Debating the Bristol Pound
We recently saw the launch of the Bristol Pound. In this blog we thought we’d offer two perspectives, one from Michael Sanders outlining the challenges of community currencies and one from Susan Steed, one of the co-founders of the Brixton Pound outlining their potential benefits.
Local Currency Anti – Michael Sanders
Bolstering communities, saving the environment, boosting employment and making us all wealthier and society more equal, local currencies have a lot to live up to if their supporters are to be proven correct.
Bristol’s newly minted currency joins a raft of others across the UK, and it certainly appears that this is an idea whose time has come – but how do local currencies stack up against the claims made about them?
The good news is that areas with local currencies are more affluent than those without them. Unfortunately, this seems to be a result of local currencies failing in poor areas and surviving in affluent ones – places where, one might argue, they are less needed. In the little robust economic research that exists in this area, Krohn & Snyder (2007) find no evidence of any economic benefits.
By imposing restrictions on trade, even just psychological ones in the form of a weak commitment device, we limit the number of beneficial exchanges that can take place – although this may be good for the people with whom one is forced to trade, it is necessarily worse for those from further afield.
These two observations – that protectionism will tend to beggar one’s neighbour and that local currencies seem mainly to survive in affluent areas, suggests that the rich or middle class benefit at the expense of the poor.
As for the sociological benefits, which seem plausible, if likely to be endogenous, the benefits of these will be felt by those least in need of them – both social trust (vital to community cohesion), and wellbeinglivepage.apple.com, are highly socially graded.
These questions may be answered with a carefully designed evaluation, and the power of commitment devices and mental accounting has been shown to be strong in the past. More macro-level claims, such as the environmental benefits, are probably unverifiable. Nonetheless, the claims appear naive, ignoring, for all the talk of community and togetherness, the evidence found in history that humanity’s greatest achievements are found when we engage with others, either collaboratively or competitively, but most often both – the market for personal computers could not have been sustained by a local hardware store in Seattle, and the people of Wapokoneta, Ohio did not put Neil Armstrong on the moon alone.
Local Currency Pro – Susan Steed
Complimentary currencies exist to speed the flow of money around a local area, increasing the rate at which goods and services which exist locally are exchanged, and producing local economic well-being. Increasing the velocity of money locally does not represent a drain on the wider economy, or suggest that all goods and services should be relocalized; everybody could use local currencies, and still have national and global systems of exchange. Bernard Lietaer suggests that local currencies enable trade which cannot always happen in national currencies because of their unique features.
For example, the Bristol Pound (£B) uses innovations in technology so you can pay quickly by text, something you can’t yet do with ‘normal’ pounds. This is an innovation that might become common in Sterling in time (“texting money” is big in Africa) but for now the closest the big banks can do is Barclays Pingit. But that needs a smart phone to send payments, where £B works with any basic mobile. Now traders don’t need to hire a credit card machine to make payments, or pay Visa’s cut of every transaction. For some purposes, the £B is better money than Sterling!
The £B is also about getting people to think about where they spend their money, where it goes and who benefits from it. Bristol are breaking new ground being the first local currency in the UK which you can bank with the credit union. Behavioral economics shows us that people need all the help they can get acting in their own long term best interests, and a local currency is a constant reminder of other local efforts like credit unions. In Lambeth we’re part of a wider European project to evaluate whether local currencies do change people’s behavior. A local economy is about more than local currency, but a currency is a good connector.
The £B has a chain effect. Using the currency means businesses are committing to understanding where they respend their money. In Brixton we have found that the currency accelerates the growth of new enterprises by fostering tighter connections between businesses using the currency. Brixton pounds can now buy a share in locally produced energy, organic vegetables grown on a inner-city estate, or get your shopping delivered by a bicycle powered delivery service.
We’re not anticipating a Brixton Mac to come off production lines soon, but Brixton has a thriving computer repair social enterprise that repairs systems in exchange for Brixton Pounds, and picks up businesses looking for a business-to-business use for their local money.
For me personally, the most interesting thing about local currencies is thinking about where the goods and resources that sustain my lifestyle come from, who produces them and what the real costs are. Modern technology means there are goods and services that we can consume and connect with globally, but other things that it makes more sense to produce closer to home. It’s not about one or the other but getting the right balance between the two.