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Money, Money, Money
Part 1: Alternative Currencies

Quick, think of money. What does it look like? Odds are your mind’s eye is showing you banknotes or coins of your country’s official national currency – in my (and most of our readers‘) case, the Euro. But recently, there’s been an increase in so-called alternative currencies, forms of money that aren’t issued by governments or government-backed institutions. The most famous example of this would probably be Bitcoin – the online currency that has been gaining more and more popularity since its foundations in 2008.

But there’s examples in hard cash as well. My recent holiday took me through New York and Massachusetts, where two of the most famous examples of alternative currencies are presently in use – the Berkshares and the Ithaca HOURS. Walking around town with my bog-standard dollars, I saw these being accepted in stores too and had to find out what the big (or small) deal was.

Ithaca HOURS and Ithacash

Ithaca HOURS are something of a mainstay in the world of alternative currency. First released into the public domain of Ithaca, NY in 1991, by Paul Glover, their main aim was to stimulate local business. As stated by Glover on his homepage,

„we watched Federal dollars come to town, shake a few hands, then leave to buy rainforest lumber and fight wars. Ithaca’s HOURS, by contrast, stay in our region to help us hire each other.“

The objective, thus, was to keep money within the community. But how does it work?

The basic unit of payment is one Ithaca HOUR, worth $10 (however, this is just a suggestion; the actual value might be negotiated by the parties involved in a transaction). This exchange rate was chosen after calculating what the average work hour would earn you in the region. Thus, for businesses paying wages and salaries with the HOURS, the currency also established something of a regional minimum wage. When HOUR bills started being printed, 90 people had agreed to accept them as payment for services and goods. Through further publicity campaigning, other businesses joined in. More denominations were released, such as half or quarter HOURS. As of today, several million dollars worth of HOURS have been exchanged.

An Ithaca HOUR from the original 1991 series. Taken from the WRFI Community Radio website

In recent years, however, they have begun to disappear and are hardly being used anymore today. Some explanations offered for this are the original founder, Paul Glover, moving out of town, and especially the increasing popularity of electronic transactions. This is where a new project aims to step up – Ithacash, founded by Scott Morris. Morris‘ aim is also to support the local economy, but he wants to improve on the HOURS system with his newly printed Ithaca Dollars by offering a digital text-to-pay transaction possibility. Participating businesses will also be paying a small membership fee – through this revenue stream Ithacash will ideally be able to keep on promoting and distributing the new currency. Another difference is the Ithaca Dollar’s fixed 1:1 exchange rate to U.S. dollars as opposed to the HOURS work-time based principle (although Ithacash also offers fixed exchange rates for the old Ithaca HOUR notes as an acknowledgement of their pioneering role). The Ithaca Dollar was released into the public domain this summer, with over a hundred businesses having joined in previous to the launch. Only time will tell if this local alternative dollar is set to stay.

BerkShares

About four hours’ drive east from Ithaca, in the Berkshires region of Western Massachusetts, a very similar setup to the new Ithaca Dollars has been in existence since 2006. Just like the Ithaca Dollars, BerkShares were conceptualized as Transition currency, aiming, like the Transition movement from which it got its name, for more social resilience and for a greater community feeling that connects local businesses with residents. As the responsible non-profit organization Berkshares Inc. declares on their website,

“when you spend BerkShares you know you’re supporting a business that is rooted in this community. Locally owned businesses have been proven to be better for the environment and the economy than their non-local counterparts. They tend to spend more money with local suppliers and service providers, they keep profits local, and they pay more local taxes. In addition, they contribute to the diversity of our cities and towns, have higher environmental standards, and increase social equality and political participation.“

And it works like this: when you exchange your dollars for Berkshares at one of the participating banks, you get 1 BerkShare for 95 cents. When purchasing something, however, one Berkshare counts as a full dollar. So buying locally with this currency actually gets you a five percent discount!

Several notes of BerkShares. Berkshires.org

Three banks and over 400 businesses currently participate in the BerkShares project. The New York Times has called it a „great economic experiment“ and its popularity has influenced other projects, such as the Ithaca Dollars. Nevertheless, my cursory search for „Berkshares“ on the giant internet platform reddit resulted in a comment thread were several people claiming to be from the region asserted that they knew of noone using the money – its actual popularity thus might not be that high, or restricted to certain groups. In circles concerned with sustainability and local currency, the BerkShares have made a lasting impression and look set to stay.

Alternative Currencies – A viable alternative?

Of course, I wouldn’t have had to go overseas to find examples of local alternative currencies. The Brixton Pound is a London-based currency that works very similarly to the BerkShares, as are the Bavarian Chiemgauer which have lasted for more than ten years now. All of these projects have a very strong focus on community-building. What I couldn’t find out, however, is if there’s a tangible economic upside – or, to put it differently: do these projects just strengthen local community feeling or are they actually helpful for the local economy? The evidence so far, seems to be inconclusive, as stated in an article by the Federal Reserve Bank of Boston. In any case, there seems to be a consensus that with the financial crisis still not quite fought off and the growing technological possibilities, more alternative currencies will pop up in the near future. If nothing else, they’re fascinating experiments that I, for one, will surely be keeping an eye out for from now on.

 

As always, we’re interested to hear your thoughts on the topic. Let us know in the comments! And stay tuned for forthcoming parts in this article series.

 

By: Jakob Jorda

 

Further reading:

Martin Shubik, Simecs, Ithaca Hours, Berkshares, Bitcoins and Walmarts

Investopedia – An Introduction To Complementary Currencies

Slate – Do “local” currencies really help the communities that use them?

NSNBC – Is it time for the rise of local currencies?

The Atlantic – The Next Money: As the Big Economies Falter, Micro-Currencies Rise