Continuing the trend of publishing my old essays. Here is one I wrote on complementary currencies. Overall I like the piece, but I feel the ending is a somewhat surface level analysis of crypto and full reserve banking.
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A general trend away from integrated communities towards atomised individualism has gripped the Global North (Lietaer, 2001). Complementary currencies (CCs) are a potential solution to this isolating aspect of capitalism (Lietaer, 2001). CCs act as alternatives to conventional money in certain situations: where national currency would be inappropriate, unavailable, or where more socially inclined currency would benefit its users more (Lietaer, 2001; Ruddick et al., 2015; Seyfang and Longhurst, 2013).
CCs are understood to have come in four major generations since the 1980s each of which will be explored below, although schemes existed before (Blanc, 2011; Fare and Ahmed, 2017). However, the term complementary currency includes a broad array of currencies not quite captured by this linear typology (Meyer and Hudon, 2019). CCs included in the four generations typology were created for community benefit with predominantly social goals and number in thousands of projects created (Seyfang and Longhurst, 2013). Outside of this typology, are ‘inter-enterprise’ currencies that operate between businesses but also have pro-social consequences such as buffering financial crashes (Meyer and Hudon, 2019). Also outside of the four generations typology are cryptocurrencies, which are alternative mediums of exchange but were not created explicitly to advance sustainability goals (however some exciting new exceptions will be discussed below) (Meyer and Hudon, 2019). All of these currencies can be understood as CCs and will be assessed for their contribution in advancing sustainability goals.
Sustainability here will be understood through Raworth’s (2017) concept of the ‘doughnut’: where social floors such as safe housing and stable diet are met but environmental limits respected for a society to be sustainable. Thus, sustainability goals are understood as those that advance social requirements and/or protect the environment. CCs have aimed to advance a plethora of goals for the betterment of their users (Miszczuk, 2018); to assess if CCs have advanced sustainability goals, this paper will outline the goals of complementary impacts, moving on to discussing the contextualised and realised impact of CCs and will conclude by situating CCs within the wider monetary system.
Overview of existing community currencies:
First and second generation CCs were primarily established to provide social benefits for their communities (Fare and Ahmed, 2017). These currencies, such as local exchange trading schemes and time banking, create a system where informal work is valued and exchanged with the intention of creating a stronger community through trusting and reciprocal relationships (Michel and Hudon, 2015). Later generations of CCs, such as convertible local currencies, have focussed in regionalising local economies, which has served to advance both ecological and pro-local business goals (Dittmer, 2013). These currencies have placed an emphasis on supporting local communities which also has the potential to localise supply chains and economies – thereby decreasing the environmental impact of users (Dittmer, 2013). Inter-enterprise currencies are designed to protect small to medium sized enterprises from economic shocks (Meyer and Hudon, 2019). Finally, cryptocurrencies are decentralised networks free from central control and authority, instead relying on the technology to prevent fraud and financial misuse (Maurer et al., 2013). Cryptocurrencies have varying objectives, but transparency in financial flows and freedom from central control are two common goals (Friis and Glaser, 2018). Furthermore, some cryptocurrencies have sustainability goals prioritised, such as FairCoin and CommunityCoin (De Filippi, 2015; Meyer and Hudon, 2019). Gladden (2015) is proposing the possibility of a smart money, one which can filter that which it is used for and Alcantara and Dick (2017) have explored cryptocurrencies potential for enhancing the economic sovereignty of indigenous tribes in North America.
Therefore, the intentions of CCs can be considered semi-sustainable; some of the schemes have social goals in mind, others economic and others environmental. They fulfil aspects of Raworth’s (2017) understanding of sustainability even if they aren’t perfectly advancing both social floors and environmental ceilings at the same time. However, the contextualised and actual impact of these CCs must be considered. Firstly, the survival rate of CC schemes is relatively low (Evans, 2009; Meyer and Hudon, 2019). Of thousands of schemes created, Evans (2009) estimates that only 155 remain active. Evans (2009) critique goes further, illustrating that the quantifiable impact of complementary currencies on their local economies is minimal – a finding reinforced by Michel and Huddon’s (2015) systematic review. An example is Marshall and O’Neill’s (2018) study of Bristol Pounds, a convertible local currency in the United Kingdom, which represented 0.007% of Bristol’s Gross Domestic Product with minimal impact on localising the Bristol economy. Despite noble intentions, CCs have only had a minimal influence over the economies in which they are situated towards their goals (Dittmer, 2013; Marshall and O’Neill, 2018; Michel and Hudon, 2015).
There are some considerable exceptions as the context of the CC is important. In Argentina, barter networks enabled people to meet their needs during economic crisis even if it was only contributing 0.6% of the national GDP (Michel and Hudon, 2015). In New Zealand Green Dollars cushioned, but did not replace, the rapid withdrawal of state welfare during the 1990s (North, 2007: 126) and the Bangla-Pesa has enabled better provision of household needs in an informal community where national currency is rare in Kenya (Ruddick et al., 2015). Furthermore, the success of CCs depends on what is counted as a CC. Lietaer (2001) includes the example of Curitiba, Brazil, which is excluded in later examples such as Michel and Huddon’s (2015) systematic review. Lietaer (2001) illustrates that in Curitiba bus tokens were exchanged for community waste sorting and disposal, and the extent of the program meant these credits operated as a CC. Applying Raworth’s (2015) principles in retrospect, the progress in Curitiba made possible by the bus tokens has created social-material benefits (rapid increase in human development index) for informal settlement dwellers in Curitiba at the same time as the city receiving recognition in 1992 as the world’s most ecological city (Lietaer, 2001). Thus, even if the overall impact of CCs is minimal, in the correct context they can be vital in advancing sustainability goals by protecting social floors and environmental limits at the macro level.
