Excerpt from People Money: The Promise of Regional Currencies by Margrit Kennedy, Bernard Lietaer and John Rogers (Triarchy Press, 2012).
Americans are drawn in large numbers to the beautiful Berkshire Hills and Taconic Range of the Appalachian Mountains. The Boston Symphony Orchestra is one of several cultural institutions with their summer home in the region. Residents of New York City and Boston have second homes in the Berkshires to relax in the landscape enjoy the rich cultural life, feast on the great local food tradition, and drink in the history.
Susan Witt credits her strong connection with this landscape, its culture, and its people as inspiring her work in local economics.
To explain, let me tell a story about visiting Wendell Berry, our great American poet and essayist at his farm in Kentucky. It was a long drive there and I wasn’t sure of the way, but turned a corner and suddenly came into what I later could only describe as a shining landscape.
You know how, as a traveler, you sometimes see things in a way that you can’t see when you’ve been there every day? You have a fleeting vision of a place more intimately, more deeply. And there I was in this shining landscape. The shimmering leaves, the water glistening, and it wasn’t just the sunshine. There was a different character in that landscape.
After leaving I pondered what made it so. At length I came to the following: that it was a landscape well observed. Not just observed in a distant way like a reporter might describe. It was an observation that was penetrated with love for the place itself, a love that could then lead to action.
When reading Wendell Berry’s essays and novels, you walk through that landscape with him. You peek in the old tar bucket hanging from an oak tree and count the acorns that have collected there. You step over the stonewall and realize that the next field needs reseeding and plan to take the team of horses out next week. It’s an observation penetrated by love that leads to restorative action.
That type of conscious observation works to transform the very landscape itself. A physical change takes place. A consciousness embeds the trees, and fields, and rivers and begins to spiritualize them.
The question arises, what is preventing the creation of more shining landscapes? I believe it is our abstract economic institutions that distance us from direct relationships with the landscape and the people of a place.
When land and other natural resources are bought and sold as a commodity, rather than experienced as a community to which we belong, a barrier occurs to the creation of shining landscapes. When our financial system separates the investor from the producer, then the citizen is alienated from the maker of the products used in the home and the objects become merely stuff rather than reflecting the story of a local place.
So in part what motivates me in my work at the Schumacher Center for a New Economics is an effort to cross these economic barriers to the creation of shining landscapes. The intention is to shape new economic institutions that reveal and support our conscious connections with a place and its inhabitants.
This is Susan’s goal with BerkShares, one of America’s most high profile local currencies: ‘conscious money’, money used with full consciousness of its effects.
Currently we do not know what our money is doing tonight. It may be earning a three percent return, but that abstraction does not tell us if it is financing an organic farm in our region or a distant chemical factory using child labor.
At its core the economic life is no more than that place where human labor, organized by human ingenuity transforms the natural world into products for use by others. That process can be life affirming, or can be degrading to those involved and to the planet itself. Our task, it seems to me, is to insure it is life affirming at every level.
Susan began her first experiments with local economic development 32 years ago.
In 1980 she founded the E. F. Schumacher Society with her partner Bob Swann to disseminate the ideas and philosophy of the German economist who died in 1977. Schumacher’s widow generously donated his books to the Society’s Library. It was a treasury of books on philosophy, religion, and literature from all the world’s traditions. Not primarily a collection on economics.
Schumacher was studying how to live well on Earth, how to conduct oneself responsibly on Earth and with each other. Out of that study a new economics was formed, rather than from a study of economics. We have to tell a new economic story about the whole. We have to reach to the core of our beliefs and explore how those values can instruct economic institutions.
In Schumacher’s book ‘Small is Beautiful’ he called for an economic system in which the goods consumed in the region are produced in the region. He felt that such local production for local consumption would create a more sustainable economic system. Goods would not be transported over long distances. Citizens would see the production process, the conditions of workers, and the effects on the environment of that process. They would meet shopkeepers and understand the relation of those businesses to the wider community. It was a face-to-face economics.
Susan and Bob launched the SHARE programme in the early 1980s.
