Complementary Currency Movement

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John Quintiliani:

* The Early Complementary Currency Movement

"The notion of complementary currencies is not just a theory, but is rooted in centuries of proven implementations. It is important to analyze the early and recent successful implementations to have a complete understanding of complementary currencies and their current uses. The earliest forms of complementary currencies can be traced to the ancient gift-giving notion observed throughout history. However, in the modern era, complementary currencies were quite prevalent worldwide at the beginning of the 20th century. One successful complementary currency of this era was the 'Wara' system implemented in a small town in Germany in the early 1920's. At the time, Germany was experiencing a complete collapse of their national currency with the value plummeting to near worthlessness. During this time, Dr. Hebecker, an owner of a coal mine in the town of Schwanenkirchen, convinced his workers to accept 90% of their wages in a complementary currency called 'Wara,' or he would be forced to close the mine. He agreed initially to provide food that they could purchase with their 'Wara,' which means 'commodity money' in German. He also stated that the money was backed by the coal inventory. The Wara itself was paper money that also incorporated the small monthly stamp fee to prevent hoarding and encourage circulation. The Wara was immediately successful in saving the coal mine and in saving the entire town of Schwanenkirchen. Over the next several years, the circulation of the Wara spread dramatically throughout Germany and over 2000 corporations began using the new complementary currency. However, the central bank considered the Wara to be too successful and even thought it was an inflationary threat although its value was tied to the value of coal. In October 1931, the Minister of Finance declared that the Wara was illegal thus ending the success.

Another well-documented application of complementary currencies during this era occurred in the small town of Worgl, Austria. The new mayor of the town inherited a population of 4500, with 500 jobless and 1000 close to jobless. Additionally, the mayor, Michael Unterguggenberger, had a list of projects that he wanted to complete in the town with people willing and able to work, yet with only 40,000 Austrian schillings in the bank. He decided to put the money up as a guarantee for issuing 40,000 of Worgl's own schillings to use for the community projects. Within no time, they re-paved streets and built new houses and even a bridge. The schillings also included a stamp scrip that encouraged circulation and were the source of funding for many of the future projects. Soon 6 nearby villages had mimicked the Worgl complementary currency system to similar success, and by 1933 some 200 Austrian townships were looking to copy the system as well. However, it was at that point that once again the central authority intervened and made it a criminal offence to issue what they labeled 'emergency currency.' The panicked reaction by the central bank resulted in the town of Worgl retreating back to 30 percent unemployment by 1934.

The nation with the most comprehensive history of complementary currencies during the era was the United States. In fact, the U.S. came quite close to declaring complementary currencies a part of the nation's official public policy. Complementary currencies emerged in the U.S. during most periods of distress, from the Panic of 1837 through the Depression crisis. There is considerable documentation of thousands of examples of local complementary currencies from every state in the Union. At the onset of the Depression, after intense experimentation, research, and public support, the well-respected Professor Irving Fisher met with the Undersecretary of the Treasury. Fisher presented correctly designed and successful complementary currencies proven in American communities and also stated that, "The correct application of stamp scrip would solve the Depression crisis in the U.S. in three weeks." The Undersecretary commissioned his own research and eventually also agreed that a correct complementary currency would bring the U.S. out of the Depression. However, due to fears of decentralization, President Roosevelt denounced the complementary currencies soon afterwards, and they were prohibited. This was the common trend among the complementary currencies of the early 20th century. Although, the successes of the complementary currencies were apparent, government authorities ended them all. The authorities acted hastily on biased fears and mainly due to the fact that the new currencies were simply too successful without the need for central banks.

* The Recent Surge in Complementary Currencies

However, there has been a dramatic surge in the implementation of complementary currencies over recent years that deserves a more complete analysis. The recent surge in complementary currencies involves all parts of the world with dramatic increases each year. The recent successes in complementary currencies have occurred in all types of environments, from shantytowns to the largest metro-areas. Aside from the continual successes of complementary currencies, the most encouraging aspect of the recent surge is the presence of government acceptance in many countries. An analysis of several different variations of the complementary currencies during this recent surge will yield a more complete understanding of the implementation process, leading to potential remedies for future communities and specifically those in South Africa.

