In some Chicago schools, a Time Dollars program incentivizes tutoring of younger students by older students. The hours spent tutoring can be used to obtain, for example, refurbished computers. A Time Dollars credo states, “You have something your community needs, you should be rewarded for offering it.”
Another application that makes us of Time Dollars is a prison program, currently operational in the United States and Great Britain. Inmates are offered the opportunity to earn Time Dollars by refurbishing bicycles. The Time Dollars earned can then be used by the families of participating inmates for their own needs, while the bicycles are sent to Africa as part of an aid program.
The cost of starting a Time Dollars program is minimal; communities can use a blackboard or a piece of paper to keep a tally. For larger-scale projects, a timekeeper computer program can be downloaded for free from the Internet. Time Dollars is also scalable to accommodate any level of participation. Its scalability, cost-effectiveness, ease of use, and benefits to community members make Time Dollars a popular choice among students, retirees, and the unemployed.
There are approximately 350 Time Dollars programs now operating in 22 countries on six continents. In the United Kingdom, where the system is referred to as “Fair Shares” or “Time Banking,” an estimated 79 programs are currently in operation with another 80 now in development. In both the United States and Japan there are 65 to 70 established Time Dollars programs. Other countries that have recently adopted the system include Senegal, Ghana, and New Zealand.
Both Time Dollars and LETS cater mostly to the needs of individuals and are designed specifically for smaller, lower-income communities where, for whatever reason, there is insufficient national currency.
In recognition of the social contributions offered by Time Dollars, three separate Internal Revenue Service (IRS) rulings make this complementary currency officially tax-exempt in the United States.241
COMPLEMENTARY CURRENCY REFLECTIONS
An understanding of LETS, Time Dollars, and similar mutual credit complementary currency designs helps shed light on matters associated with money, including: money’s value-nonneutrality; currency designs and inflation; and the advantages of money, including complementary currencies, in comparison to barter.
Currencies and Behavioral Changes
In keeping with the value-nonneutrality of money, currency designs have the potential to elicit specific behavior patterns. Complementary currencies engender attitudes and interactions that are distinguished from those customarily associated with our national currency paradigm.
LETSystem founder Michael Linton observes:
Community currencies seem to engender different attitudes. Fear disappears. People aren’t overly concerned about individual trade balances or who “benefits” most in a particular transaction. A different type of exchange comes into existence. Local currencies go round and round and come back: Joe does this for Mary, Mary does this for Jim, and Jim helps Joe. Life is cyclical, I serve my neighbor then another neighbor serves me. Community currencies encourage people to support each other, which is really the business of life. And it slowly restructures the economy into a more benign form, generative of quality of life, social capital, and common wealth.242
What is the reason for the occuring behavioral differences when conventional money or community-oriented mutual-credit systems are used?
As the Eleventh Round story in Chapter Five illustrates, the interest feature built into conventional money drives the competition for a scarce currency. Most complementary currencies instead do not bear interest, and some make use of a demurrage. Within mutual credit systems, artificial scarcity need not be maintained; the currency is automatically created in sufficiency when an agreement to trade is reached. Thus, the two hidden mechanisms that promote competition in conventional money (scarcity and interest) are both absent in complementary currencies.
This structural difference helps explain why mutual credit and other social-purpose currencies engender cooperation and a sense of community among their users. These systems are simply a formalization of the tradition of helping each other, as in gift exchanges among neighbors that were embedded in almost all past societies. In southern France, for example, these activities were called aller aux aïdats (coming to the aid).
Complementary Currencies and Inflation
The structure of well-designed complementary currencies also clarifies why, in contrast to what some economists might suspect, this form of money does not add to inflationary pressures. Inflation risk would be valid if, and only if, the complementary currency were designed as a fiat currency, like the dollar, euro, pound, and other national currencies. LETS and Time Dollars are not fiat currencies; they are each mutual credit systems, in which money is created only when an agreement is made, with a simultaneous credit and debit charged to the parties involved. This ensures that just enough money is created specifically for the transaction at hand—and no more. In this way, all mutual credit currencies automatically create their corresponding supply of goods and services when they are put into circulation.
It is essential to understand that most complementary currencies are intrinsically different from fiat currencies and are intentionally designed to avoid contributing to inflation. All our notions regarding inflation emanate from a traditional economic perspective, which implicitly assumes a monopoly of one single fiat currency in use within a given country or region. This perspective holds that inflation results whenever there are not enough goods and services produced for the quantity of money in circulation. Such a premise is, however, simply not applicable to well-designed complementary currencies.
