Generic Currency Model Overview 1. Overview of currency types a. Timebank Time Banking is the community currency concept in which time, typically hours, are used as unit of account. Services provided for in the context of time banking are valued according to the time it takes to deliver them, regardless of who does it or what the “market value” is. A Time Bank is typically are community-‐run organizations that, according to Gill Seyfang (2002:4) turns unpaid time into a valuable commodity, and aims to build social capital and promote community self-‐help through mutual volunteering (both giving and receiving help in exchange for time credits). Across the world, many different organizational models and have been developed to run time banks. The differences are often significant but overlooked in comparison to the idiosyncratic nature of timebanking itself. The idea of Time Banking was described and popularized by Edgar S. Cahn in 1986. He applied the principle and the so called Time Dollars to social projects (education, healthcare, youth justice) in Washington D.C. He later expanded his projects to include Florida and Chicago. Cahn’s objective was to address the inadequacy of the government’s ability to provide sufficient social services and to deal with social problems existing in Washington D.C. (Greco 2001: 98). Consequently the idea rapidly spread across the US and from the 1990s, when the New Economics Foundation had invited him to speak at the TOEF conference in London, through the UK. Often compared to other volunteering facilities, volunteers in a Time Bank are deliberately rewarded for their contribution with time credits for which they can in turn receive ‘voluntary’ benefits themselves. “One hour of everyone’s time is worth one time credit”, no matter the task. Social services accomplished through Time Banking may include education, babysitting, healthcare, computer tuition and gardening. Time Banks can attract socially excluded groups of people (e.g. unemployed, poor, retired, elderly and disabled), volunteers, and those dependent upon receiving services (e.g. elderly and disabled) (Seyfang 2004a: 244). This is accomplished building upon and referring to the core values of timebanking (Timebanks US, 2012; Timebanking UK, 2012): 1. 2. 3. 4. 5.
Asset: We are all assets and we all have something to give. Redefining Work: Some work is beyond price but needs to be honored. Reciprocity: Helping works better as a two-‐way street. Social Networks: We need each other, to reweave communities of support, strength & trust. Respect: Every human being matters.
Time Banking seeks to strengthen social cohesion and encourage a more human approach to interactions and exchanges. Despite some similarities with LETS currencies in terms of being typically run as non-‐for-‐profit initiatives and involving individuals as providers of goods and services, time banks have their focus outside of what is commonly seen as the economic sphere.(Seyfang, 2002:2). The absence of a pricing mechanism in timebanking (one hour of service is always valued at just one hour) further illustrates this. Time Banks are thus designed in a complementary fashion to fill the gaps of social services (rather than goods) that the conventional economy cannot deliver. In the understandings of Seyfang (2002: 4-‐5), the objectives of Time Banks are: • • • •
to engage members of the population who are socially excluded and would not normally be involved with community volunteering initiatives; to enable them to meet their needs through exchanging time, earning and spending time credits, including boosting skills, self-‐esteem and confidence of participants; to build social capital and foster friendships, reciprocity and trust through participative engagement; to encourage community involvement, by valuing and rewarding the (normally unpaid) social work which is essential for healthy, sustainable communities (Cahn, 2000).
Time banking is fundamentally anchored in the concept of co-‐production (Cahn, 2000). Cahn defined co-‐production as a new way of thinking about society based on respect. Co-‐production values people as assets, recognises unpaid work and builds social capital through reciprocity. Timebanking lies at the heart of co-‐production, and is a key mechanism for changing relationships in a way that is integral to co-‐production (Timebanking UK, 2012) b. LETS Local Exchange Trading Systems or Local Employment and Trading Systems (LETS) are ‘social’ mutual credit currencies where members trade skills, services and resources with each other by using credits issued by members themselves. LETS was originally conceived by Michael Linton in 1983 in Canada as “a self-‐regulating network which allows its users to issue and manage their own money supply within the boundaries of the network” (Linton and Soutar, 1994). As a voluntary association of individuals (members), LETS typically hold the following features (Linton and Soutar, 1994): • • • •
co-‐operation: no-‐one owns the network self-‐regulation: the network is controlled by its members empowerment: all network members may ‘issue’ the ‘internal currency’ money: used primarily as a means of exchange
LETS hold many similarities with barter systems. Whereas barter can be essentially defined as being for businesses purposes only, LETS are meant to encourage ordinary citizens to trade with each other and is usually run by volunteer community members on a not-‐for profit basis (Greco, 2001: 89). A LETS is designed to strengthen the local economy and empower community members (Seyfang, 2002: 3). A LETS makes the economy more resilient by addressing two failures of the mainstream monetary system: it provides an abundant medium of exchange and it creates a currency that cannot leave the area (Seyfang, 2004: 7). By exchanging goods and services with local currency, members (theoretically) save on the expenditure of official currencies and thus increase their
purchasing power. LETS currency is at the same time abundant as credit is simply created with every transaction and inflation-‐free. As a result of the increase of personal economic relations, LETS also serve as a means to encourage social cohesion and community building. LETS can be effective in attracting people excluded from the mainstream economy (e.g. unemployed). Indeed, LETS-‐credit enables people at the margins of society to exchange goods and services not valued in the conventional market economy. By becoming economically active, they consequently gain opportunities to reconnect to their community and therefore improve their socio-‐ economic condition. There is a great variety of LETS initiatives around the world, most of which are located in Canada, Australia (where most are referred to as CES), New Zealand and Europe (called SEL in French and Tauschringen in Germany). Prominent examples include: • • • •
Calgary Dollars (Canada), LETSLink, a service organization for LETS in the UK, Le Grain de SEL – Système d’Échange Local (France), Noppes (The Netherlands).
