Many people have heard the success stories of local currencies, the most preeminent of which in the U.S. is the Ithaca Hour, instituted in Ithaca New York in 1991. The concept is fantastic, local currency that CAN'T leave the community and forces reinvestment. This model for local economic development seems very innovative, however it has really been going on for hundreds of years. The concept is really just a monetarization of a traditional barter system, but most likely is more inclusive because most people today are not very comfortable with bartering and would prefer some form of currency. Having recently participated in the Washington Barter Faire in Tonasket, WA I can attest to the power of a barter system. I brought some t-shirts that I had screen printed and returned with a huge box of veggies, smoked salmon, pear sauce, goat cheese, soaps, candles, and more.
I'm curious why this kind of local currency isn't more prevalent. Is it because people are not comfortable with a currency not tied to the national system? It would be interesting to study the relative risks between a national and community currencies. I am wondering if there is a business proposition for a consultancy who could take the best practices from all the community currency models out there and sell their services to other cities or regions...
Ryan:
ReplyDeleteVery interesting stuff. My questions is if this local currency grows in popularity, how does one leave his locale to another city and trade? If local economies are creating micro-markets, is there applicability on the larger, outside trade?
This is a really key question. In the current systems no one has all of their capital in any local currency, so they can take their dollars elsewhere and trade. But what would happen in a case where every municipality or region had an exclusive currency? I suppose that there would have to be some type of exchange market for these currencies, just like we have for national ones, or more optimally, they might be able to sell some of their goods in a different currency region to earn some of it. I do think however that ultimately these systems don't allow for outside trade by design. They are designed to maintain community wealth and not allow it to leave.
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