Town & Country Planning, November 2011
Ten years ago at least, I used to write a column for this magazine about new kinds of money. I had just written one of those phenomenally expensive Financial Times reports on virtual currencies, and suddenly we were awash with them.
Then the dot.com boom intervened. Beenz and i-points bit the dust and so did most of the others. I carried on developing time banks – which are anyway slightly different – but found I was running out of things to say.
So I stopped. Not before time, you might say.
Suddenly, I find that the new money world is twitching and stirring back into life, also perhaps not before time. As I wrote, the euro is struggling and may unravel completely.
It is not, as economists put it, an optimum currency zone. But then, neither is Britain – the interest rates that would suit Liverpool are completely different to those that would suit London. Just as Greece tends to get sidelined by the euro, because they can’t reduce the value of their currency, so Liverpool ends up in the same position.
We don’t see this because nobody bothers about the balance of payments between Liverpool and the rest of the nation. But the human cost is all too plain.
So, while the policy-makers of Europe make secret contingency plans for re-inventing the drachma, lire and franc – well, possibly not the lire – the open question is whether some other kinds of parallel currencies might now be useful.
This is not to suggest that the Greek shipbuilders, and the other backbones of the Greek economy, should somehow stop earning dollars and euros. This is how the bankers will be paid. It is that, like all economies, there are at least two layers. And the local layer, which keeps people alive in the hard times, needs extra help to stay alive.
Communities across Greece will be the same after national bankruptcy, after all. There will still be things people need and others willing to do the work, but there will be a serious lack of money to bring the two sides together. That is where we need new, local means of exchange
Nor is this just about Greece. A huge sucking sound is going to be audible all over Europe and will continue for years as the bankers extract their debts. People will want to find other ways of meeting their needs, especially as there are resources and time all around them.
The Greek government has passed an emergency law encouraging new forms of exchange. The Volos networks are growing there too. But for some reason European policy-makers are not looking to Latin America for inspiration.
They should be looking at the C3 model in Uruguay, which takes bills owed to small business hem and factors them in return for local currency.
They should also be looking at the community banking model in Brazil, providing low cost or no cost loans to the poorest neighbourhoods, to individuals and businesses.
Both are learning the lessons from two decades of development in Latin America, and both have support from the European Commission.
Yet here we are, on the Commission’s own doorstep, and Europe has to laboriously reinvent the tools of exchange, just like the beleaguered and indebted people of Argentina had to do ten years ago.
It is worth taking more than a second look at Brazil if you want to see the future over here.
It was there that the Brazilian central bank took against the community banks, as central banks traditionally do when they are faced with monetary innovation.
They tried to close them down and lost the case in the supreme court. Now they are on the other side, committed to rolling out the model across the country.
They see the importance, especially during financial turmoil, of providing very low cost credit to the poorest people and the smallest enterprises.
So apply this to the UK and it is a question about regions, and where the optimum currency zones exist in the UK, and what might be optimum for each economic endeavour – and all these might be completely different.
My feeling is that it is now inevitable that local authorities will start thinking about innovative ways they can provide very low cost credit to local business along these lines.
Or it would be if England – and I exclude the Scots in this; they gave us John Law – wasn’t the most financially conservative country in the world.
We English still tend to believe that the banking system was created fully formed by God around Day Six of the creation of the world.
We still believe that Captain Mainwaring is firmly at his desk, doling out sherry, when he has long since been pensioned off and replaced by dysfunctional software.
I was even assured some years ago by the Washington correspondent of a British newspaper that all money was based on gold, which hasn’t been the case here since 1931. Admittedly, he represented the Sun, but you get the point.
That is what we are up against. But most days I believe we will overcome this weight of conservatism, if only because we can see the benefits of doing so elsewhere, and provide ourselves with more flexible and more local currencies to use.
David Boyle is a fellow of the New Economics Foundation. He is the author of The Human Element: Ten new rules for kickstarting our failing organizations. www.david-boyle.co.uk