The color of money: alternative currency promotes fresh thinking about sustainable economics - Money Matters - barter systems - Brief Article

E: The Environmental Magazine, May-June, 2002 by C.B. Gaines

The angry people crowding the streets of Buenos Aires, Argentina last January were armed with casseroles and wooden spoons and making a hell of a ruckus. Unemployment was at historic highs, crime had skyrocketed, and the political system was on the verge of collapse. What was responsible for the sudden onslaught of bad fortune in this historically wealthy country? The long answer: a complex intermingling of social, political and economic forces. The short answer is money.

Money has long had globe-trotting tendencies, and the fortunes of countries have often been subject to rapid change. Bernard Lietaer, author of The Future of Money: Beyond Greed and Scarcity (Century, 10.99 [pounds sterling]), writes, "When a government does something not to the liking of the market, nobody sits down and says, `You shouldn't do this.' A monetary crisis simply manifests in that currency."

And yet the picture is not entirely grim. Global capital investment has brought much positive change, including economic development in India and China. Is there a way to minimize the instability the system can engender without jettisoning the gains?

Think Globally, Act Locally

One response to the downside of our money-based economy is the recent growth of alternative currency and barter trading systems. These programs stimulate local economic activity, easing the pain of recessions and currency crises. They tend to encourage a more trusting, cooperative community, since everyone is linked in local trade. They can also engender accountability, since all business is out in the open.

Thomas Greco, author of Money: Understanding and Creating Alternatives to Legal Tender (Chelsea Green, $19.95), believes these systems improve the health of communities. "Locally owned businesses are more likely to use local suppliers, reducing the environmental costs of transport and stimulating local production. They are more likely to employ local people, and they contribute to the culture and uniqueness of a community."

With standard currency, there is always incentive to chop down non-interest bearing trees and put the proceeds into interest-bearing bank accounts. Because alternative currency systems do not bear interest--and in some cases, actually have negative interest--there is less incentive to plunder natural resources.

In the U.S., there are several well-known examples, such as Ithaca-HOURS, which have been active since the early 1990s. With nearly 70,000 HOURS in circulation, the system is creating significant value for Ithaca, New York. Participants earn HOURS by working for each other on such everyday tasks as lawn mowing, tooth cleaning, bread baking and local crafts. The accumulated HOURS then pay for other services. In addition, 10 percent of the funds are devoted to interest-free grants for local community organizations, such as senior citizen groups. U.S. dollars are still in circulation, and still are used for a majority of purchases.

Paul Glover, a tireless promoter of the HOURS system, believes even more is possible. "In the future, we hope to make loans to purchase regional farms and prevent suburban sprawl," he says.

LETS Do It

While the Ithaca-HOURS program issues physical currency, some systems rely only on a book of checks and balances. The LETS system (the name is not an acronym; it's meant to embody the "Law of Two Feet," meaning, "If you like it, you walk in. If you don't, then you walk away") is probably the best known of this sort of exchange, which is also known as mutual credit.

Unlike the HOURS system, which is relatively open and unregulated, LETS requires membership and stringent accounting. For example, if your neighbor mows your lawn, he gets a credit in his account and you receive a debit. The credits and debits are measured in national currencies--dollars in the U.S.--for familiarity. Basically, it's like a big I.O.U. program, or grassroots credit cams. As such, it depends on trust, which tends to have a positive impact on community spirit.

Not everyone is convinced of the merits of these systems, however. An official of a group involved with currency issues, who asked not to be identified, says, "What disturbs me is the general evasion of politics that has accompanied the movement to find solutions at the local level. I see local currencies as irrelevant--they will never be strong enough to change the money and banking system, which is one of the great centers of power in the world." Even if the systems do create value on the local level, few people believe taking them beyond that is a realizable goal.

If you're interested in starting a local currency, good resources can be found online. CONTACT: Ithaca HOURS, (607) 272-4330, www.ithaca hours.com; LETS System, www.gm lets.u-net.com; Transaction Net, www. transaction.net/money/community.

C.B. GAINES is an intern at E.