One of the major stakes for cities is the maintaining of a commercial activity in situ. For both economic and ecological reasons. Tomorrow sustainable cities will offer the possibility to shop in their centers, moreover on a bike! In order to reach that goal, Brixton, in the southern area of London, explores the idea of local currency and has been striking its “Brixton Pound” since September 2009.
The principle of local currency, without support from the State, is not new. The first experiments date from the XIXth century and rather bore resemblance to systems such as loyalty coupons, the forerunners of “miles”. We can also count a few attempts of complementary currencies with an economic aim in the thirties. Wörgl (Austria) for instance saw its local economy rapidly return to normal thanks to its own currency, which it had to stop a year and a half later, by demand from the Austrian Central Bank.
Reflating by demand
Brixton therefore wishes to maintain on its ground the maximum of added value by multiplying commercial exchanges. We may compare the approach to an economic reflation by demand. By paying their employees in Brixton Pounds, employers encourage them to spend locally. Shopkeepers, being paid in local currency themselves, will in their turn use it to pay local suppliers and providers. And so on. As it is impossible to invest them in exchange for interests, Brixton Pounds circulate. And circulating money is good for the economy.
Of course it is always possible to convert one’s Brixton Pounds into Pounds Sterling (the rate of exchange is one to one) so one can go spend one’s money elsewhere… and yet it seems to be working. First, inhabitants seem to be proud of having their own money (banknotes represent local heroes, chosen by vote), then it’s a strong message weighing on people’s consciences: we must spend our money here, this is good for all of us in the end. It must also be said that a third of the 150 shops accepting Brixton Pounds offer a discount if they are paid with local currency. Enough to motivate reluctant people.
Economists are skeptical
Let’s have a look at the hidden side of the affair. Each Brixton Pound is secured by a Pound Sterling, put in escrow and invested without taking any risk, for the interests are being used to produce coinage (the launching of which has been sponsored). The system therefore isn’t very risky for the users and is neutral in view of inflation. Nonetheless some economists remain skeptical about long-term benefits. Such is the case for Tim Harford, economist and journalist for The Financial Times, who states that coinage is not a resource but a mere exchange tool and that changing it won’t make anybody richer. According to him, the profits brought in the short term by the relocalization of the economy are inferior to the losses due to the decrease in exterior exchanges. For him proof is the very short lifetime of all these systems. If this is statistically true (most of them collapse within a few years), the oldest one still functioning (in Ithaca in the State of New-York in the United States) will all the same celebrate its 20th anniversary next year!
A step beyond:
- Book: “Les monnaies parallèles”, (Parallel currencies) Jérôme Blanc, Editions L’Harmattan
An on-going experiment in France
In Villeneuve-sur-Lot (Lot et Garonne), the association “Agir pour le vivant” (“Working for the living”) has launched last 23rd January a local currency named “The Bee”. For one Euro, one can buy a Bee that can be used in about forty stores and artisan shops. It is no use hoarding for this is a “melting” money, which means it looses 2% of its value every six month! And we thought ecological associations were advocating degrowth…