The idea is to design complementary currencies that use the underutilized resources and mobilize to meet the unmet needs of your community.
Remember, the starting point for complementary currencies is to meet needs that remain unfulfilled after transactions facilitated with conventional money have taken place. Similarly, unused resources are those that haven’t been used in economic transactions mediated by conventional money.
Beginning Currency Design
There is not one “ideal” design for a complementary currency. Almost every design characteristic has advantages under certain circumstances that can become disadvantages in others. The best design for your community depends on what the objectives you have set for the medium of exchange and the conditions under which it has to operate. Various objectives can be relevant to implement a currency system, such as the functions the currency is supposed to serve, the type of concern it addresses or the people it aims to involve in exchanges.
Legal Tender
Legal tender is the currency that the government of a country accepts as payment in taxes.1 For example: “This note is legal tender for all debts public and private” is printed on every US dollar bill. What this means is that if you owe someone money in the US and she refuses your offer to pay with US dollar bills, you can walk away and simply declare your debt void. If needed, the courts will back you in such a declaration. One particularly important type of debt that almost everybody incurs is taxes, and therefore legal tender means in this context that the government of the country in question accepts only this type of currency in payment for taxes. Normally, only conventional national currencies are defined as legal tender.2
The principal coercive feature of legal tender is that no matter how much exchange value you earn in various types of complementary currencies, if you can’t pay your taxes in them, you have to find a way to earn legal tender. It gets worse, of course, if transactions in complementary currency incur taxes in legal tender. In the United States, both commercial barter and informal barter systems generate what is considered taxable income, so this taxation has served as a disincentive to their use.
Commercial Purpose Currencies
There are a wide variety of commercial purpose currencies that are defined by the kind of exchange relationships they are designed to encourage. The four main categories are:
• Business to Business (B2B)
• Consumer to Consumer (C2C)
• Business to Consumer (B2C)
• Consumer to Business (C2B)
They typically take electronic forms (see classification by support medium below), offering dramatic cost reductions due to data processing technologies over the past decades.
B2B
These complementary currencies usually are exchange units created by businesses to facilitate exchanges with suppliers and wholesale customers. For instance all the contemporary commercial barter currencies fall into this category. There are well over 500 such commercial barter systems, particularly in the US, regrouped under two trade associations: the International Reciprocal Trade Association (IRTA) and the Corporate Barter Council (CBC).
B2C
The most widespread category of complementary currencies today is loyalty currency issued by a business or a group of businesses to encourage clients to return to them. Frequent flyer miles are the largest such system today, with 1.5 trillion miles issued yearly worldwide by five major airline alliances. One older and still very common paper-based variety of such system is the ubiquitous discount voucher redeemable for goods or services in retail shops and supermarkets.
C2C
At some level, one can describe an important part of the conventional payment system managed by the banks (i.e., checks, cash payments) as a commercial C2C system. Outside of the banking sector, the PayPal™ payment system is a successful example of this approach extensively used by the e-Bay online auction system, although it exchanges only conventional money at this point.
C2B
An interesting innovation by Strohalm Foundation introduced in Amsterdam, the Netherlands, El Salvador, Uruguay and in the South Brazil is called Consumer and Commerce Circuits or C3.3 It is an Internet-based system in which some basic rules guarantee sound performance and inter-C3-exchange, but most of the details in any system are decided locally. Consumers buy vouchers with a locally established premium (varying between zero and 10% to encourage consumers to join) with conventional money from the C3 network. The vouchers are used to pay for goods and services provided by member businesses. The businesses can use the vouchers to pay other businesses members of the network or can cash them in at C3 against a small fee (similar to the Save Australia project).
Using this system, businesses obtain customers they wouldn’t get otherwise and improve customer loyalty in general. The float (in conventional money) accumulated in the system is handled by a local bank which uses it to offer low-cost financing for member businesses or projects. Consumers get loyalty discounts and help make decisions about the way their money is being invested in the community because consumers and businesses all get an equal vote in the management of the system; and there are more consumers than businesses. This, and the fact that consumers are initiating the creation of the complementary currency by buying the vouchers, justify labeling this approach as a new type of commercial application: a Consumer to Business (C2B) financial product.
Combinations of the Above
There are also successful combinations of the above like currencies issued by businesses that are used among individuals as well. For instance, the WIR system in Switzerland or the WAT system in Japan fall in this category.4
Social Purpose Currencies
The bulk of social purpose currencies are highly focused on specific problems or social classes, ranging from elder care to employment or education. Here are some examples.
