I had the opportunity to attend a speech on local currency last night. It was held in a small town and sseemed like an interesting way to encourage community involvement. Part of the reason I made the effort to attend on a weekday was Monbiot’s commentary on the subject. I’ve been hearing about how local banks should help communities develop independently, cut off reliance on harmful projects like Dams and Nuke Plants so it was heartening to see some movement on that front too. One of the panelists introduced local currency as a way for peopel to get together and talk about money, learn how it works in the community, to find out what is available locally, and just generally help each other. He seemed like a nice, particpatory kind of guy.
Monbiot’s introduction to local currency is particularly provocative after reading Tom Dispatch’s Nick Turse on the local governments running out of money and cutting servised thoughout the US.
Troubled Towns and Troubled Times
Stories about the economic woes facing individual cities and towns are already a staple of national newspapers, even as the bad news, experts believe, is only beginning to flow in. Spikes in unemployment already reaching double-digit levels in some cases, municipal governments deep in the red, essential cutbacks in local services, increasing lines at food pantries, towns facing bankruptcy or even contemplating municipal suicide are increasingly common nationwide.
Towns like Elkhart, Lehigh Acres, and Mendota may now be media poster-towns for tough times nationwide, but most distressed small towns are still suffering in silence and, as a group, they may only be the proverbial canaries in the coal mine. It isn’t surprising that towns which relied heavily on the collapsing auto industry and the building trades are going belly-up first, but what about the rest of America’s towns and even big cities? The same economic forces are battering them, and while they may have been able to withstand immediate collapse, there’s no guarantee that town after town won’t be deep in the red, drowning in joblessness, and facing catastrophe as the American depression drags on.Nick Turse
A Better Way to Make Money
January, 29 2009By Monbiot, George
But the projects which have proved most effective were those inspired by the German economist Silvio Gessell, who became finance minister in Gustav Landauer’s doomed Bavarian republic. He proposed that communities seeking to rescue themselves from economic collapse should issue their own currency. To discourage people from hoarding it, they should impose a fee (called demurrage), which had the same effect as negative interest. The back of each banknote would contain 12 boxes. For the note to remain valid, the owner had to buy a stamp every month and stick it in one of the boxes. It would be withdrawn from circulation after a year. Money of this kind is called stamp scrip: a privately-issued currency which becomes less valuable the longer you hold onto it.
One of the first places to experiment with this scheme was the small German town of Schwanenkirchen. In 1923, hyperinflation had caused a credit crunch of a different kind. A Dr Hebecker, owner of a coalmine in Schwanenkirchen, told his workers that if they wouldn’t accept the coal-backed stamp scrip he had invented – the Wara – he would have to close the mine. He promised to exchange it, in the first instance, for food. The scheme immediately took off. It saved both the mine and the town. It was soon adopted by 2000 corporations across Germany. But in 1931, under pressure from the central bank, the ministry of finance closed the project down, with catastrophic consequences for the communities which had come to depend on it. Lietaer points out that the only remaining option for the German economy was ruthless centralised economic planning. Would Hitler have come to power if the Wara and similar schemes had been allowed to survive?
The Austrian town of Wörgl also tried out Gessell’s idea, in 1932. Like most communities in Europe at the time, it suffered from mass unemployment and a shortage of money for public works. Instead of spending the town’s meagre funds on new works, the mayor put them on deposit as a guarantee for the stamp scrip he issued. By paying workers in the new currency, he paved the streets, restored the water system and built a bridge, new houses and a ski jump. Because they would soon lose their value, Wörgl’s own schillings circulated much faster than the official money, with the result that each unit of currency generated 12 to 14 times more employment. Scores of other towns sought to copy the scheme, at which point – in 1933 – the central bank stamped it out. Wörgl’s workers were thrown out of work again.