It looks as if some of E. F. Schumacher's ideas have begun to grow legs in Milwaukee. The Riverwest and Eastside communities have begun to entertain the possibility of establishing local currency, and they've been getting a fair share of local and national media attention for it too. Newsweek, the Chicago Tribune, and the Milwaukee Journal Sentinel, have each ran articles about it. A local radio station, WTMJ (am620), a local television news station, TMJ4, and a radio station in Baltimore, WBAL (am1090), have also provided coverage of the story. The issue has made an appearance in a number of blogs as well. (cf. The Consumerist)
So far, nearly every news piece that I've read, watched, or listened to, has implicated the current financial crisis as the reason for Riverwest's rising interest in local currency. Consider the opening lines of the Newsweek and Chicago Tribune articles, respectively:
People nationwide may start hoarding their cash as recession fears grow. But in Riverwest—a progressive enclave of —residents have another answer to their money trouble: they'll print their own. The proposed River Currency would be used like cash at local businesses, keeping the area economy humming whatever the health of the country at large. "We can create our own value," explains Sura Faraj, 48, one of the plan's organizers. (Newsweek)
Residents from the Milwaukee neighborhoods of Riverwest and East Side are scheduled to meet Wednesday to discuss printing their own money. The idea is that the local cash could be used at neighborhood stores and businesses, thus encouraging local spending. The result, supporters hope, would be a bustling local economy, even as the rest of the nation deals with a recession. (Chicago Tribune)
The way I see it is that the explanation offered by Newsweek, the Chicago Tribune, et alia is due to the presumption of a logic of economic centralization; rural and certain urban localities, with the labor and resources they provide, are essentially seen to act as tributaries that feed a steady stream of goods and services into larger, central markets, which themselves feed back into their tributaries, as if forming a loop. The presumption is that, so long as the central markets continue to grow, overall wealth should increase for its tributaries as well. Likewise, when larger markets falter, one should expect the same for local communities. Given the logic of centralization and given that the adoption of local currency entails at least a mitigated rejection of centralization, it isn't difficult to imagine that the only type of scenario in which a community would consider adopting local currency would be one in which the central markets fall on hard times. In all other cases, adopting local currency would amount to biting the hand that feeds, which is irrational so long as the hand keeps feeding. However, the current economic crisis must have scared some into believing that sometime soon the hand might actually stop feeding, so naturally these folks have begun to look for another means of sustenance.
Monopoly money? Think twice!What is one to make of this explanation? Well, the Milwaukee Journal Sentinel article is exceptional in that it depicts Riverwest's interest in local currency as arising from a broader concern for building a stronger, more eco-friendly community. One of its quotes is from a post on Sura Faraj's blog, in which she discusses the various benefits of localizing currency. Faraj is a politically outspoken member of the Riverwest community, and apparently her blog has served as a catalyst for Riverwest's flirtation with developing a local currency. Here's a bit about what she has to say:
Most community currency is based on time and can be used to exchange services in neighborhoods. This promotes local economic strength and community self-reliance. Other benefits include more community involvement and pride, patronage of local businesses (those that participate), and ultimately the reduction of traffic emissions. Because of its positive impact on the environment, local currencies are part of economic strategies of more and more sustainable living supporters. (Sura for Change)
Taking this into account, one can see why a community would want to adopt local currency no matter how well or poorly the larger markets may be doing. By encouraging local productivity and widespread ownership, allotting more control to the community and its members, and providing a counter-balance to national and international businesses who have no qualms with funneling wealth out of local communities, local currency would guarantee more freedom, in the sense that the community becomes less dependent on external financial and economic institutions to meet its needs.
Local Currency in Milwaukee by Nathan M. Blackerby is licensed under a Creative Commons Attribution-Noncommercial-Share Alike 3.0 United States License.
I'm glad you blogged about this. I nearly did myself but was a bit too busy grading papers.
ReplyDeleteI think it's a fine idea, and I'm very interested to see how it works out.
Thanks for the all the details and analysis, it helps me to really think about what the community plans to attempt.
Fascinating.
Local currency works only if the community is willing to buy into it, literally and figuratively. There are a handful of practical obstacles that I didn't mention in my original post, such as its value being determined by national currency, how exchanged rates would work between different local currencies, paying utilities and other more centralized services, etc. The latter is clearly a hassle and thus a disincentive for many businesses. Perhaps most important, however, is that local currency only works when it is good for both consumers and businesses. Consumers need an incentive to buy with local currency, and businesses need an incentive to sell. The incentive for consumers is usually that they get more purchasing power when they exchange national currency for local currency (e.g. 100 dollars is exchanged for 110 in local bux, and the value of 110 local bux is equivalent to 110 dollars). The incentive for business is that it is supposed to broaden their customer base and give them an advantage over national and multinational businesses, because the two latter obviously wouldn't accept currency that only has local value. However, sometimes what happens is that these local businesses end up having to run specials to provide further incentive for consumers to use the local currency, and the businesses either take a cut in the profits or suffer a loss. So even if local currency is a good thing, communities that want to adopt it will face some difficulties and they should be realistic about its limitations. At this point, local currency couldn't replace national currency. At best, it serves as a stimulus for local economies by encouraging people to purchase local products.
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