To most people the primary purpose of money is to enable the process of consumption. The Self-Help Association for a Regional Economy (SHARE) was designed to help clarify the distinction between money to finance new production, money to facilitate exchange, and gift money.
SHARE was a simple micro-loan collateralization program. Residents of the Berkshires opened a savings account at a participating bank that was written as a joint account with SHARE. The organization had no assets of its own. It was a very Zen-like operation with a Post Office Box, a filing cabinet drawer, and a box to hold the passbooks. Someone coined it the ‘shoebox bank.’
Committees of volunteers vetted each loan-collateralization request. These were small businesses, usually without previous borrowing history, making products sold in the region. Once approved by committee, the participating bank would make the loan at a favourable interest rate, collateralized by a fistful of SHARE passbooks. The organization enabled 25 loans, creating new businesses employing local people. SHARE depositors knew ‘what their money was doing tonight.’ They supported those businesses, told their friends, built a market for locally made products, resulting in a 100% repayment record of the loans.
Our little experiment inspired local banks to make more small, productive loans on their own. SHARE linked citizens directly with producers, sharing the risk in building the local economy. It lay the groundwork for the establishment of the first Community Supported Agriculture farm in the country at Indian Line Farm, just down the road from what is now the Schumacher Center for a New Economics. In a CSA the citizen-member shares the risk with the farmer for yearly operating costs. A movement began to grow.
We gained a lot of skills during this period. We learned that what might look like a risky loan to a distant financial institution, when informed by local knowledge and supported by local action, turned out not to be risky at all, but a good step in shaping the kind of economy we wanted to see.
The next formative experience along the road to BerkShares was ‘Deli Dollars’.
Frank Tortoriello was the owner of a popular deli on Main Street in the Berkshire town of Great Barrington. A bank refused him a loan to help move his restaurant to a new location so he turned to SHARE.
We were focussed on start-ups. Frank had his own base of loyal customers. We suggested he borrow from them by issuing his own scrip. Printed scrip currencies were widely used in America in the early 1930s Depression Era. So with our help, Frank printed Deli Dollars to finance renovation of the new location. Customers could use the scrip to buy their favourite sandwiches once the new shop was opened.
A local artist designed the scrip showing a crowd of people carrying Frank and his staff – all busy cooking – to their new location. The notes were marked ‘redeemable for meals up to a value of ten dollars’ and sold for eight dollars. Frank raised $5,000 in thirty days in multiple very small loans and raised lots of community support. Customers stashed them away for future meals, gave them away as presents, and even traded them for goods at local stores where the owners were known to eat at The Deli. Repayments were staggered over a year by placing a ‘valid after’ date on each note. Frank signed every note individually like a check to discourage counterfeiting. He repaid the loan from his community in cheese-on-rye sandwiches, not hard-to-come-by federal dollars.
Great ideas are infectious. A local farm family wondered if they could use the same idea to raise funds to pay for the high cost of heating their greenhouses through the winter. Customers would buy notes in the late autumn for redemption in plants and vegetables in the spring and summer. Another farm was damaged by fire and needed help.
In 1989 with help from SHARE, the two farms got together and issued Berkshire Farm Preserve Notes with a head of cabbage at center instead of a head of a president. The notes read ‘In Farms We Trust’ and sold for nine dollars each. The Massachusetts Commissioner of Agriculture travelled from Boston to purchase the first Berkshire Farm Preserve Note, and five national networks showed our farmers using Yankee ingenuity to survive a difficult winter.
The popularity of these printed scrip currencies inspired the next experiment. By then we had coined the name “BerkShares” for a future currency for the region. The Southern Berkshire Chamber of Commerce agreed with the Schumacher Society to issue BerkShares as an experimental summer promotion. Customers were given one BerkShare for every ten dollars spent in a participating business over a six-week period. During a three-day redemption period customers could spend their BerkShares just like dollars in any of the seventy participating stores. In its first year of operation, 75,000 of the notes were given away, representing three quarters of a million in trade. During the three-day redemption period, 28,000 were returned and spent — a great success for a give away programme.
