Sacred Economics: Money, Gift, and Society in the Age of Transition (40 page)

Compare their policies with those of Mexico, which allowed foreign manufacturers to set up factories in the Maquiladora zone, with no taxes, no limits on the expatriation of profits, and no requirement to source components in Mexico. Mexico and the many other countries offering such “free-trade zones” merely provided low-cost labor and freedom from environmental restrictions, essentially selling off their natural and social capital without gaining much know-how or infrastructure in return. Instead of enriching their economies, they bled them. Then the factories moved to take advantage of even cheaper labor elsewhere. First GATT, then NAFTA and the WTO and EMU destroyed in one country after another the protections that kept local economies from becoming helpless colonies of commodity export and consumption. The only beneficiaries were the elites, who are relatively independent of the local economy. Unlike the masses, they can import what they need and move away if conditions become too terrible.

Monetary autonomy is a crucial part of political sovereignty. Ultimately, political sovereignty means very little if outside corporations can strip-mine that society’s natural and social capital—its resources, skills, and labor—and export them to global markets. At the present writing, Brazil, Thailand, and other countries are taking measures to protect their economies from the flood of cheap U.S. dollars that has resulted from the Fed’s quantitative easing program. Left unchecked, these dollars would allow foreigners to buy up domestic equities, mines, factories, utilities, and so on. These countries recognize that meaningful sovereignty is economic sovereignty.

What is true for nations is also true for smaller regions. However, compared to tweaking interest rates to below the zero lower bound, the proposal that local and regional governments issue their own currency may seem naively impractical. Actually, it is a very accessible solution that is constantly being suppressed. Although it is illegal for states to issue currency in the United States and many other countries, people find ways around laws when the necessity arises.

The case of Argentina’s financial crisis of 2001–2002 is most illuminating. When provincial governments completely ran out of money to pay employees and contractors, they paid them in low-denomination bearer bonds instead (one-peso bonds, five-peso bonds …). Local businesses and citizens readily accepted these bonds, even though nobody really expected they would ever be redeemable for hard currency, because they could be used to pay provincial taxes and fees. Acceptance for payment of taxes enhanced the social perception of value, and as with all money, value and the perception of value are identical. The currencies, which were all denominated in a common unit of account, circulated far beyond their region of issue. They revived economic activity, which had ground to a halt since, after all, people still had the capacity to produce goods and services that other people needed, lacking only the means to make exchanges. This was only possible because Argentina is fundamentally a rich country that had not been completely converted into export commodity production. At the same time, Argentina’s government repudiated its foreign debt, temporarily cutting it off from imports and increasing the need for local self-reliance. At that point the IMF stepped in with emergency loans to induce the country to keep its debts on the books.

As of 2011, we are still living, if no longer in normal times, at least in the inertia of the habits of those times. Accordingly, local
currencies still face an uphill battle, languishing without government support. Even worse, governments present them with crippling handicaps through tax laws. Citizen-created currencies are unacceptable for payment of taxes, yet transactions made in these currencies are subject to income and sales taxes. That means that even if you used local currency exclusively, you would have to pay taxes in U.S. dollars—even though you earned none!
⁷
Taxing people in a currency they don’t use is tyrannical—it was a cause of the American Revolution and a key instrument of colonialism (see the discussion of the “hut tax” in
Chapter 20
).

In places where local currencies have been effective, either they have received government support, or they have emerged in war zones and other extreme circumstances. In Argentina in 2001–2002 and the United States and Europe during the Depression, local governments actually issued currency themselves. Moreover, in those places and times, there was still a lot of local production, subsistence farming, local distribution and supply networks, and local social capital in general. Local currencies had a real chance there and, unsurprisingly, provoked the hostility of the central authorities. In the case of Argentina, the IMF demanded their abolition as a prerequisite for aid.

Nonetheless, the efforts of local currency activists over the last twenty years have not been in vain. They have created a model—many models, in fact—to be applied when the next crisis erupts and the unthinkable becomes common sense. They are creating a new logic, a new template, working out the kinks, gaining experience
that will become essential very soon. So let us examine some of the types of complementary currency being explored today that may have a role in the coming sacred economy.

The first kind of local currency I’ll consider is the dollar (or euro) proxy currency such as the Chiemgauer or the BerkShare. You can buy a hundred BerkShares for $95 and buy merchandise at the usual dollar price; the merchant then redeems a hundred BerkShares for $95 at participating banks. Because of this easy convertibility, merchants readily accept them, as the 5-percent discount is well worth the extra business volume. However, the same easy convertibility limits the currency’s effect on the local economy. In principle, merchants receiving BerkShares have a 5-percent incentive to source merchandise locally, but in the absence of local economic infrastructure, they usually won’t bother.

Proxy currencies do little to revitalize local economies or to expand the local money supply. They provide a token of desire to buy local but a very small economic incentive to do so. Since BerkShares originate as dollars and are convertible into them, anyone with access to the former also has access to the latter. The international equivalent is found in countries that adopt a currency board. We call these
dollarized economies
because they have effectively surrendered any monetary independence. Proxy currencies like BerkShares are useful as a consciousness-raising tool to introduce people to the idea of complementary currencies, but by themselves they are ineffectual in promoting vibrant local economies.