LETS, Time Dollars, Money, and Barter
LETS and Time Dollars are both money, and like other complementary currencies, enjoy the full functionality of money. They should not be mistaken for barter exchanges, in which goods and services are swapped bilaterally without any standardized medium of exchange. An inherent limitation of barter exchanges is that they require a “double coincidence of wants;”243 resources and needs must match up perfectly between two parties for a transaction to take place. In a barter transaction, if one person needs shoes and another food, the exchange can only be completed if each possesses the particular item wanted by the other.
As money, LETS and Time Dollars overcome the limitations of barter. Each system provides an internal currency—a medium of exchange used by all members within a given LETS or Time community—which permits participants to select from a much wider variety of goods and services. LETS, Time Dollars, and other complementary currencies enable many exchanges that would not otherwise take place and allow communities and society-at-large to better meet their many needs.
Many other social-purpose complementary currency designs are possible, two of which are examined in the next chapter.
CLOSING THOUGHTS
There is no lack of work to be done in the world. There are children to be educated, shelters to be built, ecological systems to protect, sick and the aged to be cared for—the litany is endless. In addition, there are hundreds of millions of unemployed or underemployed people who are ready, willing, and able to work.
What has been lacking is money, especially different types of money. We can easily make agreements to interact and assist one another. We do not need gold to back our currencies; garbage was turned into money in Brazil. LETS and Time Dollars demonstrate that in crafting monetary agreements, we are limited only by our imagination and competency to make use of these new monetary tools, and the courage to innovate.
Our national currencies are but one form of money. Just as no single tool can build a house, no single type of money, no matter how ingenious or robust, can be designed to address each and every one of the many and sometimes divergent requirements of society. Moreover, given the particular architecture of our current money, with its artificially maintained scarcity, there will never be sufficient sums of national currency available to meet our many and ever growing demands. A one-type-fits
-all monetary design makes as much sense as artificially limiting our use of tools to hammers when so many other specialized tools are readily available for practical use right now.
CHAPTER FIFTEEN - Social-Purpose Currencies
There is a loftier ambition than merely to stand high in the world.
It is to stoop down and lift mankind a little higher.
~HENRY VAN DYKE
An all-too-common reality of most societies today is the inability to adequately address an extensive list of social concerns, in no small measure due to the chronic lack of necessary funds. In stark contrast to the trillions of dollars made available by governments to the financial sector during the banking crash of 2008, hard-fought battles must be continuously waged to raise even the most basic sums necessary to address a wide range of health, education, and welfare issues in most developed and virtually all developing nations around the world. This struggle is not an accident, but is instead the logical outcome of a society shaped and constrained by our centuries-old monetary and banking systems. These systems currently maintain a virtual monopoly with regard to the money in play, and place almost exclusive emphasis on industrial and commercial interests.
It must be reemphasized that our national currencies are but one type of money. No single monetary design is capable of addressing the full spectrum of both societies’ commercial and social requirements. Fortunately, there is a growing recognition of the necessity for different currency designs that, working alongside the dominant currency system, can address a much greater range of today’s vital needs.
In the following pages, two social-purpose currency designs are showcased as examples of what becomes possible by rethinking money. Unlike LETS and Time Dollars, each of which are basic complementary currencies applicable in a generic way to a variety of different applications, the two currencies examined herein are more specifically designed to help address particular sectors of social concern for a society, namely health care and education. The following initiatives also serve to illustrate how important social needs can be met in the face of limited public funds.
We begin with the ongoing economic struggles in one of the world’s leading economies and its endeavors to provide adequate health care for its mounting elderly population.
JAPAN AND THE FUREAI KIPPU
Although sometimes mischaracterized as a nation of imitators, Japan is unquestionably a leading innovator of complementary currency initiatives.244 Consider the following:
Japan has the largest number of complementary currency systems in the world today, with more than 780 operational systems.
Japan also has the largest diversity of ongoing complementary currency experiments. More than 260 different types of systems have been tested nationwide. This represents an almost 100 percent increase in Japan since 2002 and amounts to more types of systems than the rest of the world combined!245
Japan additionally led post-World War II complementary currency efforts, beginning with a visionary, award-winning article by Teruko Mizushima in 1950.246 Mizushima developed the core ideas of a time-based currency and a time bank, and went on to establish her own “volunteer labor bank” in Osaka in 1973, which is still in operation today.247
But, why is such a vast and diversified complementary currency movement happening in Japan?
