Andrew Willis, "Community Currency Systems"

hydrarchist writes: "This article was published in Green Pepper Magazine's "Life Beyond the Market" issue.

"Community Currency Systems:

Formal Mutual Aid Networks with Anti-Capitalist Potential"

Andrew Willis

Anti-authoritarian anti-capitalists have two broad imperatives to guide our activism: the need to raise awareness of capitalist deficiency, and to begin to replace or supplement capitalism. For the latter imperative, we have two options: replace capitalism with another system outright, waiting until we have the consummate theoretical frameworks and public support to begin replacement on a wide scale. Or, we can build parallel institutions to begin experimenting with implementation of alternate systems.

For those of us impatient with the infinite holding pattern requisite of the former, experimenting with community-based mutual aid networks, systems, mechanisms or institutions reflective of cooperative, horizontal organization both represents an active, if incipient, embodiment of our ultimate goal and creates an effective outreach mechanism for education for critical consciousness.Hundreds of thousands of people in dozens of countries — over a million in Argentina alone — have experimented with the creation of more sustainable, just, efficient and stable local economies through participation in community currency systems. CCSs are legal, taxable private currencies issued for use in specific areas, generally by leftists or anti-capitalists, to perform some of the functions of inefficient and scarce state money. They provide a mechanism for the exchange of unvalued skills and unused services, and have been found in the United Kingdom to successfully augment the standard of living of the underemployed and unemployed.

While concentrated in Europe, Oceania, North America (defined here as the USA and Canada) and Japan, these systems are also being used to build meaningful parallel support structures and mutual aid networks in the Global South, utilizing many types of currency, reflecting variant need and system developer orientation. I will focus on the three most prolific and promising types, which account for nearly all CCSs in North America. Local Exchange and Trading Systems, HOURS and Time Banks or Time Dollars, while tailored to fit the needs of the locality or group of users by which they are implemented, are structurally distinct, having evolved separately as devices that ultimately serve to compensate for the failings of capitalist relationships and the market economy as a whole.

Likewise, they produce disparate effects, and vary in potential for educating for critical consciousness and creating experimental mutual aid exchange networks. Each has its strengths or has found favor in certain circumstances. Each represents a useful precedent, and presents the possibility for further experimentation and analysis. None of these currencies are proposed as a replacement for capitalism. Rather, they are experimental and ever-evolving exchange models that could be used to materially support activist communities, provide examples of alternatives to state-subsidized capitalist exchange methods and help us to define the practical realities of anti-capitalist (or post-capitalist) relationships. And as their existence is due entirely to the failings of capitalism to meet the needs of all people, they provide an organizing tool or activist space uniquely suited to facilitate anti-capitalist organizing and the process of radicalization.

State money has several defining characteristics, including its ability to be used as both a medium of exchange and a store of wealth, and issuance by private banks in the form of interest-bearing loans. Because of this method of issue, all money is also scarce. Money is not issued to those who most need it; debtors who take on loans either have good credit to begin with or can afford the interest rates. CCSs seek to counter this scarcity and the tendency of money to accumulate where it is already plentiful by allowing anyone to issue either paper money or no-interest mutual credit. CCSs for the most part also prevent currency from being used as a store of wealth; most systems incorporate a “holding tax” or other deterrent to hoarding exchange capital that encourages its wide distribution. State money is also subject to fluctuating currency markets, inflation rates and liquid capital investments, the volatility of which has devastated the savings of billions from Indonesia to Argentina. Theoretically, locally-defined, non-convertible or at least de-linked local currency would be immune to such fluctuations.

