Small scale alternatives to the current monetary system

Aug 8, 2018 by

There are currently about 4,000 alternative currencies in use worldwide and  only less than 200 are acknowledged as conventional by the UN. Same time, the impact of this vast number of alternatives is only marginal. The lecture delivered by Tobias Plettenbacher investigated the reasons for their existence and gave a broad overview how those are implemented in local communities. Currently all the complementary currencies can be classified into three groups by their coverage: covered by national currency, by services/debt and uncovered.

In first case, in order to enter the local currency system one needs to forfeit the national currency. A set of demurrage and exchange fees govern the system, incentivising consumers to stay within the system’s limits and boost currency circulation. These fees fund activities of the local community, as well as maintain system’s operation. The famous example for a regional complementary currency covered by Euro is the German “Chiemgauer”, that was brought to life by a school experiment. There are other systems covered by Euro as well, such as shopping vouchers.

The second group of complementary currencies can be divided further into two subgroups: euro based and time based. The Swiss WIR Bank is the oldest functioning mutual barter circle in Europe, maybe even worldwide. Some Swiss companies accept trade via WIR. Especially interesting are the Local Exchange and Trading Systems (LETS). LETS delivers an equitable way to exchange goods and services, that do not discriminate human labor. A significant difference between LETS and barter circles, is that the former does not create money at any given stage of the transaction, rather uses working hours as means of trade. These mutual credit systems have been particularly useful to support elderly people. One example would be Time Banks in Japan (Fureai Kippu) and Germany (Senior Citizens’ Cooperatives) which allow young participants to earn hours by supplying labor for the elders. These hours are stored in a Time Bank account and can be later claimed when the participants become older. At the moment there are more than 400 Time Banks worldwide and some of them form networks. In that way a given participant does not have any migration constraints, as he/she can transfer hours to another Time Bank.

The last group of complementary currencies are experiments, with a purpose of reshaping the way markets work, shifting away from self interest and focusing on the common good. Ecosimia is one example of such currencies.

The lecture supplied us with extensive information on complementary currencies, that for some was an eye opener. Focusing on a local currency system, delivers a straightforward way to understand the concepts and economic relationships behind more complicated systems in a transparent and less complex setting. Understanding complementary currencies facilitates qualitative freedom of the end consumer (Refer to the blog post on Money and Moral); being able to choose the currency of transaction increases the system’s resiliency. Many historic examples show that these complementary currencies can be effective in tackling social issues, and still might become systemic in the future.

Written by: Zamid Aligishiev and Jana Rasch

Based on the lecture by: Tobias Plettenbacher (“Complementary and alternative currencies”)