeting these challenges, particularly the imminent problem of diminishing and more costly supplies of energy, communities are beginning to recognise the potential of community currencies.

Cuba’s response to ‘peak oil’

When Cuba lost access to Soviet oil in the early 1990s, the country faced an immediate crisis – feeding the population – and an ongoing challenge: how to create a new low-energy society. Cuba transitioned from large, fossil-fuel intensive farming to small, less energy-intensive organic farms and urban gardens, and from a highly industrial society to a more sustainable one. Although barely mentioned in the film The Power of Community, documenting Cuba’s recovery, community currency played a very important role in that process.

Kinsale 2021, Ireland

The Kinsale 2021 energy descent plan, developed by the Kinsale community (Kinsale has a population of 7,000) and unanimously adopted by the Kinsale Town Council, is based on the changes that can be expected in the absence of cheap fuel.  It is significant that 10 of the 53 pages of the plan are devoted to the design and implementation of a community currency system as the first step in the process of implementing the plan.

Regional currencies in Germany ...

Mounting economic, environmental and social pressures are prompting greater openness by communities and their business and civic leaders to the use of community currencies.  This is particularly so in Germany, where Prof Dr Margrit Kennedy has pioneered regionally-scaled systems. The first example was launched in March 2005 by students at a Steiner school in Chiemgau, for the purpose of raising funds for major repairs to the school building.

Regio participants purchase vouchers for Euros and use them to purchase goods or services, either wholly or as a percentage of the price.  Vouchers may be redeemed for Euros at any time, minus an administration fee.  A combination of education and built-in incentives leads to a preference for trades using the local currency.

... and the U.S.A.

The voucher-based BerkShares in Massachusetts have spread quickly since they were launched in 2006, when US$835,000 worth of vouchers were distributed to the participating banks. Hundreds of local businesses accept the vouchers. Chambers of Commerce in neighbouring towns are keen to bring BerkShares to their communities.

Once would-be participants come to appreciate the advantage of having their own exchange medium, promoters sign up members from all sectors of the community: local government, banks, businesses, community organisations and ordinary citizens.

A valued feature of local currencies is their tendency to build community. Like the growing appreciation of ‘slow food’, ‘slow money’ is helping to restore the social dimension of trading.  It takes more time to process a transaction, time for graciousness, time for building connection with community of place.

Community currencies are a vital tool for the empowerment of local communities as they come to terms with the multitude of challenges related to energy and climate change.