LETS: Local Exchange and Trading Systems
That was part of the rationale for LETS, which originated in 1986 in Canada and predominates there and in Oceania and much of Europe. LETS are a type of mutual credit currency, meaning no physical money is used, rather each LETS participant keeps track of exchanges and balances in their own ledger book, and reports them to a central accountant. LETS use units – which may or may not be linked to the state currency – sometimes called Green Dollars or another locally specific moniker, and members set prices for services among themselves. As an example, when one member bakes a cake for another, both decide how many units the cake and labor are worth, and the balance of the member who made the cake goes up that many units, while the other’s contracts. Like all CCSs, LETS exchanges feature a directory of services needed and offered, and it is incumbent on the participants to seek each other out. Each person’s balance is on public record in the accountant log, ensuring transparency, accountability and deterring misuse of the system. The accounting system and various requirements for membership differ among systems, which usually operate by consensus, and restrictions on balances vary, but generally LETS function on the honor system, and negative balances are not discouraged. Studies indicate that most LETS groups are small, from a few dozen to a few hundred people (although some thousand-member groups exist in New Zealand), most of whom would count as leftists or greens politically. Participants have reported that the sense of community and socializing encouraged by the barter potlucks and other gatherings that are the central organizing LETS space are just as, if not more important than the economic benefits attained. The trade volume is generally small, accounting for less than 10% of all economic activity for most participants, and surpluses of certain services are common, owing to the oft-uniform middle-age, well educated, white and underemployed demographic. As is common with all CCSs, participants must often supplement LETS units with state money when exchanging goods or capital-intensive services. Participants have also reported being intimidated by the need to haggle over prices for services, and at least one study found participants disappointed that there was sometimes little correlation between the stated ideals of participants and their sometimes competitive or abrasive behavior.

These structural nuances are listed not to disparage LETS, but as disclosure: LETS, as with all CCSs, cannot alone replace all functions performed by state currency and the interest-driven speculative economy. The disappointment of its participants is due in part to misperception, but is more indicative of the wider burnout phenomenon afflicting all radical leftist communities. LETS have comparative advantages among currency systems depending on the area of implementation and the goals or expectations of participants.

LETS function best at the micro level, as do any democratic enterprises relying on maximum transparency and accountability. They help make use of unused labor and skills, can provide meaningful support for the unemployed and an organizing mechanism or community building space. Its accountability mechanisms and small-scale orientation facilitate a horizontal organizational style. LETS can help activists to create formal support networks in their communities, and the organizational potluck meetings provide a locus for discussion and self-reflection. Activists could also take advantage of its capacity building potential, as LETS could be a method for passing on necessary skills, from group facilitation to bike repair. While a turnoff to some, the ability to set prices as needed is attractive to many, although the lack of physical currency will keep LETS confined to interpersonal skills exchanges. As with all CCSs, LETS are most useful for creating structured mutual aid networks that anti-capitalists need to insulate themselves from capitalist relationships, and for providing a point of reference or practical experimentation with the work of supplementing capitalism.

Ithaca HOURS

In 1991, the Ithaca HOUR was founded by a progressive who wanted to keep Wal-Mart? out of Tompkins County, New York. Paul Glover had been involved in an Ithaca LETS chapter that petered out, and sought to make community currencies more accessible to people outside the general close-knit LETS communities, and expand the volume of trade possible. He developed a local use-only paper currency, reasoning that large chains would be unable to export locally-defined capital. The current HOUR – initiated by Glover, the system is now administered by an elected board, with participants also able to make decisions at monthly potlucks – is linked at $10 to the HOUR, which in the early 1990s was considered a living wage in Tompkins County. HOURS can be purchased for $10, or individuals can perform services for HOURS (and half-HOURS, per the eponymous time scale) as listed in the HOUR Town newsletter. Residents also receive 2 HOURS for listing a service for the first time in the newsletter, and the HOURS board allots grants to selected community organizations. Although not the first paper currency ever issued in the northeast, the Ithaca HOUR is by far the most widely used of any paper currency in North America. It is accepted at over 500 local businesses, including a credit union and a community health insurer, and employees of several businesses receive part or all of their wages in HOURS; trade volume is equivalent to several hundred thousand dollars a year.