Elder Care
The very first post World War II complementary currency systems were conceived in 1950 by and for women5 in Japan for the care of elderly, children and disabled persons. These women also created the first Volunteer Labor Bank in 1978, a prototype that was later reinvented in the West (in the US and the UK in particular) as Time Banks. In Japan, the Fureai Kippu system is today the direct descendant of those earlier pioneering systems.
Retirees
Some of the first Time Bank applications in the US were implemented by Edgar Cahn in retirement homes and encouraged self-help activities among retirees. The time currency also created stronger community ties.
Employment
The first LETS systems originated in Canada in 1982 aiming specifically at currency scarcity in areas with high unemployment. Still today, most LETS systems tend to flourish in areas with high unemployment.
Education
The Brazilian Saber described in Chapter 6 is a complementary currency designed to stimulate learning and teaching by youngsters among each other.
Child Care (Baby-sitting)
There is a long tradition of more or less formal but small scale local babysitting groups constituted by families who in turn take care of each other’s children. A large, national-scale Internet-based system is being designed now in Holland, under the name of “Care Miles.” Its aim is to help the 2.3 million families who have trouble finding access to care centers, particularly for the 0-4 year olds.6
Community Building
Community healing and rebuilding are the most popular reasons for starting complementary currency systems in neighborhoods where there are no major unemployment or economic stress situations. Various designs have been used for such purpose, including Time Bank systems, LETS and Ithaca HOURS. The Balinese time currency described in Chapter 4 could also be considered a well-established system of this nature, operational for more than 1,000 years.
Identity Reinforcement
Reinforcing the feeling of belonging to a particular community or area is one of the secondary reasons that some complementary currencies were introduced. For example, the logos
on Ithaca HOURS proudly claims “In Ithaca we trust,” and most paper-based complementary currencies prominently feature local landmarks, plants or history as a means to reinforce local identity.
Ecology
Applications of complementary currencies specifically for ecological purposes have remained surprisingly rare so far. One example is the NU smart card system used in Rotterdam, Netherlands to reward ecological behavior (using public transport, buying more energy efficient devices, buying a bicycle) Green-points are charged on a smartcard, and these points can be used to get discounts in the same type of activities, thereby creating a double incentive to behave in an ecologically responsible way. A less successful model is the Earthdaymoney project in the Shibuya neighborhood of Tokyo in Japan, started by a major advertising firm to honor people who are contributing to the ecological sustainability of the area. A Japanese currency called “ecomoney”7 has played an important role in the acceptance and use of complementary currencies in Japan, because its originator, Kato-san, was originally working for the MITI (Ministry of International Trade and Industry), and thereby obtained substantial multi-year funding from the government. Over 40 substantial projects were launched in this way, that had in common to be operated for 3 years as experimental projects. As far as we know, there has not been a publicly available analysis of the results of all these experiments. However, despite its name, the purposes of the currencies vary, and only a few of them are specifically for ecological purposes. One exception of an ecological project was the use of eco-money to give an incentive and track the reduction of the use plastic bags during the big 2005 international exhibition in Aichi Prefecture.
Other Social Purpose
One could theoretically continue almost ad infinitum a list of specialized social functions for which complementary currencies could be implemented. Indeed, the whole field of complementary currencies is sometimes labeled as “social money.” So the above list is mostly indicative of projects that already do exist somewhere in the world, rather than what could be designed in the future.
Mixed Social Purpose
One could of course easily combine several social objectives, such as having the possibility to earn credits through ecological support activities, and use them for obtaining baby-sitting hours or other combinations of the above list.
Critical Organization, Skills and Practices
Once you have chosen your objective, you need to recruit a team of people who can help implement the project. The team will be suggested by the objective itself, since the people you will need for implementation must have connections with the needs and resources identified in the objective. Here are some examples:
Social Purpose Currencies
Elder Care
The team you will need includes organizations that:
• are currently involved with care for the elderly
• recruit and deploy volunteers
• have other underutilized resources related to the elderly — fitness facilities, restaurants, beauty parlors, educational programs
• have older people as members or clients
Employment
The team should include:
• state service providers for the unemployed
• unemployed people
• organizations that recruit and deploy volunteers
• businesses and government employers
Commercial Purpose Currencies
Business to Business (B2B)
The team you will need includes:
• business leaders
• business organizations — the Chamber of Commerce, industry associations
• local government,
• business support centers — incubators, industrial parks
• businesses that specialize in business services — temp agencies, accounting firms
Business to Consumer (B2C)
The team you will need includes:
• business organizations
• civic groups — Rotary Clubs, churches, hobby clubs
• retail businesses
• local government
The team is needed because one of the critical elements of success for a community currency is direct contact with and involvement of the target audience. If your objective is to have a real impact on the social or commercial sector you have identified, the stakeholders in that sector need to be actively involved in the design and implementation of the currency. As ideas come to fruition, you will discover other people you need on the team, like bankers, printers or other companies. Don’t hesitate to expand the group — the more people who have a voice in how the system will ultimately work, the more likely it is that it will be successful.