One of the strengths of the Berkshire County in western Massachusetts is its tradition of small, independent local banks. The initial success of the scrip program persuaded five local banks to get involved with the BerkShares committee in planning a year-round currency to support the local economy. It would take another 15 years to come to fruition.
BerkShares local currency launched in September 2006.
Citizens can now walk into 13 branches of five local banks and exchange $95 Federal for 100 BerkShares (B$), which they can spend at one-to-one value at 400 businesses in the Southern Berkshire region. To provide a context for these numbers, the year-round population of the region is only 19,000 people. Businesses that wish to redeem BerkShares back into dollars return a 100 B$ to any of the 13 branches and are given $95, a 5% fee. Thee and a half million BerkShares have been issued in the first six years of operation.
Those shouting loudest about the evils of centralised government money from the federal reserve were now faced with a question: did they have the conviction to use the positive alternative that was now in place – a democratically structured, place based, non-profit issued local currency?
The bar was raised. It sorted out those who only talk about transformation from those willing to step into a new system and be players. Use of a local currency is not easy and automatic. Long established economic patterns had to be changed. No late night buying on the Internet from an unknown supplier. It meant going to Main Street and having face-to-face relations with store keepers and professionals. Choices were limited. Prices were not always the lowest.
Some critical design choices were made.
We have been criticised by some for issuing a dollar backed currency rather than jumping to an independently valued currency. Quite simply, convertibility with federal dollars gives businesses in a small town the confidence to take part. And because we wanted to bring people back to Main Street, we decided to create a visible hand-to-hand currency rather than start with an electronic platform.
Why not just use dollars and support local shops?
Money habits are as deeply ingrained as food habits and just as difficult to change.
People are promiscuous with their money. They jump from one credit card deal to another, always looking for the lowest price. They buy books on the internet rather than locally. But price savings does not reflect the value of having a local bookshop or wholesome food. Our BerkShares currency pins money down and makes it work harder before it leaves.
Five local banks watched the SHARE programme and other experiments with interest over the years and decided to take part in BerkShares.
Unlike the mega banks with cookie cutter training for all its retail locations, small locally owned banks give their branch managers significant flexibility over how they do business. The 13 branch managers of our participating banks recognized that by introducing the BerkShares program to their locations there was potential for an expanded customer base and a way to further help the small businesses which they served. They judged this was worth the extra administration and training of tellers required in introducing a second currency.
From BerkShares perspective, our local banks have existing storefronts in user-friendly locations. They are trusted record keepers of our credits and debits with each other. They provide a valuable infrastructure for building and maintaining a local economy. We felt it essential to work with and be supportive of our local banks, handing them responsibility for record keeping of the flow of of the currency, while BerkSharese members searched for and developed viable import-replacement business for the region.
We commissioned excellent designers to make the notes, which feature landscape paintings by Berkshire artists and which honor important historical figures of the region. We print on high quality security paper. All the currency is kept secure until delivered to the banks from the printers; we unpack the notes and deliver them under the eyes of an independent accountant to witness and record everything. BerkShares, Inc. has no BerkShares; they are all held by the bank until exchanged for federal dollars by citizens coming to the banks. We have had only one instance of counterfeiting with a single note in six years, which we dealt with quickly by issuing small fluorescent lights to high BerkShares volume businesses for detecting our high quality paper. It actually led to heightened awareness and vigilance amongst bank staff and businesses.
Early traffic in the currency was huge with every fourth customer at the banks buying BerkShares out of curiosity. It has probably had more global media attention than any other local currency in the world.
Nothing here is done in a vacuum, we are on a very public stage. TV crews still come and go WOW! The very fact of the currency makes people question who, how and why money is issued in a way that all the academic papers in the world couldn’t do. Then they ask: how can we take the money issuance back and make it work to support our values?
BerkShares has become a symbol for many who want to reconnect economy and community. The website gets 10,000 hits a day. Such attention does not make Susan Witt complacent. Trade is quieter these days and she knows how far they still have to go to realise their vision.
