One way of keeping money in the community is to create an alternative system of currency
In 1932, while the world struggled through the Great Depression, a small Austrian town tried an economic experiment. To stimulate the local economy, leadership in Wörgl created its own local currency, or scrip, known in German as freigeld (literally, free money).
Based on the thinking of Silvio Gesell, an early 20th-century social activist and economist, the new currency was novel in that it depreciated monthly, which increased the pace of its circulation. Rapid currency circulation goosed the economy, putting residents back to work. Advocates of local alternative currency systems explain that what’s really happening with this sort of currency “velocity” is real reinvestment in the local community.
The “Miracle of Wörgl” seemed to be serving that community well and was interchangeable with official state currency, but the Austrian National Bank, concerned over a perceived threat to its money-printing monopoly, shut down the experiment after just 13 months.
Nearly 80 years later, as economic malaise lingers throughout the United States, the Wörgl saga is inspiring local currency supporters seeking to unlock underutilized resources that might mitigate financial tsunami cycles and create a more independent economic model.
Complementary Currencies
The first question might be, is that legal? It is. Creating and using a local currency—sometimes called complementary currency, in that it “complements,” but doesn’t replace, a national currency—will not unleash the dogs of the U.S. Treasury, as long as it isn’t coin and doesn’t look like U.S. currency. Well before the Wörgl experiment, local currencies were common, and there are hundreds of more recent examples, from Canada’s Vancouver Island to San Luis Obispo, Calif., and Totnes, U.K. In a less formal way, barters take place all the time, albeit not transferable via a common coin of the realm.
In 1991 a group in Ithaca, New York, created a currency, the Ithaca Hour, to promote local economic independence and community reliance. Its name was intended to convey the idea that currency is both a means of exchange and a representation of someone’s time spent laboring. At that time, $10 was the average hourly wage in the county, so an Hour was worth $10 U.S. With more than 100,000 bills circulating, Ithaca Hours continue offering an alternative medium of exchange used by 900 businesses and health care providers.
In the Massachusetts Berkshires, another local currency project took off in 2006 with the support of the E. F. Schumacher Society, a kind of alternative economic think tank. Named for a British economist who advocated decentralization, the society studies how local currencies work. More than 2.5 million BerkShares have been issued, with about 150,000 now circulating. Accepted at 385 area businesses, BerkShares are colorfully illustrated with historic Berkshire figures and other artwork by regional artists, further emphasizing localness. Offered through 13 branches of five local banks, 100 BerkShares are equivalent to $100 U.S., but can be purchased with $95 U.S. Thus, users receive a 5 percent discount at local businesses that accept the currency.
The alternative Massachusetts currency has received more attention from communities nationwide since the current economic downturn, according to Sarah Hearn of BerkShares. “Increasingly, communities are looking to find citizen-based solutions to economic instability, and rightly identify local currencies, like BerkShares, as elegant tools for growing more sustainable local economies,” notes Hearn.
Commitment to keeping dollars local may be enough of a driver to create a community currency. Even small shifts in market share to local businesses can create economic activity and employment gains, studies have shown. One analysis found buying from local merchants rather than chain businesses results in three times as much money staying in the community.
In nearby Ojai a working group has been established to brainstorm ways to increase area economic opportunities, and potentially create a local currency. Further north, the college town of Davis also is studying developing an alternative currency, Davis Dollars, and Eureka trades Humboldt Community Currency (CC). The Humboldt Community Currency Exchange Project suggests that participating goods and services providers accept payment half in CC and half in U.S. currency. One Humboldt CC equals one U.S. dollar.
Sustaining Planet and Economy
Here in Los Angeles, the Green Business Networking group, formed in 2005 when a small group of local business leaders began meeting informally to discuss ways of working together to advance sustainability and wellness ideas and businesses, is exploring the feasibility of a complementary currency for the greater L.A. region.
“I’m motivated to work with money and business exchange to drive sustainability,” explains cofounder and certified financial planner Gregory Wendt, who is also director of sustainable investing for Enright Premier Wealth Advisors, Inc., an established registered investment advisory firm based in Southern California. “We need to change the way we work with money.”
Still in very early discussion stages with interested regional businesses and individuals for a process that might take two to three years, Wendt envisions a regional currency that would find its initial footing in the green business community. While it’s too early to know how the currency would be backed or how actual mechanics might function, Wendt anticipates the currency taking shape through evolving discussions and a series of community gatherings that identify and address issues.
Hollis Doherty, a student of the Wörgl experiment, shares Wendt’s enthusiasm for establishing a local currency. After stumbling across the Austrian story, Doherty was “galvanized about the idea of creating a local currency,” so much so that the L.A. resident traveled to Austria and the Unterguggenberger Institute. Named for the Wörgl mayor who implemented the 1932 currency plan for his town, the think tank promotes the idea of alternative mechanisms for exchange.
Now an associate with the Unterguggen-berger Institute, Doherty finds the idea of new thought for how money is viewed to be a transformative topic, with the potential for huge social impact.
“My focus is on a currency that includes more people in the economy, one that is more abundant for more people, and favors exchange over hoarding by the few,” Doherty says. “The Institute would say there is no perfect system, but they do say it’s healthier if more than one medium of exchange is available.”
Hopefully an alternative currency would help to buffer Los Angeles in the event of a future economic downturn, regardless of what happens in Sacramento or Washington, D.C.
“It will be a very regional effort that promotes a thriving economy for the L.A. region, driven by locally owned businesses and local farms committed to sustainable business practices,” says Wendt. “What’s most important is that this be a catalyst for change.”
—L.A. writer Maria Fotopoulos is partial to the U.S. dollar, but open to a new green currency.