Japan’s Meltdown and Currency Experiments
In 1990, Japan hit an economic wall, similar in effect to what the crisis of 2008 meant for the United States. Triggered initially by a real estate crash, this economy has been plagued by declines for the better part of the last two decades. The total wealth lost in Japan during the first five-year downward period alone, from 1990-1995, is estimated in excess of $10 trillion, resulting mostly from real estate and stock market losses. This loss represents two years of the Japanese GDP at the time—the equivalent of the total losses incurred by Japan during the entire span of World War II!
Until 1995, most Japanese believed what they were being told—that just as in any other business cycle, things would get better after a few years of tough times. But every conventional recipe was tried to relaunch the economy: dropping interest rates (all the way to zero), gigantic public work projects (by encasing in cement 60 percent of the Japanese shoreline), tax cuts; massive deficit spending (to the point where governmental debt represents 200 percent of annual GDP!), and a desperate attempt to increase consumption through a coupon system. None of these conventional solutions succeeded in getting the economy back on track. The effects have been devastating and in a growing number of cases, fatal. For example, in Japan there is a suicide every 15 minutes, mostly involving men with families who are taking their own lives due to financial stress.248
Gradually, the government and grassroots circles began to look at less conventional solutions. It is in this context that the blossoming of Japanese complementary currencies was started.
From the mid-nineties onwards, the Japanese government began to quietly but ambitiously experiment with complementary currency innovations. Under the guidance of Toshiharu Kato, the former head of the Services Department of the Ministry of Economy, Trade and Industry (METI), dozens of new currencies were designed. A number of nongovernmental initiatives also began at the grassroots level.
Rui Izumi, an associate professor at the School of Economics, Senshu University in Tokyo, points to government support as a major contributor to the growth in complementary currencies:
The central government and many local governments are supporting local currencies in positive ways. For example, they have given financial support to some organizations, and [both] the Minister of METI and the president of the Bank of Japan have made several encouraging remarks publicly about these systems.249
These government-sponsored projects were implemented in communities of very different scales, ranging from small villages to entire prefectures (roughly equivalent to a U.S. county), and involved millions of people. The trials ran for a period of three years or so, and the results were carefully observed. The purpose behind the currency experiments, the cost of which was estimated at over $10 million per year, is to understand as fully as possible what works best and under which circumstances.
In accordance with the well-known Japanese decision-making tradition, before a significant change is made and publicized, it must first reach an approval through consensus. This process is still taking place, and consequently, the currency initiatives have not yet been implemented to scale.
In the midst of this unusual Japanese research and development phase, hundreds of currencies were privately initiated. One family of such systems is the Fureai Kippu, a health care system designed to help address the economic consequences of an aging society.
The Fureai Kippu
Two-thirds of all humans who ever lived to 65 years or older are alive today. The nation with the largest aging population in the developed world is Japan, with some 1.8 million elderly or handicapped citizens currently in need of daily care. The number of elders is expected to double over the course of the next decade.
Traditionally, two strategies have been used worldwide to try and deal with the economic consequences of this Age Wave:
trying to honor the financial promises that were made to the retired and elderly at the risk of fiscal bankruptcy, as seen, for example, in some Scandinavian countries;
gradually cutting support to the elderly to match available funds, as seen in the United States and Great Britain.250
Tsutomu Hotta, a highly respected former Minister of Justice in Japan, realized that these two principal conventional strategies were unsatisfactory. In 1991 he decided to tackle Japan’s Age Wave using a different approach. He created a new complementary currency system, the Fureai Kippu, whose literal translation is “Caring Relationship Tickets.” The Sawayaka Welfare Foundation further developed this idea in 1995.
The Fureai Kippu system provides the elderly and handicapped with many services not covered in the official national health care program. Its units are a
ccounted for in hours of service. Various kinds of services have different valuations. Assistance with bathing, for example, can be given a higher hourly rate than shopping.
In what amounts to a health care time-savings account, those who care for the elderly in the Fureai Kippu system accumulate credits and may draw on them in a variety of ways. Caregivers may elect to electronically transfer part or all of their Fureai Kippu credits to parents or relatives who may live in another part of the country, or may instead make use of these credits if they themselves get ill. Such options ensure that ever more people are cared for. Electronic clearinghouses perform these credit transfers.
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