More promising are fiat currencies, such as Ithaca Hours, that actually increase the local money supply. Many Depression-era scrips also fall into this category. Essentially, someone simply prints up the money and declares it to have value (e.g., an Ithaca Hour is declared equal to ten U.S. dollars). For it to be money, there must be a community agreement that it has value. In the case of Hours, a group of businesses, inspired by the currency’s founder Paul Glover, simply declared that they would accept the currency, in effect backing it with their goods and services. During the Depression, scrip was often issued by a mainstay local business that could redeem it for merchandise, coal, or some other commodity. In other cases, a city government issued its own currency, backed by acceptability for payment of local taxes and fees.

The effect of fiat currencies is much more potent than that of proxy currencies because fiat currencies have the potential of putting money in the hands of those who would otherwise not have it. It is only inflationary if those accessing the money offer no goods or services in return.
⁸
In extreme economic times, it is often the case that there are plenty of people willing to work and plenty of needs to met; only the money to mediate these transactions is missing. So it was during the Great Depression, and so it is becoming today. Municipalities all over the world are facing severe budget cuts due to lack of tax revenue, forcing important maintenance and repair tasks to languish and even laying off police and firefighters; meanwhile, many of their residents who could do those tasks sit unemployed and idle. Though legal hurdles presently stand in the way,
cities can and probably will issue vouchers, acceptable in payment of city taxes, in lieu of U.S. dollars to hire people to do necessary work. Why not? Many of the taxes are in arrears anyway. When local government is the issuer, scrip much more easily takes on the “story of value” that makes it into money.

Such currencies are often called
complementary
because they are separate from, and complementary to, the standard medium of exchange. While they are usually denominated in dollar (or euro, pound, etc.) units, there is no currency board that keeps reserves of dollars to maintain the exchange rate. They are thus similar to a standard sovereign currency with a floating exchange rate.

In the absence of local government support, because complementary fiat currencies are not easily convertible into dollars, businesses are generally much less willing to accept them than they are proxy currencies. That is because in the current economic system, there is little infrastructure to source goods locally. Locally owned businesses are plugged into the same global supply chains as everyone else. Regrowing the infrastructure of local production and distribution will take time, as well as a change in macroeconomic conditions driven by the internalization of costs, the end of growth pressure, and a social and political decision to relocalize. Noneconomic factors can influence the social agreement of money. The idealism of a few that sustains local currency today will become the consensus of the many.

There is one resource that is always locally available and always needed to sustain and enrich life. That resource is human beings: their labor, energy, and time. Earlier I said that local currencies
are viable only to the extent that producers are making goods and services that are consumed locally by people who, themselves, produce locally consumed goods and services. Well, we are always “producers” of our time (by the mere act of living), and there are many ways to give this time for the benefit of others. This is why I believe that time-based currencies (often called “time banks”) offer great promise without needing huge changes in economic infrastructure.

When someone performs a service through a time bank, it credits his or her account by one time dollar for each hour spent and debits the recipient’s account by the same. Usually, there is some kind of electronic bulletin board with postings of offerings and needs. People who could otherwise not afford the services of a handyman, massage therapist, babysitter, and so on gain access to help from a person who might otherwise be unemployed. Time banks tend to flourish in places where people have a lot of time and not much money. It is especially appealing in realms requiring little specialization, in which the time of any person is in fact equally valuable. A prime example is the famous
fureai kippu
currency in Japan, which credits people for time spent caring for the elderly. Time banking is also used extensively by service organizations in America and Britain. It can also apply to physical goods, typically by way of a dollar cost for materials and a time dollar cost for time.

In our atomized society, the traditional ways of knowing who has what to offer have broken down, and commercial means of disseminating this information (such as advertising) are accessible only with money. Time banks connect individuals who would otherwise be oblivious to the needs and gifts each can offer. As one time bank user puts it,

Beyond the meeting of immediate needs, you can see from this description the power of time banks to restore community. They generate the kind of economic and social resiliency that sustains life in times of turmoil. As money unravels, it is important to have alternative structures for the meeting of human needs.

The fundamental idea behind time banks is deeply egalitarian, both because everyone’s time is valued equally and because everyone starts out with the same amount of it. If there is one thing that we can be said to truly own, it is our time. Unlike any other possession, as long as we are alive, our time is inseparable from our selves. Our choice of how to spend time is our choice of how to live life. And no matter how wealthy one is in terms of money, it is impossible to buy more time. Money might buy you life-saving surgery or otherwise enhance longevity, but it won’t guarantee long life; nor can it purchase more than twenty-four hours of experience in each day. In this we are all equal; a money system that recognizes this equality is intuitively appealing.

When time-based currency replaces monetary transactions, it is a great equalizing force in society. The danger is that time currency
can also end up transferring formerly gift-based activity into the realm of the quantified. The future, perhaps, belongs to nonmonetary, nonquantified ways of connecting gifts and needs. Still, at least for a long time to come, time banks have an important role to play in healing our fragmented local communities.

Another way to foster local economic and monetary autonomy is through the credit system. When an economic community applies formal or informal mechanisms to limit the acquisition of credit and, consequently, the allocation of money, the local economy can maintain its independence just as if it had instituted currency controls. To illustrate this point, consider an innovation commonly mentioned in discussions of complementary currency: mutual-credit systems, including commercial barter rings, credit-clearing cooperatives, and local exchange trading systems (LETS). When a transaction takes place in a mutual-credit system, the account of the buyer is debited and the account of the seller is credited by the agreed-upon sales price—whether or not the buyer has a positive account balance. For example, say I mow your lawn for an agreed price of twenty credits. If we both started at zero, now I have a balance of +20 and you have a balance of −20. Next, I buy bread from Thelma for ten credits. Now my account is down to +10 and hers is also +10.