Despite a minimal overall effect, except in tough external economic conditions, CCs have had demonstrable effects for those involved within the schemes. CCs have found to improve living conditions, increase employability, value informal labour and empower marginalised peoples (Michel and Hudon, 2015; Seyfang and Longhurst, 2013). Profoundly, most of the schemes bolstered community, via expanding social networks and trust, succeeding in their aforementioned intentions (Michel and Hudon, 2015). Michel and Hudon’s (2015) review includes a few papers on CCs with environmental outcomes, finding that they can encourage pro environmental behaviour through lowered and more sustainable consumption. Key to these successes are appropriate design, community acceptance and uptake, and a visible socioeconomic impact (Alves and Santos, 2018). However, CCs often have a reliance on external recognition by larger institutions to guarantee their success which can undermine the project (Alves and Santos, 2018). At this micro level, CCs are advancing sustainability in social and environmental realms, but require careful design to be accepted and their impact optimised.
However, CCs are not exclusive to public good. Air miles and supermarket loyalty points can be considered CCs even though they are not advancing sustainability goals (Seyfang and Longhurst, 2013). In addition, few cryptocurrencies advance pro-social goals and are often used for illicit and unethical activities (Gladden, 2015; Meyer and Hudon, 2019). With a market cap of $326,171,216,306 across 1500 currencies, few of which are sustainability orientated, cryptocurrencies are a major form of complementary currency demonstrating the possibility of using other mediums of exchange but have done little to raise social floors and environmental ceilings (Meyer and Hudon, 2019).
Do CCs perpetuate a monetary system?
CCs are currently in a position where they cannot challenge the dominant monetary system. Although this is not often the explicit aim of complementary currencies, this position in the monetary order undermines both their own goals and their ability to meet sustainability goals. Direct subservience is created where CCs are convertible to national currencies, such as convertible local currencies and cryptocurrencies (Evans, 2009; Friis and Glaser, 2018). Indirectly, governments, controlling the monopoly of violence, will continue to demand tax paid in the national currency (Dittmer, 2013; Meyer and Hudon, 2019) and have crushed CCs when they were deemed a threat to the national currency (Fare and Ahmed, 2017; Ruddick et al., 2015). Thus, CCs can be stuck in a subservient position to national currencies, always complementing and not offering an actual alternative (Pfajfar et al., 2012). In this position the humble gains of CCs are offset by the larger issue of national currencies facilitating an unsustainable path of perpetual economic growth (Jackson, 2009; Raworth, 2017). It is no surprise that CCs have been criticised as being a ‘game for middle-class activists’ (Cato and Suárez, 2012). CCs were no middle-class game in Argentinian Barter Markets, Curitiba or Kenya, but these are the exception not the rule as CCs are predominantly of the Global North (Seyfang and Longhurst, 2013).
Nonetheless, CCs can act as symbolic and demonstrable alternatives to the dominant monetary system. North’s (2007) Foucauldian approach establishes money as a distinct and independent pillar of state power, one that is a power struggle not only in who has the money but in its socially constructed design. Ingham (2001) states that modern currency, disconnected from current production or commodities, is a promise on future production, controlled by the state. Therefore, it is the design of money and control of its issue which perpetuate capitalist growth (Ingham, 2001; Leonard and Treiblmaier, 2019). If the design of money perpetuates the system, money could be redesigned for sustainability purposes – the rules can be rewritten with experience gained from complementary currencies. The principle of demurrage, that hoarded money loses value through periodic unit revaluation, has been present in the design of a number of CCs (Godschalk, 2012). Theoretically, this should prevent the unfair accumulation of capital, prevent economic crises through discouragement of saving, act as a counter to interest-bearing-debt issued by commercial banks and encourage regenerative investing (Godschalk, 2012; Raworth, 2017). However, the demurrage concept has faced sharp criticism from Godschalk (2012) who illustrates the lack of evidence of its intended effects when demurrage and non-demurrage CCs are compared. An opposing solution to a debt-based monetary supply offered by national currencies is cryptocurrencies, that by having a maximum volume, are inherently deflationary and discourage growth (Leonard and Treiblmaier, 2019). Finally, CCs act as a test for the proposed sustainability solution of full reserve banking – where private banks can no longer profit in creating money by issuing debt and are required to hold the full amount of all funds entrusted in them (Dittmer, 2013; Røpke, 2017). For every local exchange trading scheme debit there is a credit and every hour used through a time bank is an hour earned; cryptocurrencies are decentralised, created autonomously and are not issued through the creation of debt (Maurer et al., 2013). In these situations, full-reserve banking works, but it is vital to note this may only be the case because these are currently complementary currencies and are not used solely on their own. Full-reserve banking, at a national scale, remains mired in theoretical difficulties (Dittmer, 2015).
Conclusions
Complementary currencies have come in a number of forms, advancing different goals, some of which are sustainability orientated. The impacts of CCs are varied. The context in which they emerge is vital for assessing their impact, as they have provided real aid in tough economic situations. Outside of these CCs have minimally advanced Raworth’s (2017) understanding of sustainability. This is the result of CCs existing in a subservient position to national currencies that perpetuate capitalist growth, always complementing, never being the alternative. With this said, they have demonstrated and prototyped concepts such as demurrage and full reserve banking that are proposed as tools to redesign national currencies that currently work against sustainability goals. Resultantly, CCs can be understood to be more symbolically powerful as experiments than they have been tangible actors in achieving sustainability goals.
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