BerkShares is not yet an independent currency but rather a very sophisticated discount programme with features built-in to evolve.
We are at about step 30 of a 50-step strategy in becoming an independent currency. The first step was the SHARE programme thirty years ago. The long-term goal of BerkShares is to finance the creation of new import-replacement jobs in the region, not just facilitate local exchange — though that is important, of course. The real genius of a currency is creating money from nothing to finance new production. Our vision will only be realised when we have developed a robust loan program in BerkShares.
But it was always going to be impractical to jump straight to that. We have come through an age of extreme globalisation in which local businesses had to survive. Only since the finance crisis are more people waking up to alternative visions and the potential for localisation as a counterbalance.
Local banks now know there is not a run on the currency and the dollars stay there. Businesses and individuals have worked out how to use a second currency. People have stopped suspecting that someone must be making money on the 5% discount and see the benefits of an exchange fee to discourage people trading out too quickly. The currency is still not totally convenient to use but in these times merchants are willing to stretch a bit.
We are over many hurdles. Over the negative chatter. And new allies have come on the scene: the Transition Town movement is raising support for local currencies and the Occupy Movement has helped build interest in a move out of big banks and back to cash. There is still capital for us in the romanticism people project onto a community issuing its own currency to show its independence and self-reliance but that is not quite enough for us.
BerkShares Inc., the non-profit behind the currency, has worked out a plan with local banks based on the original SHARE model, using dollars as collateral for the banks to issue BerkShares loans. People are already pledging dollars to back the loans.
We are in a research and development phase with the local community, banks and businesses as our testing ground. We have to be careful not to overstretch their loyalty. There are many questions needing research and economic analysis such as the potential to peg the currency to a basket of local goods rather than the dollar. The E. F. Schumacher Society transitioned to the Schumacher Center for a New Economics in 2013, which has helped give a broader context to this work and attracts wider support to address such questions.
Susan Witt continues to pursue a high vision grounded in a long-term strategy for change.
My original plan was to write a novel about those working to transform the economic in a socially and environmentally sound manner, but I decided early on that I wanted to be inside the work and actually understand the pressure rather than being a passive observer.
One of our most inspiring Schumacher Lectures was given by Gar Alperovitz, a historian and political economist. He was addressing those motivated by the Occupy Movement:
‘If you don’t want capitalism, what do you want? I don’t want to hear the “no.” I want to understand the “yes.” And I want to know if you are prepared to spend the next two decades of your life to bring about the change you seek. Because that is what it will take and then some.” There are no instant solutions in bringing about a new economy. The first step is preparing for the long-term. We realize it will be at least another ten years until we begin to reach our goals with BerkShares.
What I have learned is that you have basically one chance of launching a local currency in any community so you had better think it through; Main Street is a public place and the project has high visibility at banks and retail shops; you must be prepared as an organisation to handle public inquiry; a new currency is as much an educational undertaking as an economic.
For many people the leap from thinking about home economics to community economics is a big one. The workings of our economic institutions seem abstract, distant, beyond our influence — though having such a profound effect on our lives. I believe it lies in the destiny of America to meet the challenge of reshaping our global economic system into one that benefits the Earth and its inhabitants — or it is ours to fail in that task. Those who aspire to live consciously at this time have a responsibility to make sure that economic life reaches its highest and most idealistic potential, creating economic systems that connect us more deeply to each other and the health of the natural world.
So, I hope and expect that in the next five years the local economics movement will grow further and realize some of its boundless potential. That each region of the world will turn first to the resources within that region, building an economy out of the skills and materials found there, and then from that secure base begin trade with other regions, neither exploiting other regions nor being exploited. From those secure local bases a new universal sense of our common humanity and common responsibilities will then emerge.
Margrit Kennedy (1939-2013) was a German architect with a Masters Degree in Urban and Regional Planning and a Ph.D. in Public and International Affairs. The author of books, articles, and reports for UNESCO and OECD on community school planning and building, her work on women and architecture, urban ecology, permaculture, money, land, and tax systems … Continued