One of today's more successful complementary currencies in the United States is based on the notion of Time Dollars, a concept developed by Professor Edgar Cahn in 1986. At its simplest definition, the use of Time Dollars is an agreement within community to use hours of service as a means of payment. For example, if Jason doesn't have a car and needs a ride to town, Judy can offer him a ride to town and she will now have a credit in the community and Jason will have a debit. Jason can offset his debit by doing garden work for another community member, and Judy can spend her credit on food from the community baker for example. Therefore, there does not need to a matching needs and resources to complete a Time Dollar transaction; the credit and debits can be settled with anyone in the community. The cost of incorporating this system in a community is quite small, as the only requirement is a method to track the members' credits or debits. This can be done with paperwork or computer programs, such as the free 'Timekeeper' software. The Time Dollar system was first proven successful in retirement home communities in Florida and has since spread to several hundred communities throughout the U.S and overseas with several working systems in the U.K. The benefits observed within the communities include closeness among community members, the forming of a communal garden, and even occasional informal community dinners. People feel valued as they relate to each other more and research proved an overall increase in health. This even led to a health insurance company in New York deciding to accept 25% of payments in Time Dollars, because they found that the participants were healthier and had lower health care costs. The most important recent advance with the spread of Time Dollars was the ruling of the Internal Revenue Service that Time Dollar transactions are tax-free. The low costs and ease of use of the Time Dollar system make this a unique and successful complementary currency system.

One of the more successful paper currency systems today is the Ithaca HOURS system in the low-income community of 27,000 in Ithaca, New York. The important distinction with this complementary currency is that the town is a poor town where even most of the employed remain eligible for food stamps, providing a more similar comparison to South Africa than many of the Time Dollar communities. Additionally, the system was invented due to the community's close proximity to New York City, where much of the town's income was being spent, similar to the proximity of the townships in South Africa to the large cities where their income is spent as well. In 1991, a local community activist, Paul Glover, launched a complementary currency system based on the currency of Ithaca HOURS. The main element of the system is a bimonthly newspaper that advertises products and services from both people and businesses the accept Ithaca HOURS. Products or services can be payable in a combination of the complementary and national currency. The system is now being used by thousands of participants in over 40 communities successfully. The startup costs seem small, but the fact that the currency is a fiat currency requires a central authority to issue the currency. However, one benefit utilized through this is the donation of 9.5% of all currency issued to local non-profit organizations. The implementation of this aspect can extend the direct benefits of complementary currencies dramatically.

An example of a Third World city utilizing complementary currencies to uplift the community from poverty is the city of Curitiba in Brazil. The population of the city had increased from one million in 1971, when Jaime Lerner became mayor, to 2.3 million by 1997. The majority of the residents lived in favelas, which were shantytowns made of cardboard and metal, similar to the conditions of many South African townships. The mayor's largest problem that he wanted to remedy was excessive garbage piling up around the streets and breeding disease. Due to a lack of money, the mayor invented a new system where he would give one bus token in return for each bag of presorted garbage. This extended to giving students notebooks in exchange for the garbage. Soon the streets were clean and new projects were completed with similar exchanges. Curitiba was soon completing public projects without enduring the typical process of obtaining financing, and the quality of life was drastically improved. The interesting aspect of the Curitiba example is that it was never intended to be a complementary currency, but one was created in the process of solving the city's problems, and the citizens embraced it nonetheless.

Another important implementation of complementary currencies involves the use of the Bia in Thailand. The use of a new complementary currency, called Bia, began on March 29, 2000 in the Kud Chum district in Yasothon, Thailand. The main economic activity of the area occurs in small rural markets with produce, household goods, and local crafts. However, the key difference with the markets is that the price of the goods is always stated in a combination of bia and the national currency, the baht. Additionally, the bia currency is available only to community members of the local bank who are allowed to borrow up to 500 bia interest-free, which they must pay back. Each account is registered as a Unit, and can be comprised of an entire family. The bia itself is a paper currency with the addition of cultural spirit poems and local pictures on them. The small markets where the bia is used often have visitors from the surrounding areas that also pay partially in bia as well. The bia is intended to be used for the local purchases resulting in an increase in local production of cultural goods and substitutions for previously imported goods. For example, where the community used to buy mass-produced snack foods, they now buy and sell locally produced and healthier snack foods. However, the community members are still able to receive the national currency in return for the main portion of the agriculture, which they produce for income. The unique aspects of the bia combine to form a highly successful complementary currency based around small local markets.

