Jan. 1998 - Dec. 1999
Jeff Powell & Menno Salverda
Local Development Institute (LDI)
Project Managers: Jeff Powell and Menno Salverda
Partner Agencies: The following groups have agreed to provide
technical assistance, support project monitoring and evaluation and assist
with the dissemination of project findings.
Despite the abundance of money, goods and services, poverty remains.
Usually accredited to a lack of resources, increasingly poverty results
from a lack of purchasing power. In many regions (and the North is not
excluded from this list) poverty is on the rise. Unemployment rates of up
to ten percent are considered acceptable. There is no money for social
programs. Governments and their customers decry the breakdown of the
social fabric and each blames it on the other. Environmental degradation,
carried out under the aegis of sound financial analysis, continues at an
The juxtaposition of these two realities brings us to an obvious
conclusion: The omniscient invisible hand is inadequate in an increasingly
complex world. A simple mechanism which, its proponents suggest, can be
left to solve all of societys ills, is unable to create, distribute or
even measure real wealth.
In an attempt to understand why our economic system is failing us, some
have pointed to the role that money and the monetary system have played in
the commodification of our lives. In its original form, money was simply
the oil which let the machine of the economy run. It made trade more
convenient. As a source of information, it allowed us the means to trade
goods with different use values. However, the introduction of interest
rates transformed the measuring stick into that which it measured. Whereas
before, wealth depended on the endowments of resources, money turned into
a commodity which in itself represented wealth. Those who had money could
gain wealth by lending it to those who did not. Fortunes could be made
through speculation on the future prices of stocks and commodities,
including the price of money itself. With the removal of the gold
standard, the floodgates were opened to unrestrained financial
speculation, and any notions of equity in the economic system were tossed
aside in the headlong rush to maximize the efficiency of monetary
Community currency systems attempt to balance the influence of an
efficiency based global monetary system with an equity based community
one. An interest-free currency is introduced as a medium of exchange.
These currencies exist in name only--there is no banknote. The value of
these currencies is determined by members of the community. Variously, the
value has been tied to the national currency (Green Dollars in Canada);
equated to an hour of labour (Ithaca Hours in Ithaca, N.Y.); or allowed to
determine itself through members exchanges (New Berries in Newbury LETS,
U.K.). Unlike barter trade, which requires a direct exchange, (my chicken
for 10 kg of your bananas), local currencies commit the individual who
receives a good or service to supplying goods or services to the community
at a future date.
Members accounts start at zero, and each exchange moves the account
balance either plus or minus. A minus is not an overdraft, or even a debt,
but a normal entry in a community currency account. If member A gives
member B 10 units of rice, member B acknowledges this by transferring 10
units from her account to member As. A record of this exchange is sent to
a central administrator. As account is now plus 10, while Bs account is
minus 10. Later on, member C asks B to repair his motorcycle. They agree
that the labour required for the job is worth 30 units. Thirty units is
transferred from member Cs to member Bs account. Member Bs account is now
plus 20 [(-10) + 30], while member C has a balance of minus 30--a
commitment to future exchange in the community.
It is possible for part of the exchange to be made in the conventional
currency. For example, in order to repair Cs motorcycle, member B may need
to buy parts from a supplier who lives outside the community and therefore
can not accept the community currency. Member B and member C could agree
on what proportion of the repair job would be paid in local currency and
what would be paid in conventional cash. The community currency network
does not concern itself with the cash portion of its members transactions.
Without interest, the possibility of using the currency as a store of
value is eliminated. Any community member with a need can have it
fulfilled, irrespective of their account balance--there is no requirement
for a central body or wealthy individuals to issue credit. Currency
scarcity is eliminated, but only in so far as there are goods or services
available for exchange. Community currency systems can not create
resources where there were none before. They may, however, mobilise
resources that members did not know they had and allow those members who
face conventional money scarcity to trade the future value of their labour
for current needs.
The introduction of a community currency offers numerous potential
benefits to the community:
Two decades of efforts directed towards Thailands globalization have
resulted in impressive growth in GNP and stock market values. Advances
have been made in health, education, transportation and communication.
Enormous opportunities for the creation of wealth have been afforded.
Luxury automobiles sit bumper to bumper in Bangkok traffic. In rural
villages, the neighbour arrives with the latest catalogue of beauty
Despite these accomplishments Thailand has the largest income gap in
the world. Urban slums multiply as rural labourers are drawn to promises
of high-paying jobs. Farmers find themselves in a vicious cycle of debt.
Prostitution and the drug trade flourish. The country's forests are gone.
Adding to these social and environmental crises, is the recent collapse
of the Thai economy. The overwhelming burden of unproductive investment in
the property sector has led to the breakdown of the countrys financial
institutions. The government moved quickly to use national resources to
bail out those who had so greatly benefited during the previous period of
high growth. Money traders took advantage of the situation to force the
government to abandon its fixed currency policy, and thereby reap enormous
profits from speculation on the Thai baht. Industry, largely dependent on
foreign capital, is trapped between self-interest and national financial
ruin. Individual exporters do not want to convert foreign earnings to baht
for fear of further devaluation; their reluctance to do so further weakens
the national currency and increases both the burden of outstanding foreign
debt and imported raw material costs. The layoffs have only just begun.
Labourers have been told to go back to their farms. It is not clear if
there are farms to go back to.
All of this has left many wondering if there is an alternative to
dependence on a system which is so utterly beyond ones control.
Numerous strategies have been employed in attempts to stop the
haemorrhaging of community economies. Moral persuasion, in the form of
strict adherence to the Buddhist precepts, is employed by organizations in
their efforts to revive a sense of community. Non- governmental
organizations have looked to sustainable agriculture; micro-credit, credit
unions and savings groups; and both community enterprise and joint
ventures with private capital. Emphasis has been put on food security and
income generation as shock absorbers against international financial
fluctuations. These mechanisms, however, are to a greater or a lesser
degree parasitic on a mainstream economy and, therefore, still exposed to
its vagaries. Though they serve to increase community inflows, what is
still lacking is a plug--a way to stem the tide of consumerism which draws
earnings out of the community in which they originated. What we have yet
to see is the development of an economic system which structurally
reinforces a community ethic. Community currency systems attempt to fill
The experience of rural communities in Thailand has been that greater
participation in the market economy has meant greater vulnerability to
forces beyond their control, greater social and gender inequity,
environmental degradation, family and community dislocation, and for many
people, increased poverty. In other words, the current national scenario
writ small. Community currency systems provide a possible alternative.
They deserve a well-researched, carefully monitored trial.