The drawbacks of linking community currency to state money are obvious. Convertibility, many claim, would cause HOURS to suffer the same fate as state money in the event of devaluation or inflation, and businesses could potentially convert HOURS to cash and move capital out of the area. HOURS proponents argue that HOURS are shock resistant, however, as they represent the “real capital” of labor transactions, as opposed to speculative capital markets, in which less than 1% of all business relates to goods and services. HOURS have harnessed the talents of local artists and technicians to become forgery resistant, and all notes in circulation are replaced every year or so. This safeguards against a problem that destroyed the Red Global de Trueque, the miraculous Argentine paper currency network that collapsed in the wake of massive counterfeiting following the 2001 peso devaluation.

Despite several innovations, HOURS are still inherently more scarce than LETS units, as you cannot simply issue HOURS to someone else unless you have them yourself. Convertibility and linkage to state money also undermine anti-capitalist efforts at delegitimizing the market economy as a whole, as does support of an arbitrary, static price valuation system. But HOURS ultimately are defined to a specific region, and no national chain stores accept them. Almost every fiat CCS is derivative of the HOUR model, including many in the USA and several hybrid designs in use in Central and South America, indicating the intrinsic value of a commercially accepted paper currency. The value of the HOUR’s utility is instructive: People will be drawn to parallel ventures like CCSs if they perform needed functions, particularly if, like the HOUR, they are easier to obtain than state money. Like LETS, HOURS-modeled currencies could provide effective community support mechanisms for anti-capitalist activism. Both implemented in tandem might also help capitalize on the relative advantages of each, and would allow for the beginnings of replacement for a variety of functions currently provided by the state monetary system.

Time Dollars/Time Banking

While LETS and HOURS are useful in many contexts, and could be used as anti-capitalist organizing tools, both require users to set arbitrary price valuations on goods and services – more often than not reinforcing the pricing system encouraged by the market economy. Many feel such differentials are justified – shouldn’t doctors, whom have invested huge amounts of time and capital in their training, receive more remuneration for their time than bricklayers? While I will not attempt to answer this question, it is obvious that the unjust, highly disparate distribution of wealth under capitalism necessitates a nuanced definition of equitable relationships. We need practical frameworks for unlike other CCSs, Time Dollars, or Time Banking, as it is known in Europe, were not created to replace state money, much less as a stepping stone to ending capitalism. In this regard they are exceptional among currencies, and can be explained by the specific economy they were envisioned to serve. Engineered to help rebuild the “economy of home, family and community,” TDs were built to supplement the functions of the market, and account for market inefficiencies. They are designed to physically value all services essential to these three abstract entities that the market economy has neglected, or declined to assign monetary value. With Time Dollars, democracy is valuable, and essential to the health of the market – so involvement in civic organizations would entitle you to TD remuneration. Literally any service or skill the TD exchange members believe performs a function in the “non-market economy” is eligible for remuneration. Services are valued solely by the time it takes to perform them; everyone’s time is valued equally, one hour to one Time Dollar. TDs have evolved several innovations to counter common problems with LETS and HOURS, not least of which is the 1 TD = 1 hour standard, which prevents any problems resulting from linkage, eliminates the need to haggle over prices and has made TDs the only officially non-taxable CCS. TD systems also utilize a coordinator who, dependent on the locality, helps match participants together, reference checks new members and performs outreach efforts, in addition to updating balances in non-Web-enabled databases.