The Tlaloc currency is another complementary currency with a unique and successful characteristic. The location of the Tlaloc currency is the neighborhood of Colonia Tlaxpana in Mexico, where the currency was implemented in 1987. The interesting aspect of the Tlaloc is that it is both a mutual credit system and a paper currency. The currency is issued in the form of paper cheques from a group of trusted members with chequebooks. The cheques have endorsement spaces on the back where the users are required to endorse the back. Therefore, this enables the cheques to circulate as currency, and they can be brought in at anytime to record the debit of the first user and a credit to the last user. The system requires only one computer or central record to periodically record debits and credits making the Tlaloc an easy model to emulate. In fact, the Tlaloc currency model has already been successfully emulated the neighborhood of Toctiuco in Quito, Ecuador, with the circulation of compromisos cheques.

Another success outside of the U.S. and U.K. is the spread of complementary currency systems throughout Argentina. The first systems were set up by sustainable development activists in 1995 as simple barter clubs that met occasionally to exchange goods among the community. Soon the barter clubs began printing their own currency, called creditos, and now these complementary currency systems number 500 and are active in 20 of the 24 provinces. The creditos have bar codes on them to guard against counterfeiting. Any member of the community can join provided that they attend two meetings to learn about the system and the trading rules. The new members are given 50 creditos to begin trading at the local and regional markets. The practice of giving everyone credits at the beginning rather than starting at zero or in debt gives the new members a greater feeling of empowerment, and they are more likely to begin participating. The complementary currency systems have provided a livelihood for thousands of Argentineans. The markets themselves contain the usual foods and consumables, but also include lawyers, dentists and hairdressers, many of whom have no other source of work. With the recent collapse of Argentina's interest-bearing national currency, the reliance on these complementary currencies has strengthened tremendously. The economic conditions in Argentina are quite similar to South Africa with a struggling, national currency and many citizens leaving the country to work abroad. Empowered by complementary currencies, several thousand Argentineans now cling to a reasonable livelihood through participation in their respective local economies. An estimated 500,000 Argentineans now participate regularly, with up to one million participating occasionally. Even the government of Argentina stated that these networks help keep many citizens above the starvation level and provide a stepping stone back into the mainstream economy.

The recent surge in complementary currencies has extended to various nations within Africa, as a recent successful application is operating in various communities within the nation of Senegal. The implementation began in March 1998 in the Grand-Yoff district of Senegal's capital of Dakar. After several workshops promoting the new currency, the project began similar to a LETS-based system where services and products were offered among the community. The launch coincided with one of the markets, which was attended by 52 participants. The next market session brought over 150 participants and has seen a continual and steady growth. The currency notes, called "bons de travail," are denominated in hours and were printed with funding from a local non-profit organization.

Local leaders are also in the process of forming a school where students will pay for education with the bons currency. The bons received will be used to pay salaries of the school employees and will be used to fund additional community projects. The system has already spread to the neighboring country of Mauritania, and soon all 30 districts within Senegal will have a similar complementary currency system uplifting the local economies and communities.

These are a handful of the thousands of successful complementary currencies operating throughout the world. The variations among fiat currencies and the LETS-based, mutual credit systems have produced numerous different successful systems, each that are adapted to work in their respective environment. A unique recent adaptation is a system where currency is obtained through doing community service and can be redeemed at local businesses. The system, named Community Service Dollars (C$D), is being implemented in Minneapolis, Minnesota and is receiving tremendous support from the non-profit organizations, local businesses and the community as a whole. The common tie among the recent complementary currency applications is steady acceptance by local and national authorities. In fact, the New Zealand government is actually funding several complementary currency initiatives. Additionally, UK's Prime Minister Tony Blair formally endorsed LETS as "showing the way towards rebuilding human capital and making the links between rebuilding communities and rebuilding economic opportunity." The recent surge of successful complementary currencies also shows that they can be successful in the poorest countries through the most developed. The many successful variations of complementary currencies give countries in need of local economic stimulus a multitude of options. A direct replication of a successful complementary currency system is typically not recommended; countries such as South Africa should instead be inspired by them and should take aspects from several and adapt them to the local socioeconomic conditions." (