Working with a team, especially a team with diverse backgrounds and perspectives, can be a challenge — there are many skills that can make the work more effective. A lot has been written about leadership, listening, conflict management, meeting facilitation and introducing innovation, and there is no need to repeat it all here. Global Community Initiatives offers a free resource guide to all of these community organizing skills.8
Selecting Mechanisms for Complementary Currencies
Once you have convened the Community Currency Team, there are several aspects of the currency you need to consider to design the system you need:
1. Support Medium
2. Function
3. Issuing Process
4. Cost Recovery Mechanism
Each of these considerations will first be defined, and then we’ll identify the choices available within each category. We will also briefly identify advantages and disadvantages of each one of these choices. In the conclusion of this appendix, we will map some real-life currency systems according to their characteristics.
The starting point for a general typology of complementary currencies systems is our working definition of currency as “an agreement within a community to use something as a medium of exchange.” On the basis of this definition, one can identify as currencies a wide range of social tools that had been, are currently or could be used as medium of exchange in the world.
Support Medium
The support(s) used for issuing or handling a currency is one of the easiest features to grasp — we are familiar with the various forms that currency comes in — notes, coins and plastic cards, given that conventional money uses practically all of them today. These supports fall into the following types:
Commodity Money
Commodity money in history took an extraordinary wide variety of forms. For centuries, societies have successfully used salt, eggs, cattle, textiles, various handicrafts, ingots of various metals and dozens of other items as currencies. In modern times, during World War II cigarettes were used as currency in prison camps in many places. Today, the charcoal currency of Osaka, Japan is a contemporary example of that tradition.
Paper and Coins
Paper and coins are the most familiar form of money today. Paper is the most popular form for contemporary complementary currencies because it is both easy to carry and handle and comparatively cheap to produce (e.g., Ithaca HOURS, WAT bills of exchange, LETS account booklets).
Electronic Media
Electronic media include smartcards, a central computer running the accounts or Internet networks — or for large systems, mainframe computer systems. Over the past four to five decades, most conventional money has taken the form of computer bites, and complementary currency systems have been following this path as well.
Mixed Media
When several media are used for the same currency, this provides maximum flexibility. The historical evolution of conventional money has traced a logical sequence towards more convenience: currency started with physical commodity money (such as precious metal coins), but now it is more convenient to handle paper receipts with promises to pay that physical commodity (“I will pay to the bearer the sum of one Pound Sterling” is still written on the English currency bills). And of course, if the appropriate technological i
nfrastructure is available, electronic bits are even cheaper to move around than paper currency. The same currency can and often does take different forms depending on the media that supports it. National currency takes many forms: electronic bits, paper or coins.
The advantages and disadvantages of each of these media are relatively straightforward.
Commodity currencies have an advantage that one doesn’t need a lot of social or legal infrastructure to make them work — it is the only currency that can operate in extreme circumstances such as civil war, social or economic chaos. Such currency can be literally consumed directly by the recipient as a last resort, and it is also most impervious to counterfeiting. Its inconveniences are also clear: it may not be easy to create, and it can be inconvenient to store, handle and transport as well.
Paper currencies, in contrast, are among the easiest to handle and are cheap to produce. But they have as downside — they can also more easily be counterfeited. With high quality photocopying equipment available to almost anybody today, security is a perpetual issue for paper currencies. Even for complementary currencies, this issue needs to be addressed as soon as a currency become successful enough to make it worthwhile for someone to counterfeit.
Electronic media are fairly familiar by now. PCs are the most common support for small to medium-sized complementary currency systems, and are satisfactory if one has access to phones and other communication means to convey the information to the person handling the PC. The downside of these media is that processing the transactions can be labor intensive. Internet connections in which the users update their own transactions reduce the cost of overhead but create additional risks for fraud, and not everybody has an easy access to a computer. Smartcards combine the advantages of both, but require readers that are both expensive and not commonly found anywhere but in Europe at this point. The best electronic solution would be to have the complementary currency piggyback on another smartcard application, such as a public transport or a bank smartcard. That way the marginal cost of adding the complementary currency application becomes very reasonable.
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