It’s well-established that spending money at locally-owned businesses keeps money circulating in the community to a greater degree than money spent at national chain stores or online outlets.
Patronizing local business can boost the local economy more than three times as much as the same amount of money spent with nonlocal businesses. In addition to ‘buy local’ public awareness campaigns, a local currency can be a good way to support local businesses.
What Is Local Currency?
Local currency—sometimes called community currency, alternative currency, or complementary currency—is simply money not backed by a national government and intended to be used only in a specific place or region.
Because local currency is generally accepted only by locally-owned businesses within a small geographic region, the money stays within the immediate community instead of flowing out to nonlocal outlets.
Local currency advocates Robert Swann and Susan Witt write, “Regional currencies are not a recent invention. The practice is centuries old. The so-called free banking era [the 19th and early 20th centuries], when many currencies circulated, contributed substantially to bringing about Thomas Jefferson’s dream of a nation of small, independent, self-reliant farmers who found ready credit with community banks to produce and sell their goods.”
While local currencies have a strong tradition, their resurgence is a relatively recent phenomenon. In 1990 there were fewer than 200 worldwide; today there are thousands, according to Bernard Lietaer, author of The Future of Money.
From Britain to the Berkshires
The Brixton Pound, based in the London neighborhood of Brixton and abbreviated B£, began in 2009 as a physical currency. In 2011 a electronic version was established to enable customers to pay merchants via text message.
In the words of its developers, “The B£ encourages people to think about where their money is going and commit to spending a proportion of it locally. It helps maintain the diversity and uniqueness of Brixton’s shops and markets, and builds pride in Brixton. On the environmental front, the B£ supports local businesses in sourcing more goods and services locally, reducing their carbon footprint.”
The Brixton Pound is currently accepted by roughly 250 businesses, and 160 accept payment via text message.
BerkShares, a local currency based in the Berkshire region of western Massachusetts, began in the mid-1990s as the “Berk-share,” a paper note issued by merchants in the town of Great Barrington as a reward to customers who shopped in locally-owned stores. The current form of the BerkShare was established in 2006.
You can get BerkShares at four banks in the region in exchange for federal currency. As an incentive for consumers, the exchange rate is $95 U.S. dollars for $100 BerkShares, which can be used at face value in any of the 400 locally-owned participating businesses. So using BerkShares saves the consumer 5% off their local shopping.
In addition to supporting local businesses, BerkShares also support local artists by featuring artwork on the notes. Each note shows characteristic scenes of the region, which helps foster a sense of place, an important part of any community-based project.
Hudson Valley’s Local Currency
In Omega's Hudson Valley home, an online local currency is being developed. The Hudson Valley Current is an “online mutual credit network for independent local businesses and self-employed people.” This means that all transactions using the Current take place in the Current’s online marketplace or using its app. In this case, one Current equals one U.S. Dollar. Should this phase prove successful, a paper currency will likely be introduced.
Since it began in 2014, the Hudson Valley Current has created roughly $30,000 worth of credit in Ulster and Dutchess counties in New York. Using the online marketplace, users are allowed to spend below a zero balance in their account until a standard debit limit is reached. The account is then repaid by selling goods or services through the same network. This, in essence, provides interest-free credit for users, in addition to stimulating local economic activity.
Nancy Eos, the board secretary for the Current, says it's important to use the Current to help build up the system. “As people begin to use the system and see all the positive results in the local economy, more and more businesses and individuals will be accepting Currents, and you will be able to use it easily in your purchasing.…The time for green economic trading is now.”
How to Make a Local Currency Work
Many local and complementary currencies in the United States have been ‘retired.’ If a local currency is to have staying power, public confidence, and business support, it needs to be solidly established.
- The organization issuing the currency must be incorporated as a nonprofit, operating democratically with membership open to all area residents
- The policy of the organization "should be to create new short-term credit for productive purposes"
- The organization must be free of governmental control, with all decisions made by the community itself
- Social and ecological criteria should play a part in deciding who receives loans
- These loans and local currency production itself should support “local production for local needs”
While all 5 suggestions don't need to be in place to establish an alternative currency, they are the hallmarks of one that will last for the long term and help shift the current economic paradigm to one that is more sustainable and regenerative.
© 2015 Omega Institute for Holistic Studies