The rationale for complementary currencies

This chapter is concerned with money as a type of socio-technical infrastructure, and efforts to create more sustainable alternative systems of provision to conventional cash. The key to understanding New Economics theories about the role and function of complementary currencies is to first ask 'what is money?' and 'what is wrong with mainstream money?' According to mainstream economic theory, money is a politically and socially neutral technology, with four core functions: as a medium of exchange, a unit of account, a store of value, and a standard of deferred payment (Lipsey and Harbury, 1992). According to this theory, the more mobile, efficient and widely accepted a currency is, the better it will perform its functions. Sociological and political, not to mention environmental critiques of this notion lead New Economists to challenge this assumption on a number of grounds (Hutchinson et al., 2002; Dodd, 1994).

First, they argue that the functions of money - particularly medium of exchange and store of value - can conflict with each other. The fact that money is both a symbol (used for exchange) and a commodity itself (an item to be stored) encourages people to hoard money, removing it from circulation and thus reducing the amount available for transactions. It is a characteristic of modern economies that a shortage of money - supposedly the measuring stick of the economy - results in the paradox of having people with skills and labour to offer, plus work that needs to be done, but without the money to bring them together, the result is unmet needs and unemployed workers. This tendency has been observed by economists back to Gesell (1958) and Keynes (1973 [1936]), who promoted policies to ensure greater monetary circulation. A preferable solution, the new economists claim, would be to split the functions and have separate currencies for each purpose, so ensuring a ready supply of money for trade regardless of tendencies to save (store value) (Greco, 1994; Douthwaite, 1996).

Second, the mobility of money is not necessarily a good thing for local economies, according to these analysts. It results in 'capital flight' away from peripheral economic areas and towards centres, so draining regions and communities of the means of exchange. This centralising tendency, whereby money is concentrated in a few areas at the expense of other areas, is one of the economic costs of globalisation which the localisation movement seeks to address. National currencies are best suited to national-level and international transactions, and in performing this role, do not serve the needs of local communities well, according to the New Economics analysis, which criticises the 'dissociated' nature of modern money (Douth-waite, 1996; Robertson, 1999). Local economies are strengthened when money circulates many times within an area before leaving -known as the multiplier effect. New economics favours money that remains in a local area rather than migrating, and which is 'embedded' or founded within local social relations and environments, imbuing it with local significance and placing economic transactions and consumption itself within a profoundly social context (Greco, 1994; Lietaer, 2001).

Third, the current pricing regime upon which mainstream money is founded values some kinds of wealth and overlooks others, with profound implications for the signals sent by markets and hence development goals in general. Environmental and social costs and benefits are externalised from economic prices, and so are not accounted for in economic decision-making. This results in economic behaviour which degrades social quality of life and the environment, but which is entirely rational within the market framework (Jackson, 2004a). Economic rationality is a tightly-bounded world, divorced from ethical, social and environmental contexts, and arguably never intended to be considered away from these overarching - and fundamentally important - frameworks. Mainstream money is a tool used in a system which prioritises a narrowly defined range of economic activities. Its design and structure encourages users to value that which is scarce (and exploit that which has no monetary value). New economists - and increasingly they are joined by environmental economists working within the mainstream - argue that the dominance of markets at the expense of non-marketed aspects of life has gone too far, and argue for pricing to account for the full costs and benefits of activities, to enable genuinely rational decisions to be made which values all types of wealth, not merely that which is marketed (Robertson, 1999; Douthwaite, 1996; Daly and Cobb, 1990). This has implications for quality of life, justice, work and welfare.