Neither the theoretical nor practical aspects of TDs are particularly innovative. Feminist scholars have long quantified the value of women’s “double burden” to the economy, and babysitter co-ops across the world utilize the principle of hour-for-hour remuneration. It is the explicit articulation of a mutual aid mechanism called for by a perspective defining capitalism to be inefficient and structurally negligent that give Time Dollars unique relevance both among currencies and as a community organizing tool. The practice of mutual aid as we know it is loosely defined, if at all. Certainly with our collective inability to extricate ourselves entirely from capitalist relationships, it is difficult to re-envision, much less actively practice, a working model of mutual aid. We must embrace the fact that we do not have an adequate method of re-defining ways of relating and values acquired through capitalism. Even anti-capitalists need capitalism therapy, so to speak, as this re-envisioning, restructuring and revaluing will not come naturally to us simply as a result of our political orientation. Although not designed to perform this service, Time Dollars offer such a framework, defining mutual aid in an economic context as one Time Dollar for one hour of service/labor, and emphasizing a mutuality termed “co-production,” which defines each partner in an economic relationship to be of equal value to the other. To anti-capitalists, co-production may be obvious; total liberation requires us all to work for the liberation of everyone just as we struggle to liberate ourselves. But while we are familiar with this intuition, it is a practical model for its application that we lack. Just as co-production has proven revolutionary in the nonprofit services industry, where TDs have enabled “helping professionals” see the necessity of empowering “clients” to be agents of change, it could also be used to inform our activist relationships. As a mechanism of accountability, co-production could guard against burnout and empower more active participation in parallel institutions by ensuring that all who benefit from the work of anti-capitalist collectives contribute to their vitality in an equitable manner.

TDs are unique among currencies not pnly because they are not intended to replace state money, but also in that they have been widely adopted by nonprofit organizations and “third way” public-private ventures in the UK, Japan and the USA, largely as a cost effective, efficient way of providing the elderly with adequate care. As a byproduct, the social justice perspective that is a “core principle” of TDs requires them to act as a living pedagogy, vital proof that we must work together to save all people from the salutary neglect of capitalism and a complicit state system. TDs are also presented as a reformist device, explicitly “supplementing” market inefficiencies, rather than challenging the existence of the market itself. This alone is the justification for Tony Blair’s endorsement of Time Banking partnerships in the UK, and the reason private businesses have jumped to support nonprofit initiatives utilizing TDs. Businesses and governments, local and federal, have in effect endorsed anti-capitalism, as defined by the “non-monetary-economy” TD perspective.

Likewise, to people dependent on government services and the commercial accessibility of a fiat state currency, TDs may be a backdoor to anti-capitalism, both a point of introduction and a meaningful community support mechanism. TDs are also extremely flexible, and several types of systems have been tailored by the Time Dollar Institute to fulfill different functions. The simplicity of the forthcoming Web-based TD software, and current popularity of HOURS/TD hybrid TimeBucks?.org, are examples of the inherent utility of this most mainstream of CCSs, and the ease with which activists could adapt practical exchanges to their community organizing work.

Time Dollars can help us formulate practical definitions for anti-capitalist relationships, experiment with mutual aid networks within anti-capitalist communities and incorporate anti-capitalism organizing within mainstream community building initiatives. TDs as they are currently implemented depend largely on partnerships with state agencies and private businesses, utilizing excess capacity to provide, for instance, refurbished computers to teens sentenced by their peers in the District of Columbia Youth Court to tutor public school children, upon attainment of fifty TDs. They can be used to facilitate progressive policy initiatives, as with the latter example, and to engineer alternative community exchange mechanisms typical of CCSs. Anti-capitalists have the opportunity to build on the many diverse precedents of TD programs, incorporating a radical perspective into mainstream social justice work, or create new community institutions using the co-production framework. Little effort has been invested in developing hybrid currencies, or in installing multiple systems in the same area.

Both the tangible benefits and structural deficiencies of community currency systems have been well documented. As Robin Hahnel writes in his forthcoming book, “local currency systems are useful to the extent that they reduce local unemployment, reward people for their labor more fairly than capitalist labor markets, and help people understand that they can — and should — manage their own division of labor equitably. Local currency systems are counterproductive when participants deceive themselves about how much can be accomplished and see nothing wrong with allowing the laws of supply and demand to determine the terms of their labor exchanges.” But what has not been explored is the extent to which they can help activists define post-capitalist practical realities, serve as devices for progressive analysis and meaningful anti-capitalist community building initiatives. These are our imperatives, and community currencies, particularly Time Dollars, may facilitate their realization.

For more information:

CCSs in the Global South

All About CCSs

Empirical CCS Research

[Andrew Willis is an activist and graduate student of International Peace and Conflict Resolution at American University in Washington, DC.]