c. Legal Tender Backed Currency Legal tender backed refers to any currency system where the physical note, or digital money, is backed by an equivalent amount of legal tender currency held at a central place, either a bank, credit union or currency operator location. These currency schemes generally aim to promote local economic activity by implementing a payment mechanism (often including physical vouchers) that can be used for purchases from local businesses. The underlying principle is that the currency encourages consumers to purchase goods and services from local businesses that in turn purchase goods and services from local suppliers, or pay their staff partly with the local currency. The intention is that the scheme creates a ‘local multiplier’ effect, keeping spending within the local area while and reducing hoarding. This ensures that each unit of local currency has a greater velocity and thus each means that each unit supports more economic activity, since it is spent more times within the local community. In order to further reduce the incentive to hoard money and increase the local multiplier further some currencies (Chiemgauer Germany, Mesure France, Stroud Pound UK) implement demurrage in their systems. Demurrage is a negative interest rate that acts as an effective cost of holding. Demurrage in a currency system also reduces discount rates, and thus increases the present value of a long-‐term investment, and thus gives an incentive for such investments. As well as economic goals these currencies often also promote social aims. There are reports that businesses who accept local currencies benefit through the … of 2 networks, one with other businesses in the network as well as the user of the local currency. The businesses are drawn together by the common desire to support a local initiative but also because the businesses need to find outlets and uses for the local currency that they accept. Currency operators will often offer specific services to businesses members to encourage these kinds of links. Businesses and users also report that there is a reinforcement of the relationship between then as users seek out businesses that are part of the network, engage in more frequent conversations with the businesses and shop more frequently at those places. Interestingly the overall community, beyond the businesses and
users of the network, may also benefit from the mere presence of a local currency initiative in their area by increasing the pride that people feel for their local area. These currencies are currently proliferating across the NW Europe region with well over 50 already in operation and a similar number at various stages of implementation. d. Closed loop currency systems Closed loop currency systems comprise a variety of currency systems from mutual credit exchanges, where the members create the credit or money at the point of engaging in a trade (Sardex Italy etc.), to credit clearing systems where a central authority issues credit to users in complementary currency, often against assets (WIR Switzerland) Another common feature is that the complementary currencies are not convertible into legal tender. These systems almost exclusively designed to be used by the businesses in order to facilitate the exchange of goods and services within the network’s members through the use of a virtual currency. These schemes can be especially effective at providing businesses with alternative means of payment during economic downturns, when ordinary currency can be scarce. Closed loop currency systems use a business-‐to-‐business currency to perform transactions. Members buy and sell products and services among each other using this internal ‘business to business currency’ thus enabling participants to increase their volume trade beyond what would be possible where they restricted to using legal tender. A major difference in how these currencies systems can operate is with regard to how credit limits are assigned and created. Whereas within mutual credit exchanges all participants start with an account balance of zero and accounts are debited when purchases are made, and credited when sales are made in centralised credit clearing systems a specified volume of credit is assigned to accounts based on a variety of factors who are then free to use them to trade within the network. However because this has almost no bearing on the legal aspects in question it remains suitable to group these models together. e. Hybrid Currency Systems There are also a growing number of systems that are combining different models to create new and unique currency systems. Some notable examples are •
•
RES, Belgium o RES is a complementary currency launched in Belgium in 1996 that operates as a closed loop payment system, modelled after the WIR Bank but allowing consumers to purchase RES prepaid credit for Euros o The RES is a digital currency with consumers and businesses holding credits on a chip and pin card, which can then be used to complete transactions at member businesses. SoNantes, France o The currency will operate as a mutual credit system between businesses (B2B) ! Businesses will only be able to earn and spend the currency by trading their goods and services with other members of the business
o o
network, within a pre-‐arranged credit limit set by the Credit Municipal de Nantes. Consumers (B2C) will also be able to exchange euros for SoNantes SoNantes will only be a digital currency
This means that when assessing new systems it is always important to consider the exact architecture of the currency as it may not easily fit into one of our predefined buckets listed above.