Publications / Essay

Appropriate Currency

It is up to the advocates of appropriate technology and small-scale systems to become the inventors of an appropriate technology for money. This task is vital to us, because all of the other appropriate technologies with which we are involved eventually depend upon a proper and decent exchange system. When national currencies fail because of runaway inflation, or for any other reason, we will survive in some fashion by using barter or labor exchange systems.

If we are to expand and grow, and become more than a counter culture movement or a New Age subset of the larger culture, then we must create a new money system to replace the present system. Through this new system, the attributes we value-cooperation, self-reliance, community-can become growing and dominant within the entire culture. This is direction our work needs to go, not only survive the coming currency collapse, but also to develop what Schumacher called an “economy of permanence.”

To help us do this, we must create local currencies. A local (appropriately scaled) currency should be:

  1. Consistent with customary practices, such as cash, checking, and accounting systems
  2. Redeemable by a universal measure of value in real goods and based on local production
  3. Controlled by the community, perhaps through a nonprofit bank

Two important questions follow from that. The first is, what commodity has a universal measure of value in today’s world? I would suggest that it’s energy, and that we consider using some form of energy as the unit of measurement and as the reserve currency for redemption purposes. The so-called energy crisis has made it clear to almost everyone that energy is the key factor in all forms of production, and in meeting the needs of society as a whole. In this respect, commodities that provide essential energy are replacing gold as the traditional form of reserve currency. Thus oil is referred to as “black gold.”

The second question is, if we’re looking to use a universal form of energy, where do we look? Obviously, the most sought after forms of fossil fuel energy, such as oil, are as poorly distributed and limited in supply about the earth as gold. What is needed is a form of energy that is both renewable and is universally available throughout the world.

I propose that to establish a local currency with universal value, we consider using some convenient measure of wood energy, which can be used for redemption purposes. We might begin, for example, with something as simple as cordwood. Even though the energy component of cordwood is variable and might not be ideal, if you compare a cord of wood with the U.S. dollar in terms of its constant value, the cord comes out way ahead. I only suggest this as a way to begin; we will have to perfect it as we go along-perhaps developing an index of different kinds of wood, or using one ton of dry wood. Consider also that in addition to being used on a worldwide basis as a primary source of energy, wood is also used for other basic needs, such as fruit and nuts for food, lumber for building, and as a substitute for metals.

Let’s now project a different scenario. With whom might we start such a local but universal money and banking system? A group of corporations, community land trusts, local merchants, and small businesses could establish a joint account in a local bank with each of its member depositors. Deposits in the bank would initially be made in terms of U.S. dollars. Once sufficient capital was established, the surplus could be invested directly into a commodity of intrinsic value. This could be gold or silver, but I am suggesting investing in energy, and the best source of energy available almost anywhere is trees.

Therefore the surplus would be invested in forests, or directly in cords of wood. A community land trust would manage and control this resource. As a sufficient potential supply of cordwood from the forests became available, each depositor would then be issued a certificate (or note) measuring the value of his or her deposit in energy, or cordwood-meaning that the deposit would be redeemable in cordwood. With a ready and continuing supply of cordwood to “back” its currency, the group would then be in a position to “issue” or provide credit for projects of productive value within the local community.

The most pressing need I can imagine for a local and regional self-reliant economy is the invention and establishment of an appropriate exchange system such as I have described. Yet such a system, because it is based on a universal measure of value such as a unit of wood energy, could at the same time become the key to eventually establishing a worldwide system. For it is obvious that while on the one hand we are at a historical point when local and democratic participation in the economy is essential to our economic survival and to our humanity, it is also clear that we live in a world that is rapidly moving toward a one world economy. This new, local and appropriate system would consist of thousands of small, primarily self-reliant regions exchanging or trading directly with each other using a common unit of exchange. Thus the foundation for a true world economy would emerge.


Publication By

Robert Swann

Robert (Bob) Swann was the founder of the E. F. Schumacher Society, now the Schumacher Center for a New Economics. In 1974 E. F. Schumacher asked Robert Swann to start a sister organization to his own Intermediate Technology Development Group, but it was not until 1980, when prompted by Resurgence editor Satish Kumar, that Swann organized the E. F. … Continued

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