Institute For The Future

The Great Recession and community currencies

The Great recession has brought into focus the role community currencies (sometimes referred as complementary currency) can play in fostering local communities, helping create local jobs, and making small local businesses thrive instead of lose their battle to a national chain. Community currencies provide an easily recognizable currency for local transactions that supports local commercial enterprises: provide local shoppers with discounts as incentives, encourage local services workers (gardeners, handymen, painters) to spend locally and monetize various local volunteer services like child care, senior care, tutoring, and so on.

 

Community currencies make sure that the dollar that I spend at my local coffee shop stays in my community; it goes to help someone else run their business or find a job. The recession has certainly heightened the interest in using community currencies, but they still have a long way to go before every community in America has a community currency in addition to the dollar. I think I should reiterate that community currencies will never replace fiat currencies like the dollar or euro, they will co-exist with them. Although localism is becoming more pervasive with people supporting local economic activities from going to farmers market every Sunday to buying the next cup of cappuccino at a locally owned coffee shop we have to remember that humans are no longer local beings. We travel nationally and internationally; we rely on global labor and services to meet our everyday needs. We obviously need fiat currencies that we can use anywhere in the country and exchange them for other national currencies.

 

But it is useful to support and create community currencies that nurture local communities. From an economic perspective, community currencies have several tricky issue that need to be ironed out: How will governments treat the taxation of local currency uses? Who sets the exchange rate that turns them into real dollars (so the local coffee shops can buy coffee beans and napkins and tables and pay their electric bills)? And who assumes the risks and uncertainty of a widely fluctuating exchange rate?

 

 

There are several experiments in community currencies across the globe. Here are some of my favorites:

1. Palmas in Brazil: To eradicate poverty and help an impoverished community thrive locals in Palmeira district, a favela in Fortaleza Brazil came together and created their own bank and their own currency. It has been very successful in enabling local economic activities as neighbors are buying and selling to each other, creating a self-sufficient and growing market place that is not dependent on the outside economy.

2. Fureai Kippu is a community currency used in Japan that lets people earn credits for helping seniors in their community.

3. Bernal Bucks are regular dollars with RFID tags that can be spend in Bernal heights neighborhood in San Francisco. Consumers spending them in the neighborhood are rewarded with free goodies and discounts by participating businesses.