Fourth, mainstream money and its system of exchange actively promotes particular types of behaviour and discourages others, and the implications of these effects are detrimental to sustainable consumption. For example, employment within the formal economy is rewarded while unpaid community labour is not; furthermore, the political structures surrounding the system of exchange reinforce this through the state benefits system by actively undermining people's capacity to undertake unpaid work and insisting that they enter formal employment. By redefining what is considered 'useful work' and 'wealth', New Economics aims to build a system of exchange provision which does not make these judgements, and which is more enabling of community participation and engagement through valuing all kinds of productive activity regardless of whether it takes place in formal employment or not. It suggests that the societal system of income distribution (currently based upon formal employment) should be altered, to remove the privileged position which formal employment currently has over other types of socially-useful work (Boyle, 1993, 2004; Robertson, 1999). Furthermore, despite claims that commod-ification is inevitably spreading and eliminating non-commodified exchange, there is evidence that non-market exchange (informal exchange networks and community currencies, recycling, second-hand goods, and so forth) is still a powerful force in industrialised economies (Williams, 2005). Consumers choose these alternative exchange networks for a variety of reasons, not only affordability, but also to experience and strengthen the anti-materialist values that such consumption embodies (Seyfang, 2001a, 2004c; Manno, 2002; Leyshon et al., 2003).

This review illustrates how the current system of provision of money and exchange mitigates against actions and activities for sustainable consumption, and limits the scope of lifestyle changes which are possible within this system. The solution which a New Economics analysis suggests is to create new, alternative exchange systems which rectify these negative aspects; these are known as complementary currencies. The New Economics approach views all money systems as social infrastructure with in-built incentives, behaviour-framings and value. These can de structured to deliver sustainable consumption outcomes (Greco, 1994; Boyle, 2002; Seyfang, 2000; Lietaer, 2001; see Chapter 3 for a fuller discussion). For example Briceno and Stagl (2006) investigate complementary currencies as a type of 'produce service system', a socio-technical infrastructure whereby consumers access services, rather than owning products, for example through sharing and hiring goods. They find limited success at meeting physical subsistence needs, but considerable benefit in terms of social and psychological needs such as esteem, friendships, belonging and so on. Another example presented by Bob Swann (1981) of the Schumacher Society argues that specifically local currencies are tools designed at the appropriate scale for managing the sustainable development of self-reliant regions, and he suggests using energy - the kilowatt hour - as a universal standard of value; this measure could become increasingly pertinent with efforts to reduce CO2 emissions to tackle climate change.

In addition to the 'social' currencies emerging across the world to tackle social, economic and environmental needs (see Chapter 3), a range of virtual currencies is now in use across the globe which are rarely thought of as alternative exchange systems, but which nevertheless function as mediums of exchange, units of account and stores of value. Air miles, for instance, are a virtual currency. They are earned when spending on everyday consumption goods and they can be spent on travel, so incentivising flying. Supermarket reward cards perform a similar function: they are given to consumers as rewards for purchasing at a particular supermarket (and so encourage loyal and increased consumption), and in turn can be spent in the stores or on special 'prize' items. Of course, these examples are corporate incentive schemes to encourage consumption, and so might even be seen as antithetical to sustainable consumption. But they serve to illustrate that complementary currencies are popular, in general use among the population, and are widely understood and accepted by the public (Boyle, 2003; Lietaer, 2001). Furthermore, as Air Miles claim to be a profitable behaviour change programme (Alliance Data, 2007, emphasis added), this raises the question of whether and how these tools can be adapted to encourage behaviour change towards more sustainable consumption.

Having described the problems associated with mainstream money and the conventional system of exchange, an alternative has been described: complementary exchange systems designed to address these problems and enable more sustainable consumption patterns. How effective are these complementary currencies at overcoming the drawbacks of mainstream money institutions, and facilitating sustainable consumption? The next section will review experience with three distinct types of complementary currency.

Getting Started With Solar

Getting Started With Solar

Do we really want the one thing that gives us its resources unconditionally to suffer even more than it is suffering now? Nature, is a part of our being from the earliest human days. We respect Nature and it gives us its bounty, but in the recent past greedy money hungry corporations have made us all so destructive, so wasteful.

Get My Free Ebook


Post a comment