Money with memory: how to plug local economy leaks

Many town centres are struggling because too much money flowing around the local economy is allowed to leak out. Lock that money in and you can multiply its impact and generate local wealth. A new money-tracking tool being trialled in Lancaster could be the answer to plugging those holes 

Apparently the UK is now out of recession. With the ranks of the global super-rich swelling by 40% since 2008, some might agree. Meanwhile, the increasing number of UK citizens who are now deemed to be living in poverty – estimated at 33% of the population– might beg to differ.

The small northern city of Lancaster, population 135,000, still has a relatively healthy retail centre by current UK standards with many small independent shops adding a unique flavour to the serial monotony of the multiples, with their standardised prefabricated shopping formats. Yet having witnessed the alarming increase in shop vacancy rates in other areas of the country, interventions may be required to prevent the death of Lancaster’s distinctive town centre.

The Ethical Small Traders Association (ESTA) started in 2010 to encourage freelancers, social enterprises, independent retailers, community organisations and those wanting to start their own businesses to work together. As part of that process, ESTA founder Michael Hallam started to examine the underlying nature of the economy, not with a view to reforming the existing economic system, but with a view to re-booting the economy at the local level with the collaborative help of ESTA’s members.

Various ideas for local wealth creation already exist, including alternative local currencies, local economic transfer schemes and time banks. But as originally described by the New Economics Foundation (NEF) and subsequently adopted by Hallam, the root cause of declining or stymied economic growth in many of the towns now facing high street death is too many ‘holes’ in the metaphorical ‘bucket’ (the local economy). Holes are created when people spend money non-locally, and they allow wealth to flow away like water from a leaky bucket. If this bucket has enough holes, the level of community wealth drops faster than it grows. In contrast – the key to the solution to this problem – in a hole-free bucket, all wealth is inter-traded locally, creating what NEF calls the local multiplier effect. The more times money gets re-spent within a community, the more wealth is retained, and ultimately the total wealth grows through the added value each trader contributes.

What if people could track local money being re-spent around their community in real time? Would such feedback about the impacts of the local multiplier effect prompt new local spending behaviour?

In early 2012, Michael Hallam approached Lancaster University with an idea for collaboration towards a technological solution that could provide this kind of information. Today, this collaboration has resulted in the development of a mobile and ubiquitous data capture and visualisation tool called Barter. The overall aim of Barter is to educate Lancaster consumers about the dynamics and benefits of spending money at Lancaster’s many locally-run businesses, to create a new sensibility about the impacts of spending decisions on other members in our community and help spur widespread change toward the kind of local spending behaviour that can keep Lancaster thriving.

In order to facilitate such insight, the Barter system effectively adds a digital information layer onto money to create ‘money with memory’. Money is a highly practical information system that works well for enabling trade between individuals, but money also obscures the very information that would help individuals understand their spending impacts. Specifically, when money is exchanged there is no visible trace of the transaction, or those that follow, to reveal who the ultimate beneficiaries of that spending are.

The Barter system collects spending data to feed this digital information layer through Barter cards, freely available to Lancaster residents to present when purchasing. This card has built-in Near Field Communication, such as that found in the London Oyster card, allowing the retailer to use their phone or tablet to quickly take a ‘snapshot’ of the financial transaction data. This is immediately fed into the Barter visualisation, which shows users not only who they have spent with, but also when money has completed a ‘closed loop’, when a certain amount of money effectively returns to sender. These closed loops should eventually happen in any healthy economy, but fewer holes in the bucket increases their likelihood. Indeed, this closed loop represents a mini hole-free bucket. It is hoped that the system will provide information people need to make more informed choices about where to spend their money to contribute to the formation of these wealth creating closed loops.

This autumn the current research phase of this project should be completed and the Barter code will be made open source, enabling the technology to be used in communities around the UK and internationally.

Details: www.barterproject.org