by Peter Geoghegan
In September, Peter Main handed over a fresh new Bristol pound note to buy a loaf of bread in a bakery in the centre of Bristol. Main was not being eccentric: he is the major of Bristol and was celebrating Bristol becoming the first British city to launch a local currency.
About 300 city centre stores and businesses have opened Bristol pound accounts with Bristol Credit Union, as the city follows Totnes, Stroud and Brixton, The list of businesses includes butchers, bakers, solicitors, plumbers, electricians, book stores, art galleries, a chimney sweep, even a pole dancing tutor, according to the Guardian (http://www.guardian.co.uk/uk/2012/sep/21/bristol-banks-alternative-pound-retailers)
As Scotland struggles to emerge out of recession, it’s obvious – or at least it should be – that creative solutions are required to reinvigorate small businesses (and the economy more generally). Banking reform, and the redirection of capital away from speculation and into productive activity, is an imperative. But beyond waiting for root and branch reform that might never happen, how can we stimulate Scotland’s local economies quickly?
Issuing local currencies, like the Bristol pound, is one innovative option. The theory behind local currencies is straightforward: national notes are exchanged (usually on a one-to-one basis) for a specially created local denomination that can be used to buy designated goods and services in a geographically defined area. Local currencies are perfectly legal and can be very efficient ways of increasing economic activity, especially in times of economic or political crisis. Since they don’t accrue any interest, local currencies generally circulate at a much faster rate than national currencies. They also retain money in the local economy and encourage consumers to buy local produce.
When they work, the effects of local currencies can be impressive. In 1932, the mayor of Wörgl in Austria replaced the faltering national currency with specially printed ‘Certified Compensation Bills’. Inspired by Silvio Gesell’s theory of ‘free-flowing money’, the Wörgl bills were designed to depreciate by 1 per cent of their value each month in order to promote rapid circulation and dissuade hoarding. Within weeks Wörgl had almost full employment. A new ski jump was built. Roads were repaired. Six neighbouring villages soon copied the ‘miracle of Wörgl’. In 1933, the Austrian Supreme Court upheld the Central Bank’s monopoly over the issuing of currency. Thirteen months after it began, Worgl’s experiment was over; within weeks joblessness in the town returned to around 30 per cent.
In Switzerland, the WIR Bank has existed as an independent complementary currency system for small and medium sized businesses and retailers since 1934. Having begun with just 16 members, WIR has grown to 62,000 users with assets of around 3bn Swiss francs (£2bn). Germany currently has about 30 local currencies. Damanhur, an eco-community of about 900 people in northern Italy, has been using its own currency for decades, tied first to the Italian Lira and, more recently, the euro.
Damanhur runs on a similar model to Scotland’s oldest and most successful local currency, the eko, which circulates among shops and businesses in the Findhorn eco-community in Moray. Established in 2002, the eko has proved remarkably resilient: about £20,000 worth of currency is currently in circulation. The notes have a set life-span, usually between three and five years, at the end of which they can be redeemed for new issue ekos or, in rare cases, sterling. Capital raised by each eko issue is used to fund low or no interest loans to community projects such as wind farms and affordable housing.
In the wake of the financial crisis, local currencies have gained traction elsewhere in the UK. In 2009, the first urban local currency was launched in Brixton, London. The Brixton pound has been one of the success stories of the area’s regeneration: more than 70 local businesses accept the stylishly designed notes, which have become a symbol of the area’s burgeoning cultural confidence. The Bristol pound is due to launch soon.
Local currencies, popular in the US during the Depression, have also been making a comeback across the pond. The most successful, BerkShares, circulate in Berkshire County, Massachusetts, with the participation of five local banks. BerkShares retail at 95 cents for a $1 share, an attractive saving that increases the currency’s appeal to customers.
Edinburgh, with its proud history of independent retailers and niche shops, seems like an excellent testing ground for a local currency. The notion of a special currency for the capital is not exactly new. Last year, Transition Edinburgh drew up plans for an Edinburgh pound, which the council broadly supported.
Unfortunately, enthusiasm for a local currency in Edinburgh was been less than fulsome, not least due to a lack of confidence amongst business people and shopkeepers. A Portobello pound, due to launch this year, is currently on hold. A similar local currency scheme was launched in Hawick in 2010.
Arguably the main reason why local currencies have struggled to get off the ground here is a paucity of information on how they work and why.
The Greens remain the only political party actively campaigning for their establishment in Scotland.
Local currencies are not a panacea for all our economic woes but they could help lift some of the fug that surrounds our high streets. The time to think creatively about our economy – and local currencies – has arrived.