Towns Print Money to Help Local Merchants

BerkShares local currency. Photo by Jason Houston.

By Matthew Cardinale, Jun 19, 2009, Inter Press Services

ATLANTA, (IPS/GIN) – In the face of an economic system in full crisis mode, a handful of communities across the U.S. and the globe have begun experimenting with alternative forms of local currency as a pathway to sustainability.

Local currencies existing today in the U.S. include the Humboldt Community Currency in Eureka, California; Berkshares in the Massachusetts Berkshire region; Bay Bucks in Traverse City, Michigan; Ithaca Hours in Ithaca, New York; Cascadia Hours, Corvalis Hours, and RiverHours in Oregon; Equal Dollars in Philadelphia, Pennsylvania; and Madison Hours in Madison, Wisconsin, according to the E. F. Schumacher Society [now the Schumacher Center for a New Economics], which runs Berkshares.

These currencies all represent an effort to respond to the pressures of globalization, like the advent of massive chain stores competing with local merchants. People in Great Barrington, Mass., can go to one of five participating local banks to trade 95 cents for one Berkshare, at a five percent discount to the dollar. They can then spend Berkshares at over 400 participating local stores as a direct replacement for dollars, thus saving 5 cents with every Berkshare they spend. Even though store owners lose the 5 cents whenever they trade Berkshares back for dollars at a bank—which they have to do to buy something that can’t be produced locally—they are still typically happy with the loyal, local customers they keep instead of losing them to chains like Wal-Mart, Starbucks, and Barnes & Noble.

“Local currencies are part of what educate people about the importance of their small, independent businesses,” Susan Witt, founder of Berkshares, told IPS. “It’s bringing people off the internet back to Main Street, for the face-to-face exchanges. Once they’re there, they like it.”

A local currency can help create a more sustainable economy in several ways, leaders in the local currency movement say. First, since using a community currency forces people to buy locally, fewer goods have to be imported. “By having economic transactions so focused locally, that’s definitely, for one thing, reducing use of fossil fuel. If it’s a local farmer’s market … food (is) produced 30 miles away instead of 3,000 miles away,” said Steve Burke, executive director of Ithaca Hours.

Trade theorists might object that it is less efficient, or less productive, for diverse goods to be produced in many communities than it is for each community to specialize in producing one product for export, even factoring in transportation costs.  A second way in which community currencies support environmental sustainability is that they can lead to reduced consumption, Ms. Witt argued. She believes people purchase more and more “stuff,” not because they need it, but to fill a void that community currency can satisfy. “You know the full story about the goods you purchase. You know how they were produced. You know the carpenter who made the table. You know who her children are. You realize buying the table is supporting that family,” Ms. Witt said.

The products bought with local currency “link you to your neighborhood, your place, the people of your place. They’re not just stuff … they enrich your life the way that stuff would not. So you need less.”

A third way in which community currency can lead to sustainable economy is communities can print the currency they need to issue interest-free, or non-profit loans. Allowing credit to be issued interest-free eliminates the need to service growing debts. High-interest debt owed by individuals, businesses, and governments to private banks is one of the main factors pushing economies to constantly grow at an exponential rate. As these entities struggle to service the interest on their debts with a total money supply that was mostly created through issuance of credit, more and more new debt must be created in order for the system to be stable.  Thus, because high-interest debt pushes the economy to constantly grow, it also pushes industrialization into new markets, new products, and new technologies, which often lead to deforestation, air pollution, and the like.  By communities printing and issuing their own currency, in part through productive non-profit loans, the economy can function without the constant growth that is imperiling the environment.

There are at least two different models for how to organize and operate a local currency that local communities are using. One is used by Berkshares; the other was pioneered by the Ithaca Hour.  Founded in 1991, the Ithaca Hour is the oldest local currency to exist in the U.S. since local currencies disappeared in the 1900s. Numerous local currencies have since based their model on the Ithaca Hour.  Businesses become members in Ithaca Hours by purchasing a listing in the Ithaca Hours directory, and they receive two “hours” every year as part of their membership fee. Employees at these businesses then can accept hours instead of dollars for some of their wages. People can accept hours instead of dollars for services, like mowing a lawn, that they provide.  This, in addition to low-cost loans, is the primary way Ithaca Hours enter Ithaca’s economy.

“There’s a pretty fundamental difference between our model and the Berkshares model,” Mr. Burke said. “They sell them. With ours, you can’t buy them; you can only earn them.”  They are called hours “to make a statement,” Mr. Burke said. The founders “wanted to emphasize the relationship between time and money.”  (This story is part of a series on sustainable development by IPS and the International Federation of Environmental Journalists for Communicators for Sustainable Development. See more at