Resources for the Local Economy: Local Currencies
In this final post before the Easter break (back in a fortnight), I’m visiting perhaps one of the most common resources for the local economy, local currencies. Perhaps the two best known examples are the Brixton Pound (perhaps the first) and the Bristol Pound, which is the first city-wide local currency in the UK.
It is worth looking at both sites as they are good examples of how to convey a complex idea; inspiring the visitor with the vision for the scheme as well as the practical information they need to take part. There’s always room for improvement but both sites get most things right.
Under the next four headings, I shall explore local currencies and the contribution they make to local economies.
Equivalent to Pounds Sterling
This may seem an odd starting point but it is important to understand local currencies. They are not the same as Local Economic Trading Schemes (LETS). A LETS creates a new currency that is completely self-contained. It is not possible to value it in pounds sterling or any other currency. I suppose bureaucrats might attempt to assign a value to LETS, eg to enforce benefit rules, but essentially LETS are ways of tracking transactions between people; they form self-contained economies independent of the mainstream. This is not a criticism of LETS, it merely distinguishes them from local currencies.
One Local Pound (usually designated by preceding the word pound with the name of a place), is equal to one pound sterling. It is essentially a voucher system. You buy them with sterling and can sell them, receiving sterling in exchange.
Practicalities
So, I could pay with a five-pound note and receive Bristol pounds in my change. I can refuse them if I choose. I might refuse them as I don’t live in Bristol and so unable to spend them.
Usually these schemes work in units of £1 equivalent. So if I purchased something worth fifty pence with a Bristol pound, there’s no reason I shouldn’t receive 50p sterling change. It works so long as the trader and the customer are happy to do this.
Some of the schemes use local pounds to pay for council tax or include them in employees’ wages. This is possible where all parties agree. Shops can easily declare them in tax returns, simply add them to the total income or expenditure in pounds sterling.
I understand some schemes have a more complex system where they sell local pounds at the rate of £11 local for £10 sterling. The £11 local received are still equal to £11 sterling. The exchange rate the other way is £9 sterling for £10 local. If you do the maths you will see this balances the books. The person who loses would be someone who ended up with more local pounds than they first purchased. This is an incentive to stay in the scheme.
Retains Money in the Local Economy
So, why bother? The aim of the scheme is to keep money in the local economy. They are designed to enable businesses and customers to keep money circulating locally whilst still participating in the wider economy. Over time, businesses can collaborate to make sure more of their trade remains local. Businesses can for example, offer local pounds to their local suppliers.
It does not benefit local economies to be cut off entirely from the rest of the world. After all, local economies grow as new money enters it. The problem for many localities is the flow of money out of their economy is greater than the inward flow. Money leaving the economy largely goes to global corporations who salt it away in offshore accounts, avoid taxes and in effect take money out of circulation.
This means local businesses use local currencies and not local branches of multi-national corporations. Local businesses are likely to use local suppliers and collaborate with other local businesses. They are dependent on the flow of currency locally and so many can see the advantages of developing a local system that increases the flow of currency through their businesses.
This means customers may need some incentive to use local pounds. Why should they bother? After all, it restricts what they can spend their money on to local businesses. But this is an opportunity to educate everyone about the economy and how it works. Just as the first retail co-operatives usually included a library and meeting room because they needed to educate their customers, so local currencies need to see their scheme as to some degree educational.
Helps Traders Identify Local Customers
One big advantage, easy to overlook, is it helps businesses find local customers. Anyone using their local currency is likely to be local and so has the potential to become a regular customer. One thing few people realise is the role of friendship in business. Where a business owner can befriend their local customers, they are likely to build long-term business relationships with them.
This can be as simple as the trader, knowing their regular customers’ habits and being able to prepare their usual in advance. Brief conversations accumulate over the years and a network of friendships, can support the core activity of a business.
This can be supported with special offers for customers paying in the local currency. Examples can be found on both the Bristol and Brixton sites.
Use of Mobile Phones
Banknotes are a simple way of promoting a local currency and can be an opportunity to promote the area. The Bristol notes for example include hidden away an image of the dreaded Bristol crocodile that apparently inhabits its waterways, eating who knows who.
However, most schemes have a means of banking their currency, using a local credit union for example, thus allows some interesting schemes using texting. Note this is not an app, you simply pay by texting. Both Bristol pounds and Brixton pounds use this payment method.
If you know what you owe, you can set up the text whilst queueing at the till. The text goes to a special account that returns a confirmation text to the customer and to the retailer. This is a good example of how online methods can support local trading.
Can you think of other advantages or indeed disadvantages of local currencies? Do you use them? If so, what difference have they made to your life?