Localising the Global Economy

With growing concerns and protest over the global free market economy and the Eurozone, Alan Mann wonders if the time is right to see local currencies become the norm rather than the exception.

‘Production from local resources for local needs is the most rational way of economic life.’ Until recently, these words of E. F. Schumacher, taken from his book, Small is Beautiful: Economics as if People Mattered, may have sounded like the ramblings of a fiscal maverick out of kilter with mainstream economic reasoning. In the current climate of international financial meltdown, global warming and concerns over peak oil, they read more like the oracle of a pecuniary prophet. The global free market economy, heralded for its role in bringing about ‘the feel good factor’, is virtually on its knees; gasping for the oxygen of monetary movement through its veins. As recent protest around the world have shown, a growing and vocal protest would gladly see its demise angry that too much wealth goes to too few people.  On the flip side, those who still have faith in the system believe that the global free market economy should be left to do its thing, for it will find an answer to our current economic woes. As with many polarisations, there is a third way – a decentralising, localisation of economic life that would have drawn a knowing smile from the late Schumacher.

Tucked away amidst the rolling hills of south Devon is the picturesque town of Totnes, hardly the kind of place you’d expect to discover an economic revolution taking place. However, back in 2005, Totnes took its first tentative steps towards becoming the UK’s first Transition Town, that is ‘a community in a process of imagining and creating a future that addresses the twin challenges of diminishing oil and gas supplies and climate change.’

One of the fundamental keys to addressing these envisaged problems is an emphasis on localisation. To that end, the town’s mission is stated as two-fold:

1.To explore and then follow pathways of practical actions that will reduce our carbon emissions and dependence on fossil fuels.
2.To build the town’s resilience, that is, its ability to withstand shocks from the outside, through being more self reliant in areas such as food, energy, health care, jobs and economics . . .

Which in the case of Totnes, includes the printing of its own currency – the Totnes Pound. Surprisingly, this is a perfectly legal thing to do, and provided it is recognised within the community, it can function alongside sterling as a means of payment within participating shops and businesses. Which naturally begs the question, ‘Why bother?’ If my £1 sterling will buy me the same amount of goods as one Totnes Pound, surely there is little reason to carry the local currency. Such thinking, however, belies the fact that money has far more value than simple economic transaction – and it is this added-value that the people of Totnes are investing in by printing their own currency. As they see it, the benefits of the Totnes Pound are:

To build resilience in the local economy by keeping money circulating in the community and building new relationships.
To get people thinking and talking about how they spend their money.
To encourage more local trade and thus reduce food and trade miles.
To encourage tourists to use local businesses.

The problem with sterling is that it is ultimately part of a centralised monetary system. Therefore, it has a centrifugal tendency. It is easily drawn away from local economies into the national, or even international economy. A local currency that can only be used within a designated area remains there, effectively decentralising the system. In so doing, it not only plays an important role in growing the local economy, it can act as a buffer against the vagaries and uncertainties of the global economic system. As one enthusiastic local described it to me, ‘This is about a shift in consciousness that allows people to see the true value of money. It’s about building relationships and community not just economic wealth. Ultimately, it’s an economy of hope.’

Though there is clearly a strong desire to witness the decentralisation of the economy, this ‘does not mean walling off the outside world,’ as economist and localiser Michael Shuman wishes to argue. It’s more about aspiration and priorities. Transition Towns, and other localising initiatives around the world, are simply arguing for a primary focus on producing as much as possible as locally as possible. What can’t be achieved due to local limitations is then sourced within the shortest possible distance from the point of need. So, as Ed Mayo, former Chief Executive of the UK’s Consumer Focus observes, ‘Some imagine the aim of economic localisation is complete self-sufficiency at the village level. In fact . . . it simply means creating a better balance between local, regional, national and international markets . . . Localisation is not about isolating communities from other cultures, but about creating a new, sustainable and equitable basis on which they can interact.’

In Berkshire, Massachusetts, they have been trading with local alternative to the US Dollar for more than three years. Currently there are over $800,000 worth of ‘BerkShares’ in circulation. According to Robert Swann and Susan Witt, ‘SHARE’s first objective was to make productive loans to people who were unable to secure normal bank financing but who had the kind of small, locally-owned enterprises that produced quality goods and services for local consumption. SHARE members open savings accounts at the First National Bank of the Berkshires, and these accounts are used by SHARE to collateralize loans. This kind of lending requires that the community separate the functions of banking. The bank makes the loans and handles the accounting, but the lending decisions, based on a unique set of social, ecological, and financial criteria established by SHARE, are made by the community of depositors.’ In effect, Berkshire has developed an economic system based on community accountability.

Those who established the SHARE did so because they recognised the stark reality that a very significant part of their economy was governed by a monetary and banking system over which members of a community have little or no control. What’s more, this dependency on the US Dollar was depriving the region of a very useful self-regulating tool, resulting in local economic inertia in what is the most prosperous economy on the planet.

BerkShares have been described as “slow money” because it takes more time to process a transaction compared to the hasty anonymity of a credit card or internet purchase. But as Susan Witt observes, ‘Slow money is not sleepy money but awake to the flow of economic life pulsing through a region, shaping its future, providing warning signs and creating options for public policy and private initiative. Perhaps the greatest task of concerned citizens in the twenty-first century is to reclaim responsibility for the consequences of our economic transactions.’

As residents of Berkshire, Massachusetts, trade in slow money, it’s been observed that, ‘they are at the same time re-imagining their local economy.’ BerkShares have ignited discussion about local businesses and their problems, about local trade and the economic role of non-profit making, about the role of local banks and economic sovereignty, and perhaps most importantly, about changing deeply engrained financial habits, to build a sustainable future. Again, as Susan Witt so eloquently puts it, ‘These slow exchanges are balancing the abstract tendency of money by reconnecting financial transactions with the people, culture, and landscape of a particular place, while at the same time building the community wealth which is the foundation for a newly imagined economic system.’

Back here in the UK, we have seen the successful introduction of the first urban currency with the Brixton Pound, undermining any sense that a local currency is simply a provincial novelty for quaint market towns. What’s more, 2012 will see the launch of the Bristol Pound, the first city-wide local currency. The idea of building and sustaining a local economy with a local currency isn’t new, but with increasing concern over the way global free market economies work, it might just be an idea whose time has come.

Sources and further reading:
http://www.berkshares.org/
http://www.bristolpound.org/
http://brixtonpound.org/
http://www.letslinkuk.org/
http://www.smallisbeautiful.org/
http://transitionculture.org/
http://totnes.transitionnetwork.org/
http://transitiontowns.org/

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