Will Ruddick (Eco Pesa) reached the last round of telephone interviews for a TED fellowship only to be confronted by an Important Person who flatly stated that CCs had been tried but failed. In this series of three I opine that CCs have hardly seriously been tried, and that many of the failures should be put down to the specific design or implementation of the projects.
This should really be done by an academic, who has time to be thorough and check sources, but until then, I should be better than nothing. I divide CCs into broadly different types. The money-backed model, mutual credit, and 'other experiments'.
Many towns in US, and four in UK, have desiged, printed and sold notes denominated in the national currency, intended for circulation locally. They are therefore, 100% backed by a (failing) national currency, but less useful than the national currency. Usually they are sold to consumers at a small discount, which is paid for on redemption by the high street shops. These projects are usually funded by an initial cash injection to pay for the printing, then all the notes which aren't redeemed at the end of their lifetimes pay for the next printing. The purpose is to encourage local trade by providing notes which can only be spent locally.
This template is being tried many times, notably by Transition Towns, UK, but have achieved zero impact, and many others in the US which launch with a fanfare and are never heard of again.
Michael Linton, the man behind LETS, compares this design to 'ice cubes in a leaky bucket'. If this analogy is fair, and I believe it is, then it explains perfectly why the currencies have no impact. The local economy is a bucket of water, with the money leaking out through the supermarkets. If you freeze some of that money, so it can't leak out, then other money will leak out in its place. Which is to say that the real problem is in people's shopping habits.
Assuming all actors are amoral, there is really no reason to circulate this currency. Local shopkeepers can rarely spend it, and they end up taking a cut in profits as they convert it back to national money to buy stock. With usually only a few tens of thousands in circulation in a whole town, these projects were designed to have only marginal impact. The project depends absolutely on the will of the community to buy locally, but actually provides very little incentive for them to do so.
The shopkeepers insist that for bookkeeping purposes the new money should be equivalent to, and convertible to the national currency. But that really means they don't want to, or can't use other money. The high street is a good place to distribute flyers to gain attention, but struggling local business don't want this extra complication and expense.
As far I can see, the only place that this model really works, is Will Ruddick's own Eco Pesa project in Africa, in the almost total absence of national money. In those slums, most of the hard currency is spent directly on drugs, but the shopkeepers love them because they can see them going around and around. In such poor areas, the economy consists much more of basic needs which are met locally.
What bothers me no end, is that this model is failing again and again with little modification of design. Its advocates talk about 'local feeling', or decoupling it from the national currency later, or awareness raising, or lately 'breaching experiments' but come on guys, isn't it time to learn that lesson and move on?
[peer reviewed by Eric Harris-Braun]
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