Money Money Money

One of the most difficult things for progressively-minded people to combat is the sense that most people seem to have that this world is the best of all possible ones - or that things are the way they are because that's the only way they could be. This is extremely frustrating for progressives and other people who advocate for social change, because it poses a serious hurdle: How do you convince someone that you even can change something for the better?

A few years ago, Linda McQuaig wrote an excellent book called All You Can Eat in which she took to task the capitalist hegemony, drawing heavily on the work of Karl Polanyi. Polanyi was a Socialist who tried to show that, contra the current doctrine of laissez faire, people weren't always motivated by self-interest. And even when they were, they often defined self-interest in ways that seem alien to us today. The capitalist system we've arrived at today is not, as Marx and Hayek would both have you believe, a result of inevitable historical actions. Rather, we've gotten here the way humans always have - by muddling through and doing things the way it seems more-or-less rational to do them at the time.

Nothing (to me) symbolizes this better than the issue of money. Outside of inflation, few people probably give any thought to the actual mechanics of the actual creation and regulation of money. But it's fascinating when you realize the number of different ways people have used, created, and valued money in history. Hell, in the 20th century alone we've gone through three major international systems to regulate the value of currencies - the Gold Standard (the late 1800s - 1920s or so), Bretton Woods (roughly 1945-1973), and the current regime of currency speculation. Money, as much as anything else, is a very flexible concept.

I happened along two pieces recently which reminded me of this. The first is from WorldChanging, about the use of "alternative currencies". An alternative currency is basically any unit of exchange that isn't the official currency - in Canada, the most famous example of an alternative currency is probably Canadian Tire money. But it also includes things like Air Miles, etc. From WC:

Generally these systems only work when trusted groups do it (like town governments, large companies, or specially-constructed high-transparency organizations), and generally it’s done to limit people’s spending in certain ways (like frequent-flier miles, which can mostly just be spent on plane fare).

The greatest success stories of complimentary currencies are in picking up ravaged communities and helping to get them on their feet. A primary example that Lietaer and Kennedy cite is the Worgl, a currency created by a small Austrian town during the great depression. The town of Worgl had high unemployment and lacked the money to pay for its normal infrastructure services, so they killed two birds with one stone by printing a local currency they could pay people to do civic work with, and which could only be used in the local area. They also made the value of the currency time-decaying (or "demurring", as it's properly called) by 12% per year, which caused people to spend it rapidly--increasing the "velocity of money", which in a sense multiplies the amount of money in the community. In about one year, Worgl dropped its unemployment rate by 25% and increased public-works investment by 220%, while the rest of Austria slid further into depression. The experiment was only stopped because the Austrian government was worried that its control over the national money system would be threatened. Today in the Brazilian favela of Palmeira, a local currency called the Palma is helping to lift the residents out of poverty; it is working much more slowly than the Worgl did, but it does not circulate as much because its value does not demur over time.

Similarly, Sam Smith of the Progressive Review dug this example from his archives:

Guernsey is an island state located among the British Channel Islands about 75 miles south of Great Britain. In 1816 its sea walls were crumbling, its roads were muddy and only 4 1/2 feet wide. Guernsey's debt was 19,000 pounds. The island's annual income was 3,000 pounds of which 2,400 had to be used to pay interest on its debt. Not surprisingly, people were leaving Guernsey and there was little employment.

Then the government created and loaned new, interest-free state notes worth 6,000 pounds. Some 4,000 pounds were used to start the repairs of the sea walls. In 1820, another 4,500 pounds was issued, again interest-free. In 1821, another 10,000; 1824, 5,000; 1826, 20,000. By 1837, 50,000 pounds had been issued interest free for the primary use of projects like sea walls, roads, the marketplace, churches, and colleges. This sum more than doubled the island's money supply during this thirteen year period, but there was no inflation.

In the year 1914, as the British restricted the expansion of their money supply due to World War I, the people of Guernsey commenced to issue another 142,000 pounds over the next four years and never looked back. By 1958, over 542,000 pounds had been issued, all without inflation.

As the author at WorldChanging notes, alternative currencies probably can't replace the good old-fashioned dollar (or Baht, or Euro, or Yuan.) But they are a perfect example of things we can do to fix our local communities. And if the worst predictions of what happens when oil production peaks come true, we'll desperately need new ideas for our local communities. Moreover, they're an important way of challenging our misperception that the world is as it should be, not simply as we've inherited it.