Do local currencies work?

Six years on from its launch, a local currency in the United States continues to inspire others. But what can it tell us about their potential to nurture vibrant, distinctive local economies? Austin Macauley reports

Two months on from the launch of the UK’s first city-wide local currency, the Bristol Pound, the scheme continues to create a buzz. Last week, the city’s first elected mayor’s decision to receive his entire salary in Bristol Pounds gave a huge boost to the emerging currency.

There’s a confident feel to the Bristol Pound website. The Pound will, it declares, ‘support Bristol’s independent businesses, strengthen the local economy, keep our high streets diverse and distinct, and help build stronger communities’.

The Bristol Pound is the first to have electronic accounts managed by a regulated financial institution – Bristol Credit Union – and the most ambitious of the local currencies seen so far in the UK. But what happens when the initial excitement wears off? Realistically, what can initiatives like this achieve?

A few clues as to what the future might hold can be found in The Berkshires, western Massachusetts. Its currency, BerkShares, was launched in September 2006, some eight months ahead of the UK’s first modern day local currency, the Totnes Pound.

Examine the Berkshares website and you find an altogether more sober and scholarly tone, perhaps reflecting its development by the E F Schumacher Society, now the New Economics Institute. It describes BerkShares as ‘a tool for community empowerment, enabling merchants and consumers to plant the seeds for an alternative economic future for their communities’.

Six years on, the evolution of BerkShares offers a reality check to other local currencies. But its plans for the future should also provide inspiration for those who genuinely want to bring about fundamental changes to the way their local economy operates.

Austin Macauley

Austin Macauley is a freelance writer and editor specialising in regeneration and social issues

4 Comments

  • Mike

    “But what happens when the initial excitement wears off.” This in-built assumption is where this article’s analysis falls down.

    Key difference in the Bristol Pound is that it will continue to expand, due to the nature of the TXT2PAY service and online banking software. This enables users to set up a standing order, or commit a portion of their wages into Bristol Pounds, guarding against inertia.

    We can already provide lots and lots of examples of how using Bristol Pounds is reshaping how businesses and individuals spend their money. It is working, and it’s only just begun. Feel free to contact us if you’d like some information!

  • Austin Macauley

    The line you quote is an observation based on fact (it’s what happened to BerkShares and other currencies). No one can say for certain whether or not the Bristol Pound will sustain its momentum, it’s far too early to judge. As the article indicates, the Bristol Pound offers more innovation than many other local currencies – I hope it pays off.

  • Rod Smith

    I feel that these are always going to be very small scale. I believe that if they really caught on, the government would classify them as taxable income

  • rk

    Loans for local prioritised projects and support of local suppliers by the populace can be achieved with “normal” money. Setting up local gift tokens with all inherent costs is a smoke screen hiding the real problems of lack of demand for local services.

    If local currencies were the way forward then the uk would happily be supportjng thousands of them as each village drifted towards their natural efficiency. They don t. And as Europe has found out, local currencies don t work if they remain pegged to monetary and exchange rate policies set by others.
    If you REALLY want a local currency to prove its worth then free float it with its own interest rates and see how it fares. Otherwise you just have the same as a locally minted greek euro. Its a euro but with a diffent picture on it. Oh and in the BPound case there is the added disadvantage of a 3pct levy to ever change them back to real money should you wish to buy anything that is imported into Bristol..which I would suggest is a very high proportion of everything sold in Bristol (Bristol not being renowned for its high tech manufacturing, heavy industry or agriculture). Or do the retailers make enough margin to cover those exchange fees? If so perhaps they would do better offering a 3pct discount to people using real money to drum up the business improvement